License-in/out transactions have become a key strategic approach for innovative drug and medical device (including medical aesthetics) companies to expedite the research and development of the products and expand market presence. According to statistics, the total deal value of business development (BD) transactions in life sciences sector in China has reached a historic high of over 60 billion US Dollars in 2024. The proportion of license-out transactions continues to rise[2], highlighting the strong momentum of China's biopharmaceutical industry in its global expansion.

Following the economic and financial crisis in 2007, in view of the significant weakness in the resiliency of banks and other market participants to financial and economic shocks, in particular from over-the-counter (OTC) derivatives transactions, the Group of Twenty (G20) agreed on the necessity of improved transparency in the OTC derivatives markets and further regulation of OTC derivatives, and initiated a reform programme in 2009 to reduce the systemic risk from OTC derivatives which comprise of the following four elements: All standardised OTC derivatives should be traded on exchanges or electronic platforms, where appropriate. All standardised OTC derivatives should be cleared through central counterparties (CCPs). OTC derivatives contracts should be reported to trade repositories. Non-centrally cleared derivatives contracts should be subject to higher capital requirements.

In the age of globalization, Chinese pharmaceutical companies are at the forefront of innovation and collaboration, seizing unprecedented development opportunities. Meanwhile, overseas investors and pharmaceutical companies are also keen to capture investment and development opportunities, and actively looking for new growth areas in the pharmaceutical industry. Against this backdrop, the Spin off-NewCo model (commonly referred to as "SON" or "NewCo" model), which gained popularity in 2024, has effectively met the needs of all parties involved. This model has set a new trend for Chinese companies expanding internationally, empowering many of them to secure a first-mover advantage in global competition (for practical insights into the "SON" model, please refer to our analysis article: "Insights into China Biotech's New Approach: Spin-off-NewCo Model").