The wave of mergers and acquisitions targeting Chinese innovative drug assets appears to be surging once again.

 

On March 24, the Financial Times reported that pharmaceutical giant Merck & Co. (known as MSD outside the U.S.) is nearing an all-cash acquisition of Terns Pharmaceuticals for approximately $6 billion.

 

Just one day earlier, Gilead Sciences announced the acquisition of NewCo Ouro Medicines for $2.175 billion. Ouro's core asset—a BCMA/CD3 bispecific TCE antibody—originated from Chinese biopharmaceutical company KeyMed Biosciences.

 

Two deals, announced within days of each other, totaling over $8 billion. This is no coincidence.

 

The looming patent cliff represents a core pressure point that MNCs will face in the coming years. Over the next several years, nearly 200 drugs worldwide will lose patent protection, including at least 69 blockbuster drugs with annual sales exceeding $1 billion each. The cumulative loss in sales revenue could exceed $300 billion.

 

Acquisitions are undoubtedly a fast track to escape the patent cliff. And at the other end of this track, Chinese innovative drug assets are being repriced by global capital in ways never seen before.

 

 

01、Twilight of the "Blockbuster King"

 

Looking back to early February 2026, the day Merck released its 2025 earnings report, one can better understand the anxiety within the giant.

 

The report showed that Gardasil, once a growth engine, saw sales plunge 35% due to weak demand in China and Japan. Meanwhile, Keytruda, the "blockbuster king" that supports half of Merck's business, contributed $31.7 billion in revenue in 2025, but its core patent expires in 2028. That leaves Merck with less than two years.

 

Wall Street's patience has always been limited. On the earnings call, analysts questioned whether Merck is a company that grows slowly in good economic times and faces significant pressure in bad times.

 

Merck CEO Robert Davis responded that the company is in "the broadest and most diversified product pipeline cycle in years."

 

As proof, Merck has embarked on a series of acquisitions—from last year's $10 billion acquisition of Verona Pharma and $9.2 billion acquisition of Cidara Therapeutics, to the current planned $6 billion acquisition of Terns Pharmaceuticals.

 

Terns was founded in 2016 by scientists including Zhong Weidong, with headquarters in California and Shanghai. The company is focused on developing an early-stage therapy for chronic myeloid leukemia (CML), a rare blood and bone marrow cancer caused by genetic mutations. In the U.S., there are approximately 9,560 new cases annually. This appears to be a relatively small market, but Merck clearly sees deeper value.

 

Terns' core asset targets the market of Novartis's star drug Scemblix. Novartis recently raised its peak annual sales forecast for Scemblix to $4 billion. This means that if Terns' drug successfully reaches the market, it could become a potential blockbuster product. More importantly, this acquisition can be seen as a key move in Merck's restructuring of its oncology business.

 

Just prior, in February, Merck completed a major organizational restructuring. The company split its core human health business into two independent divisions: an oncology division, and a specialty, general medicine, and infectious diseases division. Public interpretation suggests this is a proactive defense by Merck against the Keytruda patent cliff. However, in Robert Davis's view, it may be the foundation-laying ceremony for a new empire.

 

From immunomodulation to tissue targeting to intrinsic tumor mechanisms, Merck's oncology business landscape has never been as complex and dynamic as it is today.

 

In 2022, Merck entered into a collaboration with Kelun-Biotech, acquiring exclusive rights outside Greater China to the TROP2 ADC drug sacituzumab tirumotecan for a total deal value of nearly $1.4 billion. In 2023, an even larger deal emerged: Merck licensed three ADC assets from Daiichi Sankyo in a deal totaling $22 billion.

 

In addition to the current Terns acquisition, in early 2026 Merck was also in talks to acquire Revolution Medicines, whose core asset Daraxonrasib targets the KRAS G12D mutation, which accounts for up to 40% of pancreatic cancers. Although negotiations ultimately fell through, Merck's intent to build a presence in the RAS field is clear.

 

Whether this diversified transformation succeeds will determine whether this giant—once the top-ranked MNC in oncology revenue—will be an "old king in twilight" or witness the "rise of a new dynasty" over the next decade.

 

 

02、A New Wave of M&A?

 

While Merck's $6 billion acquisition fits the narrative of a "blockbuster king's self-rescue," Gilead's acquisition of Ouro Medicines on March 23 tells a different story: the march of Chinese innovative drug assets to the global center stage.

 

In November 2024, KeyMed Biosciences granted Ouro Medicines exclusive global rights (excluding mainland China, Hong Kong, Macau, and Taiwan) to develop, manufacture, and commercialize CM336, a BCMA/CD3 bispecific TCE antibody independently developed by KeyMed. Under the NewCo model, Chinese biotechs typically retain an equity stake in the newly formed company.

 

This transaction model was once highly popular in China's innovative drug circle, almost commonplace. But no one expected that Ouro, established just over a year ago, would be wholly acquired by Gilead for an upfront payment of $1.675 billion plus up to $500 million in milestone payments.

 

As a shareholder of Ouro, KeyMed holds approximately 15% equity and will receive approximately $250 million upfront, plus up to approximately $70 million in milestone payments.

 

This is not only a victory for KeyMed but also a landmark event: it marks the first time a NewCo established with Chinese participation has been wholly acquired by a multinational pharmaceutical company.

