Healthcare ETF: Outbound Biotech Licensing As Potential New Growth Driver In China
China is delivering more innovative drugs and treatments to the world than ever before, a potential new growth driver for our Healthcare ETF the KraneShares MSCI China All Shares Health Care 10/40 Index ETF (Ticker: KURE).
Cross-border outbound licensing deals from China-based biotech firms surged to $137.7 billion in total disclosed value in 2025, a nearly tenfold increase from only $13.9 billion in 2021.1 The acceleration has continued into 2026. In the first five months of the year, 39 agreements had already been announced, with a total disclosed value approaching $60 billion and average deal size jumping 76% year-over-year (YoY) to approximately $1.3 billion.2
Three headline transactions illustrate the trend:
- AstraZeneca agreed to license an obesity drug candidate from CSPC Pharmaceutical* in a deal worth up to $18.5 billion.2
- AbbVie signed a cancer-focused agreement with RemeGen* valued at up to $5.6 billion.2
- Pfizer and China's Innovent Biologics* entered into a global licensing and collaboration agreement worth up to $10.5 billion to develop 12 early-stage cancer medicines.3
A lot has changed in China's healthcare sector since we launched KURE in 2018. Back then, most international pharmaceutical deals were for foreign-developed drugs and treatments to be made available in China. In 2025, the bulk of deals were out-licensing deals, i.e., for China-developed drugs and treatments to be made available in the rest of the world.
The 2025 surge was driven by a perfect storm of global pharmaceutical companies staring down the barrel of losing multiple significant patents at once, and recent reforms in China that help foreign regulators and companies accept its clinical trial data, and vice versa.
The Patent Cliff
Patent expirations across major pharmaceutical companies are creating urgency. Global drugmakers face what the industry calls a "patent cliff," with billions of dollars in revenue at risk as blockbuster drugs lose exclusivity.4 Rather than build from scratch, many are turning to Chinese firms that have already advanced drug candidates through early-stage trials.
China accounted for approximately one-third of global industry licensing spending in 2025, with roughly one-quarter of all licensed drug assets now originating from the region, according to data cited at the 2026 J.P. Morgan Healthcare Conference.2 Next-generation antibodies, particularly for oncology, dominated China-originated licensing in 2025, accounting for roughly half of recorded cross-border deals.
Clinical Trial Reforms
China's recent regulatory overhaul expanded the acceptance of global clinical data in China, improved the standards for local clinical trials, and strengthened intellectual property protections for drug developers.6 The reforms position China as a potential first-wave launch market for innovative medicines, rather than a secondary market where drugs arrive years after initial approval elsewhere, as well as support its rising status as an innovator in the healthcare field. Nearly three-quarters of the outbound cross-border deals from 2026 involved assets in preclinical or Phase 1 testing, signaling growing global confidence in China-generated clinical data.2
The Investment Case
Outbound cross-border deals with multinational pharmaceutical companies can generate significant attention hype for the China-based firms involved. For example, China-baseed Innovent Biologics gained over 10% the day after announcing its deal with Pfizer.5
In the long run, stronger, more globalized distribution pipelines for China's biotech firms could drive significant revenue growth and help expand KURE's exposure to global demand. KURE currently consists of 37% biotech firms.
Conclusion
China represents the world's second-largest healthcare market and, due to its rapidly aging population and rising incomes, per capita health expenditure is expected to grow at a compound annual growth rate (CAGR) of between 8% and 27%.6 This massive expected increase in demand for products and services from China's health care firms is now being augmented by surging revenues from outbound licensing deals, supported by China's strong healthcare innovation capacity and improving regulatory frameworks for clinical trials. Our healthcare ETF the KraneShares MSCI All China Healthcare Index ETF (Ticker: KURE) provides comprehensive exposure to firms capitalizing on both local demand in China as well as foreign demand for innovative drugs and treatments.
For KURE top ten holdings, risks, and standard performance, please click here.
*Innovent Biologics was held in KURE at a weight of 8.356%. CSPC Pharmaceutical was held in KURE at a weight of 3.86% as of 6/3/2026. Remegen Co. was held in KURE at a 2.03% weight as of 6/3/2026.
| Top 10 Holdings as of 3/31/2026 Holdings are subject to change. | Ticker | % |
|---|---|---|
| INNOVENT BIOLOGICS INC | 1801 | 8.69 |
| BEONE MEDICINES LTD-H | 6160 | 8.17 |
| WUXI BIOLOGICS CAYMAN INC | 2269 | 6.63 |
| AKESO INC | 9926 | 5.74 |
| WUXI APPTEC CO LTD-A | 603259 | 5.68 |
| JIANGSU HENGRUI PHARMACEUT-A | 600276 | 4.58 |
| SHENZHEN MINDRAY BIO-MEDIC-A | 300760 | 4.29 |
| SINO BIOPHARMACEUTICAL | 1177 | 4.18 |
| CSPC PHARMACEUTICAL GROUP LT | 1093 | 3.61 |
| HANSON PHARMACEUTICAL GROUP | 3692 | 3.59 |
Citations:
- "China biotech licensing boom to hit record in 2026 as pipeline swells," Reuters. February 13, 2026.
- "China Biopharma Out-Licensing Surges to Record $137.7B in 2025," PharmaSource. February 20, 2026.
- "Pfizer and Innovent Biologics Enter Global Strategic Collaboration to Accelerate Development of Innovative Oncology Medicines," Pfizer Press Release. May 28, 2026.
- Bilodeau, Kelly. "How Big Pharma is navigating a $300 billion patent cliff," Pharma Voice. January 30, 2026.
- Data from Bloomberg as of 5/29/2026.
- Data from KraneShares, Pew Research Center, and OECD as of 12/31/2025. Retrieved on 3/31/2026. Assumes constant CNY/USD exchange rate, 1% average annual inflation, that health expenditure doubles for ages 65+, and equivalent scaling of out-of-pocket expenditure and covered costs.
