Global Innovative Drug Sector: License-outs Continue
Innovative drug license-outs are expected to remain a key driver of sector performance. MNCs are increasingly seeking to replenish their drug portfolios through external innovation, as reflected in a...
Chief Investment Office - Hong Kong version11 Feb 2026
  • Innovative drug license-out transactions to MNCs surged 161% to USD136bn in 2025
  • The Hang Seng Innovative Drug Index rose c.79% in 2025, outperforming the Hang Seng Index by 44 %pts
  • In Sep 2025, the US government drafted an executive order to impose tighter restrictions on the licensing-in of Chinese innovative drugs
  • Bullish on “less Chinese” players
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Innovative drug license-outs are expected to remain a key driver of sector performance. MNCs are increasingly seeking to replenish their drug portfolios through external innovation, as reflected in a y/y 161% surge in innovative drug license-out transactions to MNCs amounting to USD136bn in 2025. This lifted the Hang Seng Innovative Drug Index up c.79% in 2025, outperforming the Hang Seng Index by 44% pts. This trend is expected to continue as a large proportion of branded drug sales face patent expiry over the next five years. The US remains a critical target market given significantly higher drug pricing at >3x more than the rest of the world. White House data shows US buyers accounted for >40% of license-out deals last year.

Uncertainty around US license-ins of Chinese drugs. In Sep 2025, the Hang Seng Innovative Drug Index corrected the following news report that the US government was drafting an executive order to tighten restrictions on the licensing-in of Chinese innovative drugs (see: White House Officials Drafting Executive Order Enforcing Harsh Restrictions on Treatments Discovered in China: Report | PharmExec). Proposed measures include: 1) mandatory review by the Committee on Foreign Investment, a US national security body, for the acquisition of rights to China-based medicines; 2) discouraging the use of clinical trial data collected from patients in China; and 3) an increase in regulatory fees. These measures clearly target Chinese companies.

Prefer “less Chinese” players. With the US government targeting Chinese companies, we believe companies perceived as “less Chinese” carry lower risk. Key indicators could include: 1) production plant located in the US; 2) US-based auditors for financial reporting; 3) >50% long term assets held overseas; and 4) CEO, Chairman, and largest shareholders are US citizens or US-based entities.


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