From Pioneering Joint Ventures to Strategic Exits, Multinational Pharma Accelerates Strategic Transformation in China

After a decade of a "golden period," the operating environment for multinational pharmaceutical companies in China has changed, and they have now entered a phase of cyclical adjustment.

Recently, a reporter from 21st Century Business Herald learned from sources close to Bristol-Myers Squibb (BMS) that BMS has signed an agreement to sell 60% of its stake in the China-US joint venture Shanghai Bristol-Myers Squibb Pharmaceuticals (SASS). However, this move will not affect BMS's core business in China.

Regarding the buyer's identity, the individual noted that the acquirer is Hillhouse Capital. In response, a 21st Century Business Herald reporter reached out to Hillhouse Capital to verify the authenticity of the information. As of the time of publication, Hillhouse Capital has not responded.

However, according to industry-circulated documents, the transaction is expected to be completed in early 2026. In related emails, BMS stated that this asset divestiture plan reflects the company’s evolving network strategy, helping BMS to focus internal resources on the core areas with the greatest growth potential, while leveraging external partners with localized manufacturing and market experience to further optimize its business layout.

Bristol-Myers Squibb is a global leading biopharmaceutical company. It entered the Chinese market in 1982 and co-invested with Shanghai Pharmaceuticals and China National Pharmaceutical Group to establish Sino-American Shanghai Squibb Pharmaceuticals Ltd. This company is located in Minhang District, Shanghai, and is the first Sino-American joint venture pharmaceutical company after China's reform and opening up, holding symbolic significance. Hillhouse Capital was founded by Zhang Lei in 2005 and is one of the largest asset management institutions in Asia. The institution adheres to the philosophy of long-term structural value investing, focusing on capturing investment opportunities in industrial transformations through in-depth research. Hillhouse Capital's investment portfolio is extensive, covering both primary and secondary markets, and spans multiple stages including VC, PE, and Buyout. The healthcare sector has always been one of the key areas of focus for Hillhouse Capital, and it has invested in numerous companies, including BeiGene and Gan & Lee Pharmaceuticals.

A securities firm pharmaceutical industry analyst told 21st Century Business Herald that BMS’s divestment of its SASS equity is a microcosm of multinational pharmaceutical companies’ strategic adjustments in China—shifting from “broad coverage” to “focused concentration,” and from “reliance on global resources” to “rooting themselves in the local ecosystem.” In the future, multinational pharmaceutical companies that can continue to evolve in innovative R&D, local partnerships, and business models are still expected to maintain competitiveness in China, the world’s second-largest pharmaceutical market. Conversely, those unable to adapt to changes in policy and competitive dynamics may become further marginalized.

"For investors, it is important to focus on the business structure of multinational pharmaceutical companies in China (proportion of innovative drugs), localization capabilities (cooperation network and decision-making efficiency), and financial health (cash recovery efficiency from divestment of non-core assets)," said the analyst.

The farewell and restart of multinational pharmaceutical giants in the Chinese market are becoming a trendsetter for the transformation of the pharmaceutical industry. The quiet change of ownership of Sino-American Shanghai Squibb has unveiled the strategic adjustments of foreign pharmaceutical companies in China.

From joint venture to exit

Shanghai Squibb Pharmaceuticals Ltd., established in 1982, is a joint venture invested by Bristol-Myers Squibb (BMS) from the United States, Shanghai Pharmaceutical (Group) Co., Ltd., and China National Pharmaceutical Foreign Trade Corporation. As the first Sino-American joint venture pharmaceutical company in China, SASS has introduced classic drugs such as Captopril and Brudine, holding a special place in the history of China's pharmaceutical development.

Before this sale, Bristol-Myers Squibb held a 60% stake in the SASS factory, while Shanghai Pharmaceuticals Holding Co., Ltd., and China National Pharmaceutical Group Asset Management Co., Ltd. held 30% and 10% stakes, respectively. This transaction signifies BMS's near complete withdrawal from joint venture production operations in China, allowing it to focus on the research and promotion of innovative drugs.

BMS stated that the sale aims to "continuously coordinate resource allocation within the global network to support evolving business needs," reflecting the company's "commitment to the execution of its production strategy."

From the current information, it can be seen that BMS's sale of the SASS factory mainly involves mature products, including Cefradine Capsules, Acetaminophen Drops, Acetaminophen, Pseudoephedrine, and Dextromethorphan Tablets, Entecavir Tablets, Acetaminophen Oral Solution, and Metformin Hydrochloride Tablets.

These products are facing severe market challenges. Since the implementation of China's centralized procurement policy in 2018, the profit margins of off-patent original drugs have been significantly squeezed. According to the national organization for drug volume-based procurement policy, the price reductions for selected drugs are typically between 50% and 85%, while the prices of non-selected drugs have generally decreased by 10% to 40%. This has made it difficult for multinational pharmaceutical companies to rely on the sales of these products to achieve high returns in the Chinese market.

