Economic Security Report 2026: The Impact of Chinese Cross-Border Licensing on the Sovereignty and Biotechnological Ecosystem of the European Union
- Gabriele Iuvinale
- 8 ore fa
- Tempo di lettura: 16 min
The cross-border licensing market in the biotechnology sector reflects a profound structural shift in the balance of industrial power between the European Union and the People’s Republic of China. During the first half of 2026, the volume of out-licensing transactions from China to foreign markets exceeded the $60 billion threshold in the first quarter alone, indicating that the country no longer operates merely as a supplier of basic chemicals or as a commercial outlet, but as a net exporter of scientific innovation and biological screening platforms. This evolution fits within the programmatic framework of Beijing’s strategy aimed at promoting biotechnology as a new-generation productive force, accelerating the competitiveness of its domestic players through capital absorption and joint development with major global pharmaceutical groups. The metamorphosis of Chinese biotech is supported by a state-led financial architecture that does not adhere to the profit-driven and sustainability-focused logic of the Western market, relying instead on massive integrated industrial ecosystems, such as Suzhou BioBAY and the Zhangjiang Hi-Tech Park in Shanghai.
For European pharmaceutical companies, the appeal of the Chinese ecosystem lies in a competitive advantage that is both temporal and economic. China’s clinical research infrastructure enables faster cycles—from molecule identification to the submission of a new investigational drug application—than the European average, with significant cost reductions. The density of major urban centers and a centralized hospital system allow for patient enrollment rates in clinical trials that are significantly higher than Western benchmarks. However, this interdependence exposes the European Union to systemic vulnerabilities affecting economic security, intellectual property protection, and pharmaceutical sovereignty in the medium and long term. Regulatory asymmetry is evident in the management of data and biological flows, where Beijing shields the export of its genetic data and national biological resources through regulations on Human Genetic Resources, while simultaneously exploiting the openness of the European single market to integrate its value chains and diversify its vectors of technological influence.
The Haisco-Eli Lilly Strategic Agreement and the Context of Mega-Deals in 2026
The framework agreement signed on June 1, 2026, between Haisco Pharmaceutical Group and the multinational Eli Lilly and Company is a clear manifestation of this new value paradigm. The agreement takes the form of an exclusive research and development collaboration focused on up to five innovative target programs. The division of industrial roles stipulates that the Chinese biotech company will retain exclusive responsibility for the discovery and early identification of drug candidates, while the Western counterpart will take over starting with the studies leading up to the application for a new investigational drug, assuming leadership of global clinical development, regulatory procedures, and subsequent international commercialization.
The territorial provisions of the agreement establish an asymmetrical allocation of market rights. For certain programs, the license grants absolute worldwide exclusive rights, while for others, the multinational acquires global marketing rights excluding the Greater China region—which includes mainland China, Hong Kong, Macau, and Taiwan—where Haisco retains exclusive ownership and operational rights. From a financial perspective, the transaction has a potential total value of $3.054 billion. The structure follows the risk mitigation model typical of the sector, with an initial upfront payment of $87 million and the remaining amount contingent upon the achievement of clinical, regulatory, and commercial milestones, supplemented by future net royalties calculated on a progressive single-digit percentage basis.
This transaction is not an isolated case, but is part of a series of massive deals that have taken place since the beginning of the year. Notable among these are the $18.5 billion deal between CSPC Pharma and AstraZeneca in the obesity and diabetes treatment sector, the $15 billion agreement between Hengrui Pharma and Bristol Myers Squibb covering a pipeline of 13 new drugs, the $10.5 billion alliance between Innovent Biologics and Pfizer focused on oncology with 12 research programs, and the $5.6 billion contract between RemeGen and AbbVie for the experimental compound designated RC148, intended for solid tumors. Added to these are the $2.75 billion agreement between Insilico Medicine and Eli Lilly focused on AI-driven drug discovery, and the $1.53 billion agreement between Sino Biopharm and Sanofi for the global license of Rovadicitinib. These examples confirm that large pharmaceutical companies tend to acquire entire external research departments and complex technological platforms, shifting the focus of their investments from traditional oncology to metabolic diseases and oligonucleotide technologies.
Contract Types and Corporate Structures for Entering International Markets
The legal structuring of these transactions varies depending on the market capitalization and maturity of the Chinese operator’s pipeline, resulting in different governance arrangements and risk allocations.
