It is evident to all that China's innovative drug BD transactions have entered a new cycle of "value-driven globalization."

 

As an innovation pathway combining both financing and out-licensing attributes, the NewCo model is moving from exploration to maturity. Kailera and Braveheart Bio have successively listed on Nasdaq, and Ouro Medicines was acquired by Gilead — demonstrating that the NewCo model has produced multiple representative value-realization cases.

 

However, as transaction structures grow increasingly complex, intellectual property — the most core asset that Chinese pharmaceutical companies inject into NewCos — has made sublicensing, improvement ownership, and reversion upon exit key variables determining the long-term value of transactions.

 

At the CPIC 2026 session "The Evolution and Transcendence of NewCo," Wang Ningling, Managing Partner of Finnegan's Shanghai Office and President of the Licensing Executives Society International (LESI), systematically deconstructed IP and licensing strategies under the NewCo model.

 

Chapter 1: A "New Route" for Going Global

 

In recent years, the wave of Chinese innovative drugs going global has continued to heat up, and out-licensing transactions have become a core business model driving the translation of innovation value.

 

According to PharmCube database information, in the first half of 2026, Chinese innovative drug companies disclosed a total of 123 BD transactions, up 24.24% year-over-year; transaction value exceeded $103.035 billion, up 48.38% year-over-year, with upfront payments totaling over $4.975 billion, up 71.65% year-over-year.

 

The simultaneous rise in BD transaction volume, transaction value, and upfront payment amounts clearly outlines the profound qualitative transformation of China's innovative drug BD. Industry consensus is that since 2026, China's innovative drug BD transactions have begun moving from "scale-driven globalization" to "value-driven globalization," entering a new cycle of normalized, high-quality growth.

 

Against this backdrop, the NewCo model has emerged prominently.

 

The so-called NewCo model generally involves capital "assembling a game" to establish a new company. Pharmaceutical companies spin off pipelines and license them to this company, receiving certain equity and cash in return. This model possesses dual attributes of financing and BD, providing innovative drug companies with another globalization pathway beyond traditional License-Out.

 

In May 2024, Hengrui Medicine licensed its GLP-1 innovative drug portfolio to Hercules, with upfront payments plus potential milestone payments totaling up to $6 billion, and the company also obtained a 19.9% equity stake. This transaction kicked off a wave of domestic innovative drugs going global through the NewCo model. Subsequently, KeyMed Bio, Genor Biopharma, EpimAb Biotherapeutics, and Allist Pharmaceuticals all licensed their product lines overseas through the NewCo model.

 

From 2025 to 2026, the NewCo model began producing market-representative exit and value-realization cases.

 

In March 2026, KeyMed Bio's NewCo partner Ouro Medicines signed an acquisition agreement with Gilead. KeyMed Bio held approximately 15% equity in Ouro Medicines and will therefore receive an upfront payment of approximately $250 million.

 

In May 2026, Candid Therapeutics was acquired by Belgian pharmaceutical giant UCB for up to $2.2 billion. The core asset of this transaction was the BCMA T-cell engager (TCE) from EpimAb Biotherapeutics.

 

In April and August 2026, Hengrui Medicine's NewCo partners Kailera Therapeutics and Braveheart Bio successively listed on Nasdaq, with Hengrui's equity in Kailera recognizing fair value change gains of RMB 821 million during the reporting period.

 

It can be seen that the NewCo model is fundamentally different from traditional License-Out.

 

In the traditional License-Out model, Chinese pharmaceutical companies transfer overseas rights to product pipelines to multinational pharmaceutical companies, often receiving only one-time licensing fees plus subsequent limited milestone payments and sales royalties, with insufficient control over the product's subsequent overseas development and commercialization.

 

Under the NewCo model, equity binding transforms Chinese pharmaceutical companies from mere "sellers" into "partners," enabling a diversified revenue structure of upfront payments, equity returns, milestone payments, and sales royalties.

 

Chapter 2: Transaction Structure

 

From a transaction structure perspective, the NewCo model mainly involves three parties: the Licensor (the technology provider and IP owner), the NewCo (the operating entity carrying the assets), and the Investor/Sponsor.

 

Chinese innovative drug companies license their drug pipelines or technologies to the NewCo on an exclusive basis, receiving NewCo equity (generally a minority stake) and various licensing fees; overseas investors (investment funds and multinational pharmaceutical companies) provide capital and talent to the NewCo and participate in its operational management.

