Licensing partnerships in life sciences: Emerging and expected trends in 2025

With the year well underway, it’s an opportune time to examine the emerging and expected trends in 2025 for licensing partnerships in the life sciences industry.

Licensing trends by the numbers

The number of licensing deals in 2025 is expected to be steady as compared to last year, with approximately 130 deals—which may be contrasted with the 2020 peak of 228 deals.[1] The deals counted here are those that are disclosed licensing partnerships involving biopharma partners.

In terms of the prevalence of licensing within the life sciences industry, the largest biopharma companies currently derive greater than 50 per cent of their revenues from products and their pipeline assets from M&A and alliances (i.e., licensing).[2] This means that biopharma generates less than half of its revenues and assets from their in-house programs. Alliance-derived product revenues for biopharma were 16 per cent in 2013 and are projected to grow to 24 per cent by 2028.[3]

Key drivers for entering into licensing partnerships

A key driver of licensing activity is a looming loss of exclusivity over key products, a so-called “patent cliff.”

Biopharma companies are currently facing the biggest patent cliff since 2011, which is estimated at US$240B of sales at risk for the top 25 biopharma companies by 2030.[4] However, the patent cliff this time around is expected to be somewhat different than 2011, since in 2011 the patent cliff was for small molecule drugs and the drop-off in sales of a small molecule drug from generic drug competition is typically steep if not precipitous.

By contrast, the current patent cliff also involves biologics, but the drop-off of biologics sales caused by biosimilar competition may be gentler, with biologics retaining their sales better in the face of competition from biosimilars.[5]

Other drivers of licensing activity include high and ever-increasing R&D costs, as well as more complex biology resulting in drug development becoming riskier and less certain.[6] 

As an aside, apart from licensing and M&A, other biopharma responses to the patent cliff will include increased use of branding strategies[7] and cost-cutting measures.[8]

Key diseases and modalities for licensing

One of the main features of the biopharma industry in recent years has been the success of the GLP-1 class of drugs. Originally approved for diabetes and obesity, biopharma companies have since obtained approvals for GLP-1 drugs against cardiovascular and sleep apnea, and GLP-1 drugs are being evaluated for a wide range of indications (cancer, addiction, neurogenerative, etc.).[9]

This has revitalized interest within the industry in general medicine and treating common conditions, as opposed to rare diseases.[10] Rare diseases have always been an important part of licensing activity and that will continue to be the case, however, relatively speaking, interest in general medicine and common conditions has increased among biopharma companies. For this reason, a biopharma company without, for example, an obesity drug, may seek to obtain one—licensing provides an avenue for this.[11] 

Current trends show that the key modalities being licensed are biologics, antibody drug conjugates (ADC), small molecules, cell therapy and radiopharmaceuticals.[12]

Financial considerations

When one looks at licensing deals, the most important financial amount is the size of the upfront payment. This is because the upfront payment is typically the only money that is paid by the licensee at the time the deal is done and, due to the high failure rate of products in the industry, it is very often the only money paid under a deal. 

In 2024, only five per cent of total announced deal values went towards upfront payments, versus 13 per cent in 2019.[13] This tells us that licensing deals are becoming even more back-end loaded, with development, regulatory and commercial biobucks, including sales milestones.

In terms of where upfront money is being spent, the upfront payments for Phase II and earlier assets are down as biopharma focuses on later-stage assets, reflective of their need to restock their product pipelines in the face of the patent cliff.[14]

In terms of the number of licensing deals, however, the vast majority still pertain to early-stage assets, which has always been the case.

In terms of dollar amounts, the overall trend over time is for upfront payments to increase, growing 22 per cent per year from 2021 through 2024.[15] In other words, while the share of the overall deal for upfronts has decreased, the upfronts themselves have increased, indicating that the deals overall are getting bigger.

AI partnerships

AI applications

AI has many applications in the life sciences industry, as examples:

• Drug discovery: Predicting protein structures, identifying and enhancing drug compounds,[16] creating “digital twins” (digital replicates of patients for drug testing)[17], developing gene editors,[18] allowing for targeted small molecule development.[19]
• Clinical trials: Screening patients against trial criteria.[20]
• Manufacturing: Improving efficiency, quality and reliability, for example, by enabling predictive maintenance and real-time optimization.[21]
• Therapy/healthcare delivery: Personalizing therapies,[22] analytics and tailored information.[23]

Goals of Using AI

The goals of the biopharma industry in using AI include:

• Reducing costs and drug product failure rates (estimated to be as high as 90 per cent) and speeding-up drug discovery[24] in a period of modest revenue growth in the industry (projected to be four per cent over the next five years).[25]
• Increasing time to peak sales and revenue from drugs (one estimate being that use of AI in sales can result in increased sales of US$0.5B to US$2B per medicine).[26]

AI adoption is expected to drive tech and life sciences collaboration as life sciences companies access and develop AI tools and the data needed to create them.[27] In order to fully unlock the potential of AI, however, biopharma companies will need to overcome historical hesitancy over data sharing and come-up with novel ways of sharing data for AI purposes.[28]

The key question for drug development, namely, whether the drug’s mechanism of action works in humans, will still need to be determined in clinical trials even with the various advances in AI.[29]

China’s rise as an out-licensing hub

Licensing from China-based biotechs increased markedly in 2024 and is expected to continue apace in 2025.[30]

Currently, about 20 per cent of development programs involve a Chinese company, and greater than 50 per cent of clinical pipeline for ADCs, bispecific antibodies and CAR-T originate from China or a China-partnered company. The advantages of Chinese drug candidates include quicker and cheaper early-stage development (thereby making R&D more efficient), as well as best in class science and lower acquisition costs.

There are also risks, including regulatory (lack of clinical trial diversity has proven an issue in the past, and biopharma therefore now may be inclined to conduct the late stage clinical development outside of China),[31] legislative (such as the tabled but not yet enacted BIOSECURE Act in the US that would restrict use of CDMOs of “foreign adversaries”) and tariffs. However, biopharma seems content to continue with investment in and out-licensing from China despite such risks.[32]  

For its part, the US government has expressed concern that the US biotech industry requires support to maintain US global biotech leadership in this key economic sector.[33]

Final thoughts

Licensing partnership trends in 2025 will focus on restocking the pipeline assets of biopharma, with an increased emphasis on later stage assets, as well continued and rapid adoption of AI across all stages of drug research, development, manufacturing and commercialization.

If you have any questions about your licensing partnerships, please contact the author or a member of our Life Sciences Group.