The co-development and co-commercialization model is primarily adopted by established, large-cap Chinese companies, known as “Big Biotech.” These companies have internal cash flows and do not depend on immediate capital raising for operational survival. Consequently, they maintain strong bargaining power, which translates into demands for high upfront payments, equity stakes, and the retention of commercial exploitation rights in domestic markets. A key feature of the contract is the establishment of joint development and commercialization committees with equal voting rights and strict mechanisms for resolving decision-making deadlocks, ensuring that the Chinese partner plays an active role in the management of global clinical trials.
The model based on separate offshore entities, known as NewCo, is the preferred strategic choice for mid-cap Chinese biotech companies that possess validated clinical assets but lack an international commercial and regulatory network. In this scenario, the Chinese innovator spins off the rights to commercialize the molecule outside of China, transferring them to a new legal entity incorporated in jurisdictions with favorable tax regimes or flexible corporate laws, such as the state of Delaware or the Cayman Islands. The new company is capitalized by international venture capital funds to finance the costly advanced phases of clinical trials in the West. The Chinese company operates simultaneously as the original licensor and as a minority shareholder, increasing its equity value and securing a stake generally ranging between twenty and thirty percent of the company’s growth potential. The complexity of negotiating this structure centers on drafting anti-dilution protections and minority governance rights to prevent the Chinese stake from being marginalized in subsequent financing rounds.
Startups and early-stage companies, on the other hand, rely on traditional licensing structures. Facing an objective imbalance of bargaining power when dealing with large multinationals, these entities aim to create competitive pressure through parallel bidding processes involving multiple bidders. The technical objective of legal counsel is to prevent the asset from being licensed at a low cost and to bind the counterparty to stringent development obligations.
Operational Safeguard Clauses and Negotiating Traps in the Transfer of Rights
The definition of contractual terms directly affects the long-term preservation of the patrimonial value of assets. Legal practice highlights five areas of vulnerability where the absence of detailed clauses can invalidate the economic benefits of the agreement.
The first vulnerability concerns the adoption of generic definitions for development commitments, historically formulated under the wording of "commercially reasonable efforts." This formulation allows the licensee to slow down or freeze the development of the transferred molecule should it decide to prioritize competing internal projects. To obviate this risk of shelving, contracts drafted with modern standards replace subjective criteria with mandatory time deadlines, minimum annual non-refundable spending obligations dedicated exclusively to the program in question, and explicit binding development milestones, such as fixing rigid deadlines for the dosing of the first patient in Phase III studies.
The second criticality lies in the management of the licensee's corporate change of control. In the event that the partner multinational is acquired by a direct competitor of the Chinese innovator, the commercial destiny of the asset is compromised. The contractual text must therefore explicitly discipline the options for immediate termination or the forced renegotiation of technological safeguards in similar scenarios of proprietary mutation.
The third trap manifests in the decomposition of the conditions that trigger payments linked to clinical milestones. Multinationals can partially modify protocols or designs of clinical studies subsequent to signing in order to formally bypass the technical wording of the agreed milestone. Contractual prevention requires tying the payment to the achievement of objective biological and regulatory targets, regardless of the formal name of the study.
The fourth area of legal clash concerns the ownership and use of clinical data generated during the collaboration. Agreements must secure co-ownership or guarantee free, perpetual, and irrevocable licenses to use the results of trials performed abroad, allowing the originating company to use international dossiers to support its domestic regulatory approvals.
The fifth trap is represented by purely illusory reversion rights. In the event of early termination of the contract or default by the multinational, the simple return of patent ownership leaves the originating company with an empty shell. Real reversion clauses must impose the obligation of immediate and free transfer of all regulatory dossiers filed with competent authorities, raw clinical databases, clinical samples, and the technical know-how necessary for the chemical synthesis, new formulation, and industrial production of the drug.
The Degree of State Subsidization and the Impact of Overcapacity in Key Sectors of the European Union
State financing in the People's Republic of China is articulated through a stratified network of Government Guidance Funds, which inject liquidity into the system at zero interest rates, covering up to seventy percent of the research and development costs of local startups. To this is added the allocation of subsidies for the purchase of advanced instrumentation, such as industrial high-parameter flow cytometers and liquid chromatography mass spectrometers, tax exemptions for patents filed abroad, and state reimbursements for the recruitment of international scientists. This influx of public capital alters the cost of capital for Chinese enterprises, generating chronic production overcapacity that is exported to foreign markets at dumping prices, hitting three nerve segments of the European supply chain.
