Challenges and Value Creation in China Life Sciences Licensing

The report

Challenges and Value Creation in China Life Sciences Licensing was authored by Deloitte China LSHC Consulting Team. The report outlines the practical challenges Chinese companies face in medical product licensing deals. Summarizing the key issues transaction parties face in licensing deals, it shares some best practices from strategic, operational, and business levels to build and enhance licensing transaction management capabilities,  along with an execution roadmap for companies to take immediate action.

Viewpoints / key findings

Overview

In recent years, medical product licensing deal volume and deal value have surged in China. Licensing activity was particularly vibrant in 2021, with record-breaking deal volume and deal value.

Licensing deals go way beyond just buying the rights and interests of a product. Instead, they require long-term collaboration. Issues encountered by Chinese enterprises can be due to external policies and the market environment, or insufficient management capabilities of those involved in cooperation. The challenges involved as categorized in the following four types:

• Lack of clear strategy and cooperation purpose
• Insufficient capabilities or inadequate evaluation of the parties involved
• Failure to predict possible problems in fulfilling licensing deals
• Ineffective responses to unforeseen events

To address these challenges, these parties should work with industry professionals to identify common pitfalls, establish and optimize a license management process, form a dedicated department to track progress, train employees, communicate early in negotiations to address possible risks, and formulate a detailed execution roadmap. The goal is to maximize the potential value of each deal.

The management of licensing deals should pivot from 'individualism and opportunism' with reliance on individual professionals, to 'collectivism' based on inter-functional collaboration, and then progress to incorporate 'endemic and characteristics' factors into the company's management system to accomplish development goals. Whether it is to address domestic operational pressures, or to achieve overseas expansion, Chinese pharmaceutical and medical device companies must enhance their management of licensing deals to maximize the value of licensed products.