 

In this arrangement, intellectual property and related technology assets typically constitute the core value foundation of the NewCo transaction — including patents, trademarks, copyrights, trade secrets, and increasingly closely watched clinical data.

 

Wang Ningling pointed out that a strong, high-quality IP asset package is crucial to the entire NewCo transaction. Particularly for Chinese innovative companies, high-quality IP is often one of the important factors affecting the long-term value of innovative drug companies.

 

In recent years, Chinese innovative drug companies' emphasis on intellectual property has undergone a qualitative leap.

 

According to Wang Ningling's recollection, when Finnegan established its Shanghai office in 2008, China's pharmaceutical industry was still dominated by generics, innovative drug R&D was still in its infancy, and companies had quite limited awareness of going global or overseas patent portfolios. An institution once brought a mere five-page English patent document to consult about overseas operations — such a scenario is now unimaginable.

 

Today, most founders and CEOs of Chinese innovative drug companies have multinational pharmaceutical company backgrounds and possess a deep understanding of IP protection — once R&D yields results, their first choice is to file patent applications rather than rush to publish papers. In many frontier areas of biomedicine, China has already joined the world's front ranks.

 

In the biopharmaceutical field, trade secrets have gradually become a core component of transactions. Particularly in the large-molecule biologics track, the protection and disposition of trade secrets are crucial to transaction success. However, due to their concealed and complex nature, the assessment, protection, and transfer of trade secrets place extremely high demands on IP lawyers and in-house teams alike.

 

Wang Ningling particularly emphasized that intellectual property includes not only patents but also trademarks, copyrights, trade secrets, and data — when the industry talks about intellectual property, these aspects need to be considered as a whole.

 

Chapter 3: Three IP Issues

 

Under the emerging NewCo business model, Wang Ningling focused on three IP issues requiring special attention.

 

01、Rights and Benefit Allocation in Sublicensing

 

After a NewCo is established, a primary question is: does the NewCo have the right to grant sublicenses? This involves whether the licensor's prior consent or notification is required, whether sublicenses can be granted to affiliates or third parties, how revenues generated from sublicensing are allocated, and what obligations sublicensees should bear.

 

On this issue, the positions of the Licensor and the NewCo/Investor differ significantly.

 

The Licensor prefers to control downstream use, protect core IP, limit rights expansion, and share in the value generated by sublicensing; while the NewCo and Investor pursue maximum flexibility, minimize approval processes, create more opportunities for future collaboration, and preserve economic upside.

 

According to relevant data analysis, in NewCo projects, the vast majority have established clear diligence milestone provisions. This mainly stems from the structural and objective particularities of the NewCo model — NewCo governance structures are typically relatively independent from both collaborating parties, with the possibility of introducing third-party investors, and all parties have higher requirements for project progress transparency.

 

How to strike a balance between the Licensor's control needs and the NewCo's flexibility needs is the core difficulty in sublicensing clause negotiations.

 

02、Ownership and Control of IP in Improvements

 

Further innovation or improvements generated during the collaboration — including newly developed intellectual property, data, trade secrets, and future inventions — and who owns them, is typically one of the key issues in transaction negotiations.

 

Specifically, it is necessary to clarify: what constitutes an "improvement"; who owns ownership in independent development versus collaborative development scenarios; who controls the filing, maintenance, and enforcement of improvement IP; and how future value is allocated between the Licensor and the NewCo.

 

The Licensor's position tends toward protecting core technology platforms, preserving future technology access channels, maintaining influence over subsequent innovation, and participating in future value creation; while the NewCo and Investor want to own IP generated from development, maximize enterprise future value, maintain strategic flexibility, and control the commercialization of improvements.

 

It is worth noting that there are significant differences between the Chinese and U.S. patent systems, and differences exist between China and the U.S. in drug data protection regimes, with different types of drugs subject to different data protection periods. Therefore, in cross-border transactions, analysis must be conducted in light of specific products. Under the NewCo model, joint R&D by both parties easily triggers IP ownership disputes, and technology transfer may involve uncleared third-party patent risks.

 

Therefore, clauses on the ownership and control of improvement IP require particularly prudent design.

 

03、IP Reversion in Exit Mechanisms

 

Exit mechanisms are a non-negligible component of NewCo transactions.