In the basic active pharmaceutical ingredients segment, state subsidization has allowed Chinese companies to reach a forty-three percent share of global exports of antibiotic ingredients, with China officially surpassing India in the presentation of regulatory Drug Master Files. Beijing holds an absolute monopoly as the sole source of global supply for at least one of the key starting materials (KSM) in over 700 different active pharmaceutical ingredients. The distorting impact on the European market emerged with the legal action undertaken by the Sandoz group at the European Commission, aimed at denouncing Chinese dumping on amoxicillin trihydrate. Chinese producers offer the active ingredient at prices forty-seven percent lower than European production costs. This economic asphyxiation causes the closure of production sites in Europe, resulting in a situation where over eighty percent of antibiotic ingredients depend stably on Asian supplies, rendering European chemical relocation attempts ineffective as they continue to depend on Chinese KSMs for their basic inputs.
In the genomic sequencing segment, the action of Chinese giants such as the BGI group and its subsidiary MGI Tech configures a risk of technological and informational monopoly. By providing sequencing services at rates fifty percent lower than European laboratories, Chinese entities integrate their machinery into universities and clinical research centers of the European Union in order to accumulate enormous centralized biobanks containing genetic data, blood samples, and epidemiological profiles of European populations.
In the field of synthetic biology, Chinese companies are saturating the market for bio-manufacturing platforms. Public subsidies cover the purchase of industrial bioreactors and the development of engineered cell strains for the production of enzymes and biomaterials, practicing offer prices that are unsustainable for European startups and blocking at birth the development of a sovereign synthetic biology industry in Europe. This forces companies on the continent to outsource advanced manufacturing and the production of nucleotides, biochemical elements indispensable for scaling vaccines and therapies based on the promising mRNA platform.
Vectors of Military-Civil Fusion and Academic Infiltration Linked to the People's Liberation Army
China's strategic posture in the biotechnological sector is governed by the doctrine of military-civil fusion. This structural layout erases the separation between civil medical research laboratories and applications destined for national security or the defense sector. Under the tenure of Chinese laws on state security, data protection, and the 2020 biosecurity law, government authorities retain the right of access to all information assets and biological resources held by national companies.
The doctrinal apparatus of the People's Liberation Army (PLA) formally defines biotechnology as a new emerging domain of military struggle. Since 2005, strategic PLA documents highlight that recently developed technologies, such as genetic engineering, cloning, and tissue repair mechanisms, lend themselves directly to military purposes, including formal discussions on genetic modification both for offensive biological warfare and for the enhancement and improvement of the capabilities of combat personnel on the field.
Economic intelligence detects a systematic employment of Chinese academic institutions as vectors of penetration and technology transfer to the benefit of Beijing's military apparatus. Universities such as the National University of Defense Technology and the Academy of Military Medical Sciences operate in close synergy with civil laboratories and national biotech companies. Infiltration within the European research space is articulated through doctoral and post-doc programs granted to Chinese researchers affiliated with military academies in the fields of gene editing, brain-computer interface, and computational virology, who maintain the obligation to transmit intermediate results to China.
Furthermore, through the financing of joint scientific projects, Chinese institutes linked to the People's Liberation Army offer economic endowments to European universities in exchange for access to co-owned patents and to the methodology for training artificial intelligence algorithms applied to protein modeling, drug discovery, and cellular toxicology, transferring sensitive skills directly into the biosecurity programs of Chinese defense.
Tactics of Asymmetric Circumvention of European Union Trade Defense Dispositives
The European Union attempts to mitigate risks deriving from Chinese economic activism through administrative and regulatory instruments, including the regulation on the control of foreign direct investments, directives on personal data protection, and the foreign subsidies regulation. This last instrument confers upon the European Commission the power to investigate and block corporate acquisitions should an extra-communitarian actor utilize distorting state subsidies to alter competition in the internal market. Faced with these barriers, Beijing adopts circumvention strategies defined as asset-light. Since foreign direct investment screening mechanisms trigger principally in the presence of acquisitions of controlling equity shares in European enterprises, Chinese actors privilege the stipulation of exclusive license agreements and the establishment of joint ventures focused only on research and development, eluding government controls while equally acquiring co-ownership of data and the generated know-how.
