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CSPC Pharmaceutical
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Chinese biotech’s mega drug-licensing deals with multinationals surge on cost savings

Such deals allow Chinese firms to profit while minimising capital outlays, but also carry risks, law firm says

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Good mid-stage drug candidates from China at prices far below those in the US market are driving an increase in licensing deals, analysts say. Photo: Shutterstock
Eric Ng

A potential multibillion-dollar deal unveiled on Friday by CSPC Pharmaceutical Group is the latest in a growing number of agreements by Chinese biotechnology firms to license development rights for innovative medicines to global pharmaceutical firms, according to lawyers advising the companies.

Many of these deals use a so-called newco structure, which combines traditional intellectual property licensing with fundraising via a newly established corporate vehicle, said the Shanghai-based partners of San Francisco-based international law firm Morrison Foerster.

“Last year we saw at least seven newco deals,” managing partner Sun Chuan said. “So far this year we have already identified five deals, and more are under discussion.”

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The broader trend of Chinese biotech firms licensing their intellectual property – as an alternative to raising funds by selling shares amid depressed valuations – was also continuing, with both the number of deals so far this year and their value exceeding the same period a year earlier, he said.

On CSPC, based in Shijiazhuang in northern China’s Hebei province, said it was in talks with unnamed parties on licensing development and marketing rights for its drug candidates including a targeted cancer therapy.

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Potential payments to CSPC on each candidate could add up to US$5 billion, the company said. CSPC shares surged as much as 12.3 per cent on Friday.

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