Life Sciences Horizons Brochure 2025 - Flipbook - Page 57
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2025 Horizons Life Sciences and Health Care
China licensing transactions checklist
Chinese biopharma companies are increasingly
turning to licensing and collaboration deals for
external financing due to a challenging fundraising
environment. In 2023, out-licensing deals (i.e., Chinese
companies licensing IP to foreign companies)
increased significantly, while in-licensing deals (i.e.,
Chinese companies obtaining licenses from foreign
companies) decreased. The following is a checklist of
matters that should be considered in any licensing
transaction with Chinese counterparties.
Due diligence:
Conduct thorough due diligence on Chinese licensors or licensees,
considering whether the party is private, public, or state-owned,
their experience with licensing, and their IP portfolio. Language
and communication differences may impact deal efficiency.
Applicability of Chinese law:
While the licensing and collaboration agreements can be
governed by foreign laws, Chinese law mandatorily applies to the
protection of workers’ rights, food and public health safety,
environmental safety, financial security, and anti-monopoly or
anti-dumping issues. Also, the agreements cannot damage the
social and public interests of China.
Marketing authorization holder (MAH):
For drugs manufactured outside China, the MAH must
be a foreign entity, even if it is the Chinese licensee that
commercializes the products. However, the foreign MAH
can appoint the Chinese licensee as its local agent.
Two-invoice requirement:
The “two-invoice requirement” impacts drug distribution,
allowing only two invoices between the manufacturer and the
hospital. The exclusive China licensee of imported drugs can be
considered a “manufacturer” in in-licensing deals.
Foreign exchange controls:
Cross-border licensing deals involving payments in or out of
China will be subject to foreign exchange controls.
Dispute resolution:
The Hong Kong International Arbitration Centre (HKIAC) is a
popular forum for resolving licensing disputes due to its costefficiency and track record of awards being recognized and
enforced in China.
Bankruptcy risks:
China lacks a provision equivalent to Section 365(n) of the U.S.
Bankruptcy Code, which protects non-debtor licensees. Foreign
licensees should use drafting mechanisms to protect their rights if
the Chinese licensor ends up in bankruptcy proceedings.
Andrew McGinty
Partner
Hong Kong
Technology import/export restrictions:
Wensheng Ren
Counsel
Hogan Lovells Fidelity
China categorizes technologies as “prohibited,” “restricted,”
or “permitted.” In-licensing technologies related to highly
pathogenic microorganisms and out-licensing technologies such
as certain traditional Chinese medicine resources, cell cloning,
and gene editing technologies are subject to restrictions.
Jessie Xie
Counsel
Beijing
Data and human genetic resources (HGR):
Development involving HGR or data of Chinese patients requires
regulatory approval from the National Health Commission.
For details regarding
the aforementioned
considerations, please
refer to our article
Top legal issues to
think about in Chinarelated licensing
transactions