A further tactic involves resorting to acquisitions of control via Leveraged Buy-Outs and shell funds. Beijing finances the creation of Private Equity funds based in London, Luxembourg, or Singapore that purchase majority stakes in medium-sized European biotech companies; formally the buyer appears Western, but the underlying capital comes from Chinese state banks. On the commercial level, technology transfer occurs via Reverse Out-Licensing operations, in which Chinese multinationals purchase the global exclusive rights of a European technological platform, effectively hollowing out the European company of its exclusive technological capacity and transferring the source codes of algorithms to Chinese servers.
Finally, Chinese biotech companies focused on genomic data establish their legal headquarters and clinical trial storage servers in member states characterized by less rigid application of security regulations, subsequently exploiting the principle of free provision of services and the single market to operate freely throughout the territory of the European Union, neutralizing the national defenses of the more rigorous countries.
The Information Deficit of the European Union and Shortcomings in Pharmaceutical Stock Management
Unlike other global actors, the European Union suffers from a structural vulnerability linked to the absence of a centralized economic intelligence architecture endowed with supranational operational powers. The collection of information on asymmetric threats in the bio-pharmaceutical sector and the monitoring of military-civil fusion remains confined within the individual national security agencies of the member states. European coordination bodies such as INTCEN depend entirely on voluntary and fragmented information contributions from national governments, resulting in an analysis deficit that prevents the conduction of asset verifications and corporate inspections in real time on Chinese counterparts prior to the completion of cross-border agreements.
This information deficit overlaps with a profound weakness in the management of emergency medical reserves. The Health Emergency Preparedness and Response Authority (HERA), while operating to strengthen continental health security, disposes of budget and operational constraints that limit its effectiveness compared to homological Western agencies. European centralized storage implemented through the rescEU mechanism concentrates almost exclusively on finished medical countermeasures, ready-to-use drugs, and personal protective equipment for pandemic events.
The European Union does not possess physical reserves or strategic deposits of bulk active ingredients or key starting materials. Consequently, the entire industrial network of European bioreactors and production plants integrated into the EU FAB consortium operate according to a short-term logistical logic devoid of protective cushions. In the presence of a prolonged geopolitical crisis in the Asian theater or a targeted blockade of exports by Beijing, the pharmaceutical assembly line of the European Union would exhaust its chemical raw materials within a few weeks, causing the paralysis of the manufacturing of essential and life-saving medicines.
Systemic Risks of Spionaggio, Dependence, and Deindustrialization for the European Union
Current trends highlight three structural threats to the stability of the industrial compartment and the economic security of the European Union in the medium and long term.
The first risk is linked to biotechnological and industrial espionage. The integration of drug discovery software driven by artificial intelligence of Chinese origin or the outsourcing of clinical trials exposes the value chain of European companies to cyber infiltration and theft of intellectual property. Through targeted cyber attacks on clinical data storage servers, economic actors linked to Beijing can appropriate the results of years of scientific research to develop drugs with slight chemical modifications but identical biological efficacy, shortening internal approval times and erasing the European competitive advantage. To this is added the drain of procedural know-how related to the formulation and production of advanced therapies, such as antibody-drug conjugates, conveyed by technical personnel operating in joint ventures located in Chinese territory.
The second risk materializes in the trap of long-term strategic dependence and in the vulnerability of the European Union's biodefense architectures. The continent depends structurally on subsidized Chinese companies for components used in the treatment of Category A and B bioterrorism agents, including therapy lines for anthrax, plague, and tularemia. If European biotech companies progressively renounce maintaining an autonomous infrastructure for conducting early clinical phases, subcontracting the validation of molecules to the ecosystem of Chinese contract research organizations for cost reasons, the continent will lose the sovereign capacity to develop and test its medical defenses independently. In a scenario of geopolitical crisis, supply chain disruption, or military escalation in the Taiwan Strait, Beijing would possess an unprecedented leverage of blackmail, being able to block access to essential medicines and next-generation vaccines.