According to the latest financial report data, Bristol-Myers Squibb achieved a total revenue of $11.2 billion in the first quarter of 2025, a decline of 6% compared to the same period last year (a 4% decline at constant exchange rates). The growth product portfolio contributed $5.6 billion in revenue, a 16% increase year-over-year, becoming the key driver of performance growth. However, the revenue from the mature product portfolio declined by 20%, a trend mainly influenced by intensified generic drug competition and adjustments in U.S. healthcare policies.

According to the first quarter 2025 financial report, global pharmaceutical giants experienced performance differentiation due to patent expirations, market competition, and policy pressures. For example, Bristol Myers Squibb's (BMS) anticoagulant drug Eliquis (apixaban) generated $3.57 billion in revenue from its mature product portfolio, a decrease of 4% compared to the previous year. This decline was primarily attributed to reduced sales in the U.S. market. Similarly, the revenue for Revlimid (lenalidomide), a treatment for multiple myeloma, was $940 million, down 44% year-on-year, mainly due to ongoing competitive pressure from generic drugs.

Christopher Boerner, Ph.D., Chairman and CEO of Bristol-Myers Squibb, stated: "The company is transforming into a more agile innovation-driven enterprise by optimizing operations and accelerating pipeline development." BMS emphasized that it will strengthen its leadership in oncology, immunology, and cardiovascular disease through internal R&D and external collaborations, such as the recent acquisitions of Karuna and RayzeBio.

Innovation and transformation have become an irresistible trend. This is also because multinational pharmaceutical companies will face numerous market challenges in the coming years, especially when drug patents expire or lose patent protection, requiring them to reallocate resources to meet these challenges.

Analysis by CCB International indicates that over the next three years, many multinational pharmaceutical companies face a patent cliff risk exposure exceeding 20% of their revenue. This risk exposure varies significantly among companies, with the highest reaching up to 70%. A report by investment bank Leerink Partners points out that BMS faces a particularly significant patent cliff risk in 2025, with an estimated 64% of its revenue impacted by patent losses and generic drug competition, making BMS the company with the largest patent cliff risk exposure.

The aforementioned analyst also pointed out to the 21st Century Business Herald reporter that from the perspective of BMS's financial and strategic alignment, the mature drug business faces three major challenges: First, under the normalization of centralized procurement in China, the prices of traditional generic/mature drugs are under significant pressure (with price reductions exceeding 90% for some products), leading to a substantial compression of profit margins. Second, domestic pharmaceutical companies have a prominent advantage in the areas of generics and cost in the mature drug sector (such as Chia Tai Tianqing, Qilu Pharmaceutical, etc.), resulting in the weakening of multinational pharmaceutical companies' "brand premium." Third, BMS's global strategy is more inclined towards "high growth, high barrier" innovative drugs (for example, in 2023, the global sales of its O drug exceeded $10 billion, and China is an important growth market), and divesting non-core joint ventures can free up funds to focus resources on innovative drug R&D and commercialization.

From "lying down to win" to "big test"

In recent years, the environment of the pharmaceutical market in China has undergone significant changes. The government has introduced a series of laws, regulations, and industry policies related to innovative drugs, providing incentives and support in various stages such as drug research and development, and drug approval, thereby strongly encouraging pharmaceutical companies to develop innovative drugs.

For example, in popular fields such as oncology and autoimmune diseases, leading domestic pharmaceutical companies like Hengrui Medicine, Innovent Biologics, and BeiGene have research pipelines with global competitiveness. Hengrui's Camrelizumab and Innovent's PD-1 Sintilimab each have annual sales exceeding 3 billion yuan. Additionally, they have advantages in cost control and market penetration within the local market. Multinational pharmaceutical companies, if they only rely on an "imported brand + high price strategy," will find it difficult to compete with domestic products that offer "value for money + rapid iteration."

Moreover, China's medical insurance reimbursement list is undergoing a "cage-clearing and bird-exchange," leaning towards innovative drugs. This shift in policy direction makes it difficult for multinational pharmaceutical companies to continue their previous model of earning high profits from patent-expired original drugs.

Under the influence of centralized procurement policies, China's pharmaceutical industry has undergone significant changes. Multinational pharmaceutical companies face the reality of declining prices for drugs with expired patents and can no longer maintain their previous "luxury" pricing models. To adapt to this change, these companies have adjusted their business strategies in China, including optimizing organizational structures, reorganizing product lines, expanding sales channels, and collaborating with local enterprises. According to observations by reporters from the 21st Century Business Herald, the future focus for most mature products of multinational pharmaceutical companies is on markets outside of centralized procurement, including retail pharmacies, grassroots markets, and the deployment of innovative drugs.

An unnamed executive from a multinational pharmaceutical company told the 21st Century Business Herald reporter, "In earlier years, most multinational pharmaceutical companies found it relatively easy to obtain positive feedback after investing funds and talent in China. However, with the intensive introduction of policies such as centralized procurement, and considering the need for external price reductions and internal cost savings, in the long run, pharmaceutical companies are competing in terms of research and development, product pipelines, market positioning, and more."

Reporters from 21st Century Business Herald have found that besides pipeline adjustments, commercial transformation is also imminent. In the past, many multinational pharmaceutical companies primarily focused on the in-hospital market at the channel level, but now, the retail and e-commerce markets are more favored.

