China’s AI drug discovery companies land huge deals with Big Pharma

Western pharmaceutical giants are striking multibillion-dollar deals with Chinese biotech firms that use artificial intelligence, signaling growing confidence in China’s ability to deliver faster and cheaper innovative drugs. 

In June, British drugmaker AstraZeneca agreed to pay more than $5 billion to CSPC Pharmaceutical Group for access to its AI platform and a portfolio of preclinical cancer drugs — one of the largest AI biotech deals to date. CSPC, listed in Hong Kong since 1994, previously made most of its revenue from bulk drugs like vitamin C and antibiotics. It now counts innovative therapies as a core business, and has earned over $31 billion in revenue in the last year with more than 20,000 employees.  

Days later, Pfizer expanded its collaboration with XtalPi, a Hong Kong-listed biotech firm headquartered in mainland China. The companies will co-develop a quantum physics-based, AI-powered drug discovery platform. The deal followed XtalPi’s $250 million agreement with Eli Lilly in 2023, and a new partnership with U.S. drugmaker DoveTree, potentially worth over $10 billion. 

These partnerships reflect China’s transformation from generic drug manufacturer to a hub for novel drug discovery. Since 2018, local startups and established pharmaceutical firms have ramped up investment in cutting-edge research, fueling a recent surge in global licensing deals. In the first quarter of 2025 alone, Chinese companies accounted for 32% of global biotech licensing deal value versus 21% in both 2023 and 2024, according to a July report from New York investment firm Jefferies. 

AI research is central to many of the deals. In April, French pharmaceutical giant Sanofi announced a $1.7 billion agreement with Earendil Labs — a U.S.-based subsidiary of AI biotech firm Helixon in Beijing — to license two potential antibody candidates for autoimmune and inflammatory bowel diseases discovered by its proprietary AI platform. 

“China, as the world’s second-largest pharmaceutical market, continues to be an important part of the global life sciences landscape,” a Sanofi spokesperson told Rest of World, citing the country’s “dynamic biotech and technology sectors” as drivers of innovation that could benefit patients worldwide.

A Pfizer spokesperson referred to remarks by CEO Albert Bourla, who said at a June industry event that the company’s due diligence — including visits to Chinese labs — made him “very comfortable” with the quality of Chinese data. AstraZeneca, CSPC, XtalPi, and Earendil Labs did not respond to requests for comment from Rest of World, and Eli Lilly declined to comment.  

The vote of confidence from Western drugmakers reflects how Chinese biotech firms have successfully “repositioned themselves to provide innovative candidates for the global market,” said Fangning Zhang, a Shanghai-based partner at McKinsey & Company specializing in pharmaceutical and medical-tech companies. China now accounts for nearly 30% of global innovation pipeline assets — up from just 10% in 2019 — and leads in early-stage drug development across several therapeutic areas, according to her analysis of deal data.

“China [could] lead the next generation of AI-enabled drug discovery,” Zhang told Rest of World, citing the integration of software and hardware innovations across the entire R&D pipeline — from drug targeting to candidate screening and data validation. She estimated AI could unlock $15 billion to $28 billion in annual value for drug discovery globally.

Until recently, Chinese drugmakers were best known for producing low-cost traditional drugs, made with well-established chemical processes. By contrast, innovative drugs use biological systems and advanced technologies to treat diseases in new ways. 

The U.S. still leads in the number of biotech companies and ranks among the top three countries — along with France and Switzerland — in drug patent filings. The dominance extends to AI biotech research. Venture-capital investment in U.S.-based AI drug discovery firms tripled last year to $5.6 billion, with nearly half of all preclinical assets now AI-derived, according to Silicon Valley Bank. More than 100 of those assets have entered clinical trials.

But major U.S. pharmaceutical companies face mounting pressure to find new revenue sources. They could lose up to $183.5 billion in collective revenue by 2030 due to expiring drug patents, according to a July research note by Morgan Stanley.  

The Chinese biotech sector has a slew of advantages driving its success with Western drugmakers. Local firms benefit from state support, cheaper talent, and increasingly streamlined regulations. Recently, AI drug discovery was named a formal priority in China’s Five-Year Plan for 2025, leading local governments in pharmaceutical hubs like Shanghai to inject more funding into biotech ventures. 

“Biotech and AI in China are converging,” Scott Moore, director of China programs at the University of Pennsylvania, told Rest of World. With massive data sets and a large patient pool, he said, China has “structural advantages” in biomedical AI. The national health insurance system — covering over 600 million people — provides a vast training set for AI models, said Moore.   

Cheaper talent is another key draw. China has a deep bench of chemistry and AI engineers, and more than half of biotech startup founders are elite academics who transitioned to the private sector from university labs, according to data compiled by industry outlet Intellectual Medicine Bureau. 

Many of the firms use robotics to speed up drug development. Insilico Medicine, founded in 2014 by American entrepreneurs, established its Hong Kong headquarters in 2019 and quickly gained traction following major investment from Chinese backers. It now has extensive R&D operations in China and runs a “robotic lab” in Suzhou that claims to develop precision medicines with minimal human input. XtalPi, too, is at the forefront of automation in biotech and said it generates 40% of its revenue from selling automation tools to global and domestic clients.

The growth of China’s AI capabilities — including DeepSeek’s open-source models — has further boosted China’s drug discovery. The momentum is attracting interest from state and private investors alike. Besides legacy drugmakers pivoting to novel drug discovery, Chinese tech giants including Tencent, Baidu, Alibaba, and ByteDance are backing biotech startups. Tencent, for instance, was an early backer of XtalPi, and ByteDance established its own high-tech drug discovery arm in 2020.  

That shift is beginning to change global perceptions.

“China is the second biggest economy in the world and is going to be a serious innovation hub,” Moore said. Still, he emphasized that the U.S. retains the strongest foundation for breakthrough biotech development — for now.

As China’s startups benefit from state support and talent inflows of returning Chinese scientists, American firms face headwinds. A proposed U.S. tax reform bill would slash the budgets of two of the country’s main research funding bodies: the National Institutes of Health and the National Science Foundation. Tighter visa policies for foreign researchers and students could further strain the U.S. innovation pipeline. 

“The U.S. biotech and pharma industries will pay dearly for reduced access to talent,” Moore said.  

But Zhang said the biggest draws for global companies remain the relatively lower costs of licensing drugs and accessing advanced AI platforms from Chinese firms. 

“China’s innovation makes more economic sense to many European and American buyers,” she said. “I’m seeing more international firms prioritize China in their drug discovery strategies.”

“It’s becoming a strategic question,” she said. “What role should China play in your company’s future R&D strategy and priorities?”