The third risk expresses itself in the progressive loss of market shares and in the financial displacement of the native filiere of European innovation. By offering chemical compounds and molecules at heavily discounted prices thanks to state subsidies, Chinese companies attract large European pharmaceutical multinationals, which prefer to sign early out-licensing agreements (seventy-five percent of recent contracts concentrate on the pre-clinical phase and Phase I) with Chinese startups rather than European ones. This phenomenon deprives small and medium-sized biotechnology enterprises of the European Union of the downstream financial flows necessary to survive and refinance. Once financial and scientific leadership is consolidated in the Asian market, which represents the fastest-growing pharmaceutical user base globally, these Chinese actors will utilize internal economies of scale to enter the European market directly, progressively replacing historical European brands on communitarian soil and reducing the European Union to a condition of definitive technological, commercial, and healthcare subalternity.
The European Resilience Agenda and Economic Security Countermeasures
The neutralization of the asymmetric Chinese threat in the biotechnological compartment would impose upon the European Union the transition from a posture of bureaucratic reaction to a strategy of proactive defense, based on convergence between national security instruments and communitarian industrial policies. Such an institutional response would be articulated across five cogent lifelines.
The first countermeasure would concern the institution of centralized and standardized scrutiny over out-licensing contracts and biological data transfers, overcoming the current fragmentation among member states. The European Commission should extend the application of the Regulation on the screening of foreign direct investments also to exclusive license agreements of technological platforms (asset-light) and to the constitution of offshore NewCos involving Chinese vectors. This control mechanism should bind the approval of contracts to the verification of the absence of links, direct or indirect, of Asian partners with the military-civil fusion chain and with universities linked to the People's Liberation Army, imposing the physical and legal localization of genomic data and European trials on sovereign servers protected by state cryptography. To support this regulatory device, the European Commission should establish, within the framework of biopharmaceutical compartment reforms, a supranational agency for economic intelligence and biosecurity. This structure would operate as a permanent information center endowed with inspectorial powers over international contracts, tasked with mapping the actual ownership of foreign funds and blocking the exfiltration of biological data prior to the finalization of agreements.
The second lifeline would focus on compensatory financing and on the creation of a European capital market for life sciences. To extricate startups and medium-capitalization biotechnology companies from the necessity of accepting predatory capital or disadvantageous licensing agreements from Beijing, the European Union should strengthen the doctrine of the Critical Medicines Act. This would translate into the activation of sovereign Venture Capital funds, fueled by the European Investment Bank, capable of guaranteeing European biotech companies access to non-dilutive capital for sustaining costly intermediate clinical phases, eliminating the differential in the cost of capital compared to subsidized Chinese enterprises.
The third countermeasure would impose the rigorous application of the Foreign Subsidies Regulation to the supply chains of active ingredients, key starting materials, and sequencing services. The European Commission should launch systematic ex officio investigations into price lists offered by Chinese colossi on communitarian soil, applying structural countervailing duties should the existence of cross-subsidies or below-cost sales aimed at the asphyxiation of European producers be ascertained. Parallelly, the public procurement policies of national healthcare systems of the Union should abandon the exclusive criterion of the lowest price, introducing criteria of supply chain security and geographical diversification, incentivizing domestic bio-manufacturing and friend-shoring to reconstruct the pharmaceutical and industrial sovereignty of the continent.
The fourth lifeline would introduce exclusion from public financing and healthcare reimbursement systems for European products developed through instrumentation or platforms of Chinese companies classified as being of interest to national security. The European Union should establish an exclusion list for suppliers of genetic services or integrated bio-manufacturing linked to Beijing. The regulatory alignment of the European Medicines Agency should subject to extraordinary audits the registration dossiers of pharmaceuticals that rely exclusively on data chains or clinical trial sites located in the People's Republic of China, incentivizing communitarian Big Pharma to divest from Beijing's networks so as not to lose access to the single market.
The fifth countermeasure would concern the creation of a European Strategic Reserve of Key Starting Materials and Nucleotides, expanding the framework of reserves for health emergencies managed by HERA. The European Union should not limit itself to stockpiling finished pharmaceuticals, but should finance the creation of centralized KSM deposits for the over 700 active pharmaceutical ingredients currently under Chinese monopoly, including essential treatments for biodefense and for countering pathogenic biological agents. This reserve should cover a communitarian need estimated at no less than twenty-four months, providing the temporal cushion necessary to activate internal emergency production chains in the event of an export blockade or a global geopolitical crisis in the Asian theater.
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