The aforementioned executive candidly told the reporter: Previously, the in-hospital market accounted for 50%, but now it has shrunk to 20%. Of the remaining 80%, 50% of the channel distribution is allocated to retail pharmacies and e-commerce, managed by the company's own team, while the remaining 30% is handed over to distributors or CSO partners.

"Facing the complexity and immense potential of the Chinese market, it is difficult for a single enterprise to tackle all challenges alone. Therefore, establishing partnerships and leveraging external resources and channels will be one of the key strategies for multinational pharmaceutical companies to succeed," the executive emphasized. "A company can only focus on what it deems important and what it can do well. Although large multinational pharmaceutical companies have strong coverage capabilities, their product pipelines are vast. Thus, for non-core products, external collaboration becomes an important choice in their business model, offering new opportunities for domestic companies. In comparison, for small to medium-sized multinational pharmaceutical companies with limited resources, conducting business through partnerships is a more common choice."

How to "break through and be reborn"?

Faced with changes in the Chinese market, multinational pharmaceutical companies are responding by shifting their focus to innovative drug businesses and introducing more innovative drug products into the Chinese market.

In 2020, BMS launched the "China 2030 Strategy" closely aligned with "Healthy China 2030," making a long-term commitment to healthcare and innovation in China: accelerating the introduction of global innovative products or indications into China; enhancing patient access to innovative medicines; expanding the organization and developing talent; closely collaborating with China's innovation ecosystem, and striving to bring Chinese innovations to the global stage.

Last year, in an interview with a 21st Century Business Herald reporter, Bristol Myers Squibb Vice President Chen Siyuan stated, "The Chinese market has stable policy support for innovation, enormous patient demand, and strong innovation potential. The 'China 2030 Strategy' has made the Chinese market an important growth engine for the company's global business."

Chen Siyuan further introduced the implementation path of the "China 2030 Strategy." Focusing on innovation is the first step of the "China 2030 Strategy," with China conducting clinical research and new drug applications simultaneously with the global market. Following this, the process is accelerated towards commercialization, bringing innovative therapeutic drugs or indications to market, and enhancing patient accessibility under a multi-tiered healthcare security system. In terms of talent, the number of R&D and commercialization teams has expanded by 30% since the implementation of the strategy, also attracting more innovative high-end talents to join Bristol-Myers Squibb.

In addition to BMS, more multinational pharmaceutical companies are accelerating their strategic adjustments in the Chinese market. On one hand, companies like Roche China and Merck & Co. are undergoing personnel changes. For example, Merck & Co. announced at the end of May this year that its Global Senior Vice President Anna Tiano would step down as President of Merck China, to be succeeded by Kyle Tattle, the current President of Merck Japan. Novo Nordisk announced that CEO Lars Fruergaard Jørgensen would step down, and Niu Yanlai, head of the Rare Disease Business Unit, has been appointed as Vice President of the Emerging Business Unit. Novartis China also made adjustments in May to the leaders responsible for the oncology and immunotherapy sectors.

On the other hand, companies like AstraZeneca and Merck have accelerated major organizational restructuring. According to publicly available information, AstraZeneca China has conducted at least four structural adjustments in the past six months. The most recent adjustment occurred in early July, involving the establishment of two major business units: the Gastrointestinal Tumor Business Unit and the Early Pipeline Business Unit. Additionally, Merck has also undergone restructuring this year, establishing the Entrepreneur Business Unit (BU), which integrates mature products in the fields of infection, oncology, and diabetes, many of which have been included in the centralized procurement scope.

For multinational pharmaceutical companies, divesting non-core assets is only the beginning of adjustments. It is more important to adapt to the new environment through the following strategies. The aforementioned analyst believes that for multinational pharmaceutical companies to "break through and be reborn" in the Chinese market, they need to adopt corresponding strategies: First, focus on "high-barrier + differentiated" innovative drugs. Prioritize fields with a large base of Chinese patients and unmet demand, and shorten time gaps through a "global simultaneous R&D + China-first launch" strategy. Second, deepen local collaboration networks. Establish strategic partnerships with local Biotech, CRO/CDMO companies, and leverage the flexibility and cost advantages of local companies to accelerate commercialization processes. Third, reconstruct the business model. For mature drugs with high centralized procurement risks, maintain cash flow through "branded generics + OTC transformation." For innovative drugs, actively participate in healthcare reimbursement negotiations (balancing price and volume), while exploring diverse payment models such as commercial insurance and patient assistance. Fourth, localize organization and decision-making. Grant greater R&D, pricing, and market access decision-making power to the Chinese management team to avoid mismatches in local demand caused by "one-size-fits-all" approaches from global headquarters.

In the coming years, it is foreseeable that more multinational pharmaceutical companies will adjust their strategic layout in China: divesting mature products to focus on innovative drugs; strengthening cooperation with local enterprises to jointly develop new products; increasing R&D investment and establishing local R&D facilities.

The change of ownership of Sino-American Shanghai Squibb marks the end of an era, but also heralds the beginning of a new one. The competition among multinational pharmaceutical companies in the Chinese market is shifting from past sales capability competition to a true competition of innovation strength.