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CHINESE DRUG DEALS REROUTE SPENDING; THEY DON'T DISRUPT WESTERN CROS

Global spending on drug development is shifting rather than shrinking, as Chinese out-licensing reshapes where work is done, Evercore ISI analysts said in a research note on Tuesday.

Investor concerns over growth have weighed on contract research organizations, or CROs, with factors such as biotech funding pressures, pharma spending, AI threats and competition from China pushing valuations lower in recent months.

Pharmaceutical and biotech firms hire CROs to run parts of clinical trials, such as patient recruitment, data collection and regulatory compliance.

China's contract development and manufacturing sector has grown into a $30 billion to $40 billion export market, gaining share on lower costs and integrated services. More growth is expected through 2030 if that cost edge holds.

A key driver is a surge in Chinese drug licensing deals, which reached $136 billion in 2025, with more than $60 billion already recorded in early 2026.

The rise of Chinese assets is "more substitutive than additive," said Evercore ISI analyst Elizabeth Anderson, adding that Chinese deals are displacing what would once have originated elsewhere.

This is also changing where CRO dollars flow. Early research work is increasingly carried out in China, while U.S. and European firms tend to step in for later-stage global trials.

"As commodity early-stage work migrates, the Western opportunity skews toward higher-complexity, lower-volume work that favors specialists," Anderson said.

Anderson said the overall picture amounts to "spending rerouted, not a wholesale disruption," with the impact on Western CROs likely to be "modest" as long as they have late-stage scale and specialist positioning to absorb the shift even as more basic work moves east.

(Kamal Choudhury)

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