To The Moon

The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Refiles to fix typo in fourth paragraph.

By Katrina Hamlin

HONG KONG, Feb 2 (Reuters Breakingviews) - AstraZeneca AZN.L just made an aggressive move in Big Pharma’s China land grab. The British-Swedish giant on Friday struck a deal worth up to $18.5 billion to license drugs from China’s CSPC Pharmaceutical 1093.HK. The booming biotech sector in the People's Republic is drawing more money from overseas giants. But enthusiastic buyers can push up prices, and not all collaborations will succeed.

AstraZeneca will license treatments for obesity and weight-related conditions from CSPC and collaborate on other projects, paying $1.2 billion upfront and as much as $17.3 billion more pending developmental and commercial milestones, per filings by the Chinese drugmaker.

Pharma giants have increasingly been using China’s vibrant biotech sector as a supermarket for new drugs. Last year, Chinese companies made out-licensing deals – where innovators sell the rights to develop and commercialise new ideas – worth a total of over $120 billion, more than doubling the previous year’s tally, according to industry data provider PharmCube.

But the CSPC collaboration is the largest on record. It eclipses the value of AstraZeneca’s 2025 trio of transactions in the country, which at a combined $13.5 billion made it one of the most active licensees among its peers. And it came only a day after the UK-headquartered company announced a separate plan to invest $15 billion to expand its operations in China, including research and development, during British Prime Minister Keir Starmer’s visit to the country.

AstraZeneca now appears to be leading the charge to capitalise on Chinese innovation. If its latest efforts succeed, the $290 billion company could grab a chunkier piece of the lucrative, growing market for anti-obesity drugs, where rivals like Eli Lilly LLY.N and Novo Nordisk NOVOb.CO have stormed ahead. Yet AstraZeneca’s own London-listed shares rose just 1% on Friday, while CSPC’s Hong Kong-listed stock fell more than 10%.

Caution is understandable. There is no certainty CSPC’s ideas become blockbusters like Novo Nordisk’s Wegovy. There’s also a risk that Chinese biotech assets become a seller's market as demand soars: large Western pharmaceuticals are hunting for new drugs as older patents expire, sapping revenue streams, and it’s getting harder to find suitable targets elsewhere. In other words, an arms race for China pharma companies is likely to push up drug prices. Listed companies’ valuations are also rising. Hong Kong’s Hang Seng biotech index .HSBIO jumped 80% in the last twelve months, double the pace of the U.S.-focused Russell 2000 Biotechnology Index.

Big Pharma will fight to find the next big thing in China; investors may be more wary.

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CONTEXT NEWS

AstraZeneca will license experimental drugs for obesity and weight-related conditions from CSPC Pharmaceutical and collaborate on other projects. The UK-based company will pay $1.2 billion upfront and up to $17.3 billion more if milestones are met, the Chinese drugmaker said in a filing to the Hong Kong stock exchange on January 30.

Separately, AstraZeneca will invest $15 billion in China over the next five years to expand medicines manufacturing and research and development, it said on January 29 as British Prime Minister Keir Starmer visited Beijing.

CSPC’s shares fell 10.2% to HK$9.6 following the news. AstraZeneca’s London-listed stock moved up 1% to 13,548 pence.

(Editing by Antony Currie; Production by Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on HAMLIN/katrina.hamlin@thomsonreuters.com; Reuters Messaging: katrina.hamlin.thomsonreuters.com@reuters.net))