Tapping into China’s rising influence on drug development

A recent surge in high-value deals where Chinese biotechnology companies originate novel assets that are then licensed by Western pharmaceutical firms for global development and commercialization has fostered a more competitive, efficient and ultimately more productive environment for therapeutic innovation, with the potential to benefit patients and investors worldwide, according to Fidelity Portfolio Manager Eirene Kontopoulos.

“By licensing a promising, clinically validated asset from a Chinese partner, pharma and large biotechs can supplement their internal drug-development pipeline with greater capital efficiency,” says Kontopoulos, who manages Fidelity Advisor^® Biotechnology Fund. “This allows them to allocate internal R&D funds toward higher-risk, frontier science, rather than just competing for the same domestic assets.”

In helming the industry-based, equity-focused strategy since 2018, Kontopoulos believes that successfully investing in biotechnology requires a competitive edge on the science behind the drugs, the likelihood of clinical success and the size of the total addressable market. She favors companies that can develop what she considers the most innovative therapies.

Kontopoulos has watched with interest as China’s influence has grown amid a shift away from the primary model in which Western innovation was licensed into China for local-market access: In 2024, about 30% of all assets in large pharma licensing deals came from China, a significant increase from 20% in 2023 and a very low level five years ago, she says.

“With more ‘shots on goal’ coming from multiple geographic locations, the probability of successfully bringing transformative medicines to market increases,” says Kontopoulos, who holds a doctorate in neuroscience from Harvard Medical School.

Sourcing assets from China has some noteworthy advantages, according to Kontopoulos, particularly in fast-evolving areas like antibody-drug conjugates, or ADCs, and cell therapies.

As an example, she cites the shorter timeline that can result from the operational speed and agility often demonstrated by Chinese biotechs in early-stage clinical development.

The significant success of Chinese-developed ADCs has created a rising tide that has lifted the entire field,” she explains, adding that it has attracted more investment, talent and research into the ADC space globally, leading to second- and third-generation advancements that otherwise might have taken longer to emerge.

One of the ways she has positioned the fund to potentially capitalize is through a stake in Summit Therapeutics. The Miami-based company has partnered with Chinese firm Akeso to license the former‘s breakthrough bispecific antibody, ivonescimab, according to Kontopoulos, who describes Akeso as a pioneer and source originator in developing innovative antibodies.

“The agreement supports Summit’s mission of developing and commercializing groundbreaking oncology pipeline products aimed at improving the quality of life of patients with a serious unmet medical need,” she says.

Larger drugmakers also are getting involved, with Kontopoulos pointing to Regeneron Pharmaceuticals’ licensing of an obesity-related asset from China, as well as AbbVie sourcing an oncology asset. AbbVie was the fund’s top holding as of September 30, at 19% of assets, whereas Regeneron was not held.

“This licensing of Chinese assets by global drug manufacturers is a trend that may have far-reaching implications – potentially accelerating the delivery of innovative therapies to market and boosting revenue for biopharma firms,” concludes Kontopoulos.