 

In fact, similar narratives have played out repeatedly in recent years. From late 2023 to early 2024, China's biotech sector experienced a rare wave of cross-border acquisitions: Gracell Biotechnologies, SanReno Therapeutics, AnHeart Therapeutics, ProfoundBio, and Biotheus—five biotechs were successively acquired by overseas pharmaceutical companies.

 

BioNTech's moves have been textbook. In 2023, it licensed overseas rights to Biotheus's PD-L1/VEGF bispecific antibody for a $55 million upfront payment. One year later, it acquired Biotheus outright for $800 million. Six months after that, BioNTech sublicensed partial rights to the same bispecific antibody to BMS for $1.5 billion, recouping its costs while retaining future milestone payments and royalty rights.

 

Of course, not all acquired pipelines achieve happy endings. After ProfoundBio was acquired by Genmab, three of its four ADC assets were terminated, leaving only Rina-S, which then became embroiled in a lawsuit with AbbVie. When Biotheus was acquired, it had eight clinical-stage products, but only two core assets were ultimately integrated into BioNTech's pipeline.

 

"In the U.S., if a buyer decides not to pursue an acquired pipeline that still has value, it is typically spun off into a new NewCo. If it has no value, it is simply abandoned," explained Dr. Bao Jun, Founding and Managing Partner of Puyuan Innovation, in an interview.

 

Bao believes that Chinese innovative drug assets are gaining global attention, but the pipeline strategies of pharmaceutical giants are inherently dynamic. The assets they retain will inevitably be those highly aligned with their overall strategy.

 

 

03、Revaluing Chinese Assets

 

Putting Merck's $6 billion acquisition and Gilead's $2.175 billion acquisition together reveals an increasingly clear trend: Chinese innovative drug assets are undergoing a valuation restructuring from "low-hanging fruit" to "hard currency."

 

In 2025, the total value of out-licensing deals for Chinese innovative drugs exceeded $130 billion, with over 150 licensing transactions—far surpassing the $51.9 billion and 94 deals recorded for the full year 2024. Entering 2026, this momentum has not slowed; it has accelerated.

 

According to incomplete statistics, as of 2026, outbound BD deals for domestic innovative drugs have reached 45, a 73% year-on-year increase, with a total disclosed value of $57.5 billion, a 135% increase.

 

"Acquisitions themselves are relatively rare phenomena," Bao Jun noted. Most cross-border acquisitions of Chinese biotechs are related to their offshore corporate structures—companies incorporated in the U.S., listed in the U.S., or structured as Cayman entities, which offer many conveniences for acquisitions. However, in his view, acquisitions of Chinese assets are still possible going forward, especially when a company holds a very important asset.

 

In an interview with PharmaDJ, Yang Huang, Head of Healthcare Research for Greater China at J.P. Morgan, commented: "Currently, large multinational pharmaceutical companies still have ample cash flow. Given the high uncertainty in early-stage innovative drug development, it may be a long-term process for large MNCs to supplement their product pipelines through external acquisitions."

 

Of course, challenges also exist.

 

Zhang Yilin, Partner at Yafo Capital, noted that the reason there have been few cross-border acquisitions of Chinese biotechs since 2025 is that most of the "low-hanging fruit" has already been picked, and the remaining assets are highly valued. In particular, the sharp rise in the 18A sector in 2025 drove up valuations in the primary market, resulting in generally high valuations for assets in China's primary market.

 

Another factor is geopolitical risk. With the Trump administration taking office, overseas companies are uncertain whether spending large sums to acquire Chinese assets will expose them to risks.

 

However, Zhang Yilin predicted that acquisitions in the radiopharmaceutical space may emerge in 2026. He noted that there are few licensing records in the radiopharmaceutical field. Targeted delivery in radiopharmaceuticals is highly dependent on peptide ligands, and reliable peptide ligands are difficult to find, so there are few mature assets available for licensing. Even after licensing, without radiation safety licenses and methods for synthesizing radionuclides, a full acquisition may be necessary to ensure global supply chain integrity.

 

Returning to the two deals at the beginning of this article.

 

Merck's $6 billion acquisition of Terns Pharmaceuticals targets an early-stage drug for a rare blood cancer. Gilead's $2.175 billion acquisition of Ouro Medicines targets KeyMed's independently developed TCE bispecific antibody.

 

Two deals, two different therapeutic areas, but pointing to the same fact: global pharmaceutical giants are racing at unprecedented speed to acquire high-quality assets that can fill gaps in their pipelines.

 

And in this race, Chinese innovative drug assets are transforming from "low-hanging fruit" into true "hard currency." From Kelun-Biotech to KeyMed, from Biotheus to Gracell, the R&D capabilities of Chinese biotechs are being repriced by the global market.

 

For Merck, $6 billion is a bet—a bet on whether it can build a sufficiently diversified oncology business landscape before Keytruda's patent expires. For China's innovative drug industry, this wave of acquisitions signals a profound value restructuring. As global capital rushes in, those Chinese biotechs with genuine innovation capabilities will eventually have their moment in the spotlight.

 

As KeyMed stated in its announcement, this transaction will accelerate the global development of CM336/OM336 as a potential best-in-class TCE asset. In translation: Chinese innovative drugs are making their way to the center of the global stage.

 

References:

• Merck nears $6bn biotech deal to boost cancer drug pipeline; The Financial Times

• Merck's Self-Rescue; TONACEA

• Over $2.1 Billion! KeyMed's NewCo Acquired by Gilead; PharmaDJ

• The Great Pipeline "Reshuffle" of Acquired Chinese Biotechs; PharmaDJ