 

When exit conditions are triggered — for example, failure to meet agreed financing or R&D milestones — under what circumstances the licensed rights, data, and trade secrets should return to the Licensor's hands. For the Licensor, this concerns the protection of its IP integrity; at the same time, how improvement IP should be handled upon reversion also needs to be clearly stipulated in the agreement.

 

The Licensor wants to ensure the recoverability of licensed assets, set clear development obligations, retain access rights to data and improvements, and minimize asset stagnation risk; while the NewCo and Investor tend to limit reversion trigger conditions, preserve operational flexibility, protect development investments, and retain value created by the NewCo.

 

According to relevant statistics, regarding IP enforcement and defense against third-party infringement, it is more common — approximately 43.5% — to explicitly stipulate that one party takes the lead. This figure reflects the practical need of licensing transaction parties for clear responsibility boundaries.

 

Wang Ningling emphasized that these three issues ultimately point to the same core — the allocation of future value. Whether it is sublicensing, improvements, or exit mechanisms, all are answering the question of future value allocation.

 

Chapter 4: Due Diligence

 

IP due diligence is "a very important step" in biopharmaceutical transactions. Wang Ningling pointed out that traditionally, IP due diligence mainly focuses on three aspects:

 

First, Freedom to Operate (FTO). That is, whether the target company's technology can be freely used without infringing third-party intellectual property. This is something investors will definitely pay close attention to.

 

Second, the scope, validity, and enforceability of IP protection. Wang Ningling particularly reminded Chinese companies that when building IP, they should not be satisfied merely with "obtaining a patent," but should also consider the patent's future value to investors, and should build a patent portfolio rather than a single patent. A carefully laid-out patent portfolio can provide more comprehensive and lasting protection for a product and can also secure higher valuations in transactions.

 

Third, ownership and transferability. Inventor determination directly relates to ownership attribution, which is one of the core aspects of due diligence. Particularly among Chinese innovative companies, inventor determination and management often involve contributions from multiple R&D teams across multiple stages, requiring careful sorting and confirmation of rights.

 

Under the NewCo model, beyond the above three points, a deeper question must also be asked: can this IP asset operate as an independent, investable, commercially valuable asset? In other words, what needs to be assessed is whether this licensed asset package is complete enough, transferable, and capable of independently supporting the long-term operation of a stand-alone business.

 

Since the NewCo model may involve cross-border transfer of intellectual property and tangible assets, appropriate legal architecture design is crucial. Companies need to conduct patent risk assessments before project initiation, identify potential risks in target markets, and ensure that patent protection for core technologies and products covers the globe. The scope of authorization must be clearly defined in agreements to avoid potential future disputes.

 

In addition, compliance issues regarding outbound IP transfer also require high attention.

 

When domestic IP enters a NewCo through capital contribution, special attention must be paid: for enterprises participating in NewCo arrangements with intellectual property, core technical capabilities, or R&D data, it is necessary to prudently assess whether the relevant rights arrangements involve overseas investment, security review, technology export, or data export matters.

 

Whether choosing traditional License-Out or the NewCo model, companies must conduct systematic planning across multiple dimensions including compliance approval, IP protection, contract design, and tax and foreign exchange planning.

 

— Conclusion —

 

The form of transactions may continue to change, but what remains constant "amid all changes" is the most core innovation, as well as the IP strategy protecting innovation and the arrangements for future IP commercialization.

 

For Chinese innovative drug companies, whether choosing traditional License-Out or the NewCo model for going global, high-quality IP assets — including patents, data, and trade secrets — are always the most core property in transactions.

 

Under the emerging NewCo model, sublicensing, improvement IP, and IP reversion in exit mechanisms will become focal issues at the negotiation table, and the scope of due diligence also needs to extend from traditional FTO, ownership, and validity to the asset's independence and transferability.

 

From Hengrui's first trial of NewCo in 2024, to Kailera and Braveheart Bio successively listing on Nasdaq and Ouro Medicines being acquired by Gilead in 2026, Chinese innovative drug companies have not only achieved capital recycling and risk diversification through the NewCo model, but have also gradually shifted from single-asset output to participating in the construction of global platforms, with their role in the value chain continuously evolving.

 

As Wang Ningling said, in future work, transaction forms may change, but what remains unchanged at the core is innovation and the IP protection strategy that safeguards it.