China Pharma Licensing Trends Remain Strong; IPO Backlog Grows Amid Slower Listings
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China Pharma Licensing Trends Remain Strong; IPO Backlog Grows Amid Slower Listings
Total out-licensing deal value exceeded USD 60 billion in the first four months of 2026, showing significant structural growth; HK-listed biotech IPO application backlog hit a 5-year high, yet actual listing pace has not accelerated.
- Total licensing deal value exceeded USD 60 billion in the first four months of 2026, reaching 40% of the full-year 2025 total
- Upfront payments totaled USD 3.4 billion, accounting for 50% of the full-year 2025 total
- AI themes drove approximately one-third of deals; siRNA, bispecific antibodies, and ADCs remain highly sought-after
- HK IPO queue exceeds 70 companies, a 5-year high, but only 2 listings have occurred in 2026 so far
- Average upfront payment ratio for Chinese assets is 5%, still lower than the 12%+ for Western assets
Report interpretation
Overview
This report updates on two core funding channels for China's pharmaceutical and biotechnology sectors: out-licensing and the IPO market. The report argues that out-licensing exhibits structurally strong trends, with transaction volumes growing significantly year-to-date in 2026, serving as a vital path for asset monetization. However, despite the rapidly expanding HK IPO pipeline, the actual pace of listings has not accelerated, resulting in a severe backlog. Overall, while industry asset values are being recognized through licensing, public market exit channels remain congested.
Core views
Regarding out-licensing, total deal value in the first four months of 2026 exceeded USD 60 billion, already reaching 40% of the full-year 2025 total; upfront payments totaled USD 3.4 billion, accounting for 50% of the full-year 2025 total. This validates the firm's sector thesis that global pharma's acquisition of Chinese assets is a structural demand rather than a one-off opportunity. In 2026, AI themes have become a clear driver, with approximately one-third of deals involving AI platforms. Additionally, siRNA, bispecific antibodies, and ADCs remain the most sought-after asset types. Three mega-deals include CSPC-AZ (USD 18.5 billion), Innovent-Lilly (USD 8.8 billion), and Remegen-AbbVie (USD 5.6 billion). On the IPO front, while HK biotech IPOs saw a major recovery in 2025 (18 listings), the backlog has intensified in 2026. Year-to-date in 2026, 48 companies have filed applications; combined with 26 carryovers from 2025, over 70 companies are now waiting, marking a 5-year high. However, the actual listing pace has not picked up, with only 2 listings in 2026 so far, similar to the pace in the same period of 2025. This suggests the backlog will be difficult to clear in the short term. In terms of valuation and discounts, Chinese licensors continue to gain global wallet share, accounting for 68% of total deal value YTD in 2026 (vs. 55% in 2025). However, a relative discount persists in upfront payment ratios for Chinese assets, averaging 5% of total deal value compared to over 12% for Western assets.
Analysis framework
The firm employed data comparison and pipeline tracking methodologies. First, by comparing licensing deal data (total value, upfront payments, deal count) between China and developed markets (US/EU/Japan), it validated the rising status of Chinese assets in the global supply chain. Second, by analyzing the gap between HK IPO applications and actual listings, it assessed liquidity bottlenecks. Finally, by breaking down the ratio of upfront payments to total deal value, it evaluated pricing power discounts for Chinese assets. This analytical framework helps investors distinguish the divergence between 'asset quality recognition' (active licensing deals) and 'public market liquidity' (IPO pace).
Methodology notes
IPO Market Supply-Demand Analysis
Judges market liquidity bottlenecks by comparing IPO supply volume (companies in queue) against actual listing demand (market absorption capacity). The report cites 70+ companies in queue vs. 2 listings, indicating supply far exceeds demand.
Upfront Payment Ratio Discount Analysis
Assesses immediate deal recognition and risk discounts by comparing the ratio of upfront payments to total deal value (China 5% vs. West 12%+).
Global Pharma Asset Acquisition Transmission
Analyzes the dependence of global big pharma (downstream) on assets from Chinese biotechs (upstream), judging value chain shifts via changes in deal value share (rising from 55% to 68%).
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- 9926.HK (Akeso)Covered Stock
- Comparison
- Rating: Market-Perform | Target Price: 130.00 HKD
- ONC (BeOne)Covered Stock
- Comparison
- Rating: Outperform | Target Price: 412.00 USD
- 1093.HK (CSPC)Covered Stock; Closed USD 18.5bn Licensing Deal
- Strengths
- AI-enabled long-acting peptide platform recognized by AZ
- Comparison
- Rating: Market-Perform | Target Price: 10.70 HKD
- 3692.HK (Hansoh)Covered Stock
- Comparison
- Rating: Outperform | Target Price: 47.00 HKD
- 1801.HK (Innovent)Covered Stock; Closed USD 8.8bn Licensing Deal
- Strengths
- Undisclosed asset recognized by Lilly
- Comparison
- Rating: Outperform | Target Price: 120.00 HKD
- 600276.CH (Hengrui)Covered Stock; #1 in China Licensing Deal Count
- Strengths
- Leading licensing deal activity
- Comparison
- Rating: Outperform | Target Price: 71.00 CNY
- 1177.HK (Sino BioPh)Covered Stock
- Comparison
- Rating: Market-Perform | Target Price: 7.90 HKD
- 9688.HK (Zai Lab)Covered Stock
- Comparison
- Rating: Market-Perform | Target Price: 15.00 HKD
Key data
- Total Licensing Deal Value (First 4 Months of 2026)>USD 60 BillionReaches 40% of Full-Year 2025 Total
- Upfront Payments (First 4 Months of 2026)USD 3.4 BillionReaches 50% of Full-Year 2025 Total
- Share of AI-Themed Deals~1/3Clear Driver in 2026
- HK IPO Queue Size70+ Companies5-Year High
- YTD 2026 IPO Listings2 CompaniesPace Flat YoY vs. 2025
- Chinese Asset Upfront Payment RatioAvg. 5%Lower Than Western Assets' 12%+
Impact & implications
For the industry, strong out-licensing activity implies that even if IPO channels are blocked, high-quality assets can still achieve value realization through BD transactions, alleviating funding pressures. For investors, attention should focus on companies with core platform technologies (e.g., AI, ADC, siRNA), as they are more likely to win MNC favor. Meanwhile, the IPO backlog signals short-term liquidity risks; unprofitable biotechs unable to generate cash flow via licensing may face funding crunches.
Risks
- Continued slowdown in IPO listings increases funding pressure on unprofitable biotechs
- Risk of licensing deal terminations due to uncertainties in new drug development
- Persistent discount in upfront payment ratios for Chinese assets may impact immediate cash flows
What to watch
- Whether actual HK IPO listing volume accelerates in subsequent quarters
- Whether the gap in upfront payment ratios between Chinese and Western assets narrows
- Sustainability of momentum in AI drug discovery themed deals