China emerges as obesity drug lab for Big Pharma

Innovent Biologics

Wed 08:22

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Katrina Hamlin
HONG KONG, Nov 12  (Reuters Breakingviews) - Big Pharma’s quest for the next big thing in obesity drugs is leading to China. With patent cliffs looming, Novo Nordisk NOVOb.CO, AstraZeneca AZN.L, Pfizer PFE.N and competitors are hungry for new ideas. Meanwhile, the Middle Kingdom is in the midst of a biotech boom. Companies ranging from giants like $46 billion Jiangsu Hengrui Pharmaceuticals 600276.SS to five-year-old startup Rona Therapeutics are converging on a growing global market for weight loss treatments.
China only recently became a biotech powerhouse. Until the 2010s, its drugmakers mostly churned out cheap knock-offs of Western medicines, and clinical trial data were too shoddy for international regulators to trust. The shift began in 2011 when Beijing dubbed the sector a strategic emerging industry, alongside electric cars and cleantech. That kickstarted a years-long effort to bring lacklustre labs’ standards in line with international norms, and to build out infrastructure with billions of dollars of subsidies and private investment.
The reforms worked. By 2024, China had registered more clinical trials than the US, according to the World Health Organisation. Chinese trials also trumped Stateside peers in cost and speed, per a June survey of over 100 leaders in the American biotech industry and academia. One Pfizer executive estimates that drug development in the Middle Kingdom is three times as fast as in Europe.  
     
That speed has translated into increasing volumes of new drugs. The country’s army of researchers had nearly 5,000 innovative drugs in the pipeline by the end of last year, per Xinhua news agency. That glut is turning heads from Basel to California, where pharma executives are on an urgent hunt for fresh ideas as patents worth more than $500 billion in projected annual drug sales are due to lapse by 2033.  
     
Their plight is particularly acute for weight-loss drugs. The patent for semaglutide, the active ingredient in Novo Nordisk's Ozempic and Wegovy, expires in major markets in 2031, opening the door to cheap generics. Meanwhile, competitors are looking for ways to enter the market, which is expected to grow from around $72 billion today to $180 billion in a decade, according to Nomura. The fact that just two players, Novo and Eli Lilly LLY.N, dominate the space today makes it an even more attractive target.
Refilling the medicine cabinet the traditional way is slow and expensive. Developing a drug in-house can take up to 10 years. Snapping up young US-listed companies and their portfolios used to offer a shortcut, but that’s become pricey: The Nasdaq Biotech Index .NBI hit record highs this year, climbing 37% in 12 months.
     
That makes China’s speed and affordability alluring. However, the old M&A model does not translate well, because Beijing is wary of overseas companies controlling homegrown champions.
Big Pharma has found a way around that by striking deals to buy the specific rights to develop and commercialise drugs in markets outside of China – a practice known as outlicensing. Its popularity has skyrocketed: the total value of such deals has already topped $159 billion in 2026, eclipsing last year’s record, according to PharmCube.
Treatments targeting cancer drove the trend, but weight-loss solutions are emerging as a new frontier as the global market expands. Deals for weight-loss solutions have surpassed $47 billion since they first emerged in 2023. And there’s plenty more in the pipeline. Nearly 250 Chinese GLP-1 candidates are under development, per PharmCube data.
Even weight-loss pioneers like Novo are shopping. In September, the creator of smash-hit medicines Wegovy and Ozempic, which use synthetic GLP-1 hormones to curb appetite, agreed to pay up to $2.6 billion to outlicense an experimental pill from Jiangsu Hengrui Pharma. The draw was its potential to offer patients a weekly oral dose, rather than regular injections or daily doses that the Danish drugmaker is currently selling.
As well as attempting to help patients shift more unwanted weight, they are trying to crack problems dogging earlier generations of weight-loss drugs. Whether or not that promise holds up once products are commercialised remains to be seen, but early signs are tantalising.
     Sciwind Biosciences says a 48-week trial of its Ecnoglutide GLP-1 saw only 2% of participants quit due to unwanted side effects. Adverse reactions, such as nausea, are the second most common reason patients abandoned treatment, after financial barriers, per Cleveland Clinic research. Those challenges make quitting the norm, not the exception: Only one in four patients prescribed Wegovy or Ozempic took the medicine two years later, according to a 2024 study.  
The more novel the solution and the bigger the market, the higher the price, making cutting-edge weight-loss treatments particularly lucrative. Total deal value for weight-loss drugs over the past four years have been roughly triple the mean rate across all drug types.
True, those deals typically comprise relatively puny upfront payments, plus beefy milestone payouts which only appear when the asset hits key clinical or commercial milestones, helping buyers manage the very real risk a candidate fails to deliver. But Hengrui, Sciwind and compatriots have become better negotiators, using tactics such as royalties that rise with sales, options, or equity to capture more future upside.
Chinese upstarts are also highly motivated to come to the table because they need international peers’ expertise to go global. Most lack the branding and know-how to navigate a sensitive, highly regulated area abroad. And breaking out from the Chinese market is imperative. Despite their home’s vast patient population - around half of adults are overweight or obese according to one national survey - the opportunity to sell weight-loss drugs is not yet huge.
The government strives to keep medicine affordable. Eli Lilly lowered its tirzepdatide price to 324 yuan for 10mg from 1,758 yuan following 2026 negotiations over China’s drug list for public medical insurance, per Nomura. Growing competition, including from local rivals like Innovent’s 1801.HK Mazdutide, adds pricing pressure.  
     
Novo estimates China’s GLP-1 market is worth only around 6 billion Danish krone, less than $1 billion, versus more than $20 billion for Europe and Canada. While that could swell to around $20 billion by 2035, according to Nomura research, that still implies 90% of global sales will be elsewhere.  
China’s biotech companies are eager to keep feeding Big Pharma's addiction to Chinese innovation. For now, global rivals are prepared to accept their growing dependency. 
     
Follow Katrina Hamlin on Bluesky and LinkedIn

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