Royalty Pharma Opens First Asia-Pacific Base in Hong Kong as Chinese Biotech Out-Licensing Deals Surge
核心洞察
Royalty Pharma (搜索), the world's largest buyer of biopharmaceutical royalties, has established its first Asia-Pacific office in Hong Kong to tap into the region's growing biotech innovation.
Chinese out-licensing transaction value surged from approximately $14 billion in 2021 to over $130 billion in 2025, with deal momentum expected to continue into 2026 and beyond.
Royalty financing offers Chinese biotech firms a non-dilutive, flexible alternative to traditional fundraising amid geopolitical uncertainties and volatility in Hong Kong's IPO market.
Royalty Pharma (搜索), the world's largest buyer of biopharmaceutical royalties, has opened its first Asia-Pacific base in Hong Kong, positioning itself to capture a share of the region's rapidly accelerating biotech innovation as out-licensing deals by mainland Chinese firms reach unprecedented levels.
The New York-headquartered company, founded in 1996, established its Hong Kong office at IFC in Central in May, joining a growing roster of multinational pharmaceutical corporations setting up operations in the city. The move comes as Chinese biotech business development deals, including out-licensing, rose 30% year on year through May 31, with total deal value surging 87% over the same period, according to an HSBC report dated June 23.
"The innovation coming out of Asia-Pacific is exciting," said Kenneth Sun (搜索), Senior Vice President and Head of Asia at Royalty Pharma (搜索). "Out-licensing activity from China comprised over $130 billion of announced transaction value in 2025, up from approximately $14 billion in 2021, and shows no sign of slowing."
Sun, who spent more than a decade at Wall Street bank Morgan Stanley before joining Royalty Pharma (搜索), emphasized that this momentum is expected to continue into 2026 and beyond, as modalities, therapeutic areas, and deal structures out of Asia become increasingly innovative, comprehensive, and diverse.
A New Funding Avenue Amid Market Uncertainty
Royalty financing provides drug developers with an alternative mechanism to raise capital by offering a share of a drug's future sales in exchange for upfront funding. This model has gained particular relevance as geopolitical uncertainties and a liquidity shift toward artificial intelligence stocks have taken a toll on traditional fundraising channels, leaving the cash-hungry biotech sector exposed to volatility in Hong Kong's initial public offering market.
"Chinese biotech firms would need royalty financing as an alternative," Sun noted, underscoring the strategic importance of the funding model at a time when US investment restrictions also loom over the sector.
The benefits of royalty financing include that it is non-dilutive to equity, carries a low cost of capital, can be tailored to meet specific funding needs, and is far less operationally restrictive than debt. The global royalty market had a record year in 2025, reaching $10 billion in announced transaction value, as royalties have become a critical part of innovative biotech companies' capital structures.
Asia's Evolution as a Scientific Innovator
Sun described a fundamental shift in healthcare investing in China over the past two decades. "From 2000 to 2010, capital came for arbitrage and access: cheap manufacturing, a vast patient pool, and a generics industry climbing the ladder," he explained. "China was a factory and a market; the value captured sat downstream, making others' molecules at a lower cost and selling them locally."
After 2010, China deliberately re-engineered the risk-reward profile of innovative R&D. Three reinforcing forces drove this transformation: regulatory credibility driven by government reforms in 2015 and 2017, capital market formation for pre-revenue science, and returning Western-trained talent alongside the emergence of bio-clusters in Suzhou and Shanghai. Each step de-risked the next investor's decision, creating a self-reinforcing cycle that lifted China's share of the global pipeline from around 4% in 2015 to approximately 14% by 2020.
"Today, the world sources innovation from China," Sun said. "Western pharma faces a period of significant exclusivity losses, while Chinese discovery runs 30 to 40% cheaper and enrols trials two to three times faster, providing a new source of innovation to enhance pipelines."
Building the Royalty Platform in Asia-Pacific
Sun's initial strategic goals at Royalty Pharma (搜索) include establishing a team and building the company's platform and brand in Asia. "I will spend time introducing the Royalty Pharma business model to biopharma companies, learning more about their funding needs and clinical programmes, and explaining how they can use royalties to help fund their businesses," he said.
While a significant portion of innovation and out-licensing activity in the region is concentrated in early-stage clinical programmes, including pre-proof of concept, Sun believes it is critical to establish a strong foundation for the biopharma royalty market now and to build enduring relationships with innovators. "By engaging early, we can ensure that as these therapies advance through clinical development, companies are familiar with Royalty Pharma (搜索) and understand how royalties can serve as a flexible, strategic source of capital to support their growth."
Royalty Pharma (搜索) has a partner-centric approach and is focused on creating win-win funding solutions. The company can provide capital at the scale of multinational biopharmaceutical companies while allowing partners to retain operational control and a greater share of the economics. It also offers an integrated Data & Analytics platform and the ability to provide valuable insight and market research.
Hong Kong and Singapore as Regional Hubs
Sun expressed optimism that key markets such as Hong Kong and Singapore can act as important hubs for innovation and investment, much in the way San Francisco and Boston do in the United States. "Having vibrant local markets is especially critical to attracting specialised talent and fostering the collaboration needed to drive biopharma innovation," he said.
Regarding trade tariffs in the Asia-Pacific region, much of which has centered around API imports, Sun noted that Royalty Pharma (搜索) is "optimistic that the global biopharmaceutical industry can navigate these dynamics" and that innovation coming out of Asia will continue. He added that the company's flexible business model is not constrained by geography or therapeutic area, allowing it to quickly adapt to any changes in the regulatory or pricing landscape.
As Asian companies increasingly leverage partnerships and licensing to build innovative pipelines, Sun sees these transactions providing much-needed capital to Chinese biotechs to advance their programmes, as well as clinical, regulatory, and commercial expertise in geographies where they may not have a presence. Over time, these Chinese companies may have ambitions to scale their businesses and build global operations, further cementing Asia's role as a genuine source of global biotech innovation.