Pharma at a Turning Point 2025: Global Recalibration, Strategic Pullbacks, and China’s Out-Licensing Surge

The pharmaceutical industry is entering a phase of rapid strategic recalibration. Merck’s decision to scrap its £1 billion London Discovery Centre and vacate key UK labs, coupled with a pause on Gardasil vaccine shipments to China, highlights a growing focus on predictable returns and favorable operating environments. Eli Lilly’s decision to pause the buildout of its UK Gateway Labs incubator and temporarily halt shipments of Mounjaro ahead of a planned price increase further underscores the challenges global pharma faces in the UK market, particularly due to limited NHS uptake of innovative therapies. Domestic UK players like AstraZeneca and GSK are navigating similar pressures, balancing investment with caution. Additionally, AstraZeneca has paused a planned £200 million investment in its Cambridge research facility and scrapped a vaccine plant expansion in Speke, highlighting that even long-standing UK incumbents are rethinking commitments amid shifting government support.

Meanwhile, Novo Nordisk’s global job cuts (~9,000 positions) underscore that even category-leading companies are actively resizing operations in response to slowing blockbuster growth.

At the same time, China is emerging as a source of globally competitive innovation, exemplified by an unprecedented surge in out-licensing deals, “including Hengrui’s strategic partnerships with Merck (up to $1.97B total for HRS-5346) and GSK (up to $12.5B total for HRS-9821), as well as Pfizer’s high-profile licensing agreement with 3SBio (up to $6.0B total for the bispecific antibody SSGJ-707).

Recent reports also suggest that Bristol-Myers Squibb may sell its 60% stake in Sino–American Shanghai Squibb and several legacy drugs, potentially to Hillhouse Capital. Along with earlier exits of Xi’an Janssen in 2023 and Sino–American SK in 2025, this reflects a broader trend of multinational divestment from mature joint ventures in China. Additionally, Sanofi’s exit of Praluent (alirocumab) from China illustrates the commercial challenges global pharma faces in the region.

These developments highlight the growing importance of favorable operating environments and policy support in determining investment locations. The commercial challenges faced by Merck, Eli Lilly, and Sanofi in China and the UK also underscore why strategic out-licensing partnerships, such as those involving Hengrui and Pfizer/3SBio, are increasingly attractive for both global and domestic companies.

1) Merck's Strategic Pullbacks: UK and China

UK: Merck has abandoned its planned Belgrove House Discovery Centre in London and will vacate labs at the London Bioscience Innovation Centre and the Francis Crick Institute by the end of 2025, reducing ~125 science/support roles and relocating R&D to the U.S. The company cited the “unfavorable UK operating environment” and insufficient support for innovative medicines.

Similarly, Eli Lilly has paused its UK Gateway Labs development, part of a £279 million ($378M) planned investment, citing low NHS reimbursement for novel therapies and uncertainty over the UK life sciences environment. Lilly also temporarily halted shipments of its weight-loss drug Mounjaro in the UK in August 2025, ahead of a planned list price increase of up to 170%, further illustrating the operational and commercial challenges of the market.

China: Merck has extended the pause on Gardasil (HPV vaccine) shipments, reflecting weak discretionary demand and inventory imbalances, which materially depress near-term sales. Similarly, Sanofi recently exited Praluent (alirocumab) in China due to intense local competition and commercial pressures. These developments highlight the volatility of the Chinese pharmaceutical market and the commercial risks that global pharma companies face, even in high-growth regions.

2) UK Incumbents: AstraZeneca and GSK Navigate the Same Currents

AstraZeneca: The company has taken multiple steps to scale back UK expansion. In September 2025, AstraZeneca paused a planned £200 million investment in its Cambridge research facility, which was expected to create ~1,000 jobs. Earlier in the year, it also cancelled a £450 million vaccine plant expansion in Speke after the UK government scaled back funding guarantees. Together, these moves highlight that even UK’s largest pharma company is reconsidering major domestic commitments.

GSK: While continuing targeted investments and licensing partnerships (e.g., mRNA vaccines), GSK has publicly warned that the UK life sciences sector is at a “tipping point” for global competitiveness.

Takeaway:

These developments, including Merck's UK pullbacks, Eli Lilly’s UK Gateway Labs pause, and AstraZeneca’s suspension of major projects in Cambridge and Speke, indicate that both domestic and multinational companies must navigate a complex environment of regulatory uncertainty, reimbursement limitations, and market uptake challenges.

3) Novo Nordisk: Accelerated Cost Rationalization

Novo Nordisk announced a global reduction of ~9,000 jobs (~11–12% of its workforce) and lowered 2025 operating profit guidance to 4–10% growth, citing slowing obesity/GLP-1 drug sales (Wegovy, Ozempic) and rising competition from Eli Lilly. Cost reductions include hiring freezes and organizational simplification, with expected annual savings of ~DKK 8 billion (~US$1.25–1.30B).

Significance: Even top-performing pharma companies are aggressively right-sizing, signaling a shift from growth-at-all-costs to efficiency and portfolio focus.

4) Industry-Wide Workforce Adjustments

According to the BioSpace 2025 layoff tracker, workforce reductions are widespread, spanning both major pharmas (Novo, Novartis, Pfizer) and mid-size biotechs (Exelixis, Lundbeck). This illustrates that cost rationalization is not company-specific — it is a sector-wide response to pricing pressure, competitive saturation, and global operational uncertainty.

Insight: Workforce reductions compress near-term R&D capacity and accelerate the trend toward strategic partnerships, mergers, and selective pipeline development.

5) Strategic Licensing Partnerships: China as a Global Innovation Hub

China’s pharmaceutical sector is increasingly recognized for its innovative capabilities, as evidenced by strategic licensing agreements between Chinese companies and Western pharmaceutical giants. These partnerships facilitate access to novel therapeutics and expand global market reach.

Hengrui Pharma:

• Merck: HRS-5346, an oral lipoprotein(a) inhibitor in Phase 2, with $200M upfront and up to $1.77B in milestones.
• GSK: HRS-9821, a dual PDE3/4 inhibitor for COPD, with $500M upfront and potential milestones up to $12B.

Pfizer & 3SBio:

• SSGJ-707, a PD-1/VEGF bispecific antibody, licensed globally (outside China) with a $1.25B upfront, $4.8B in milestone payments, $100M equity investment, and tiered royalties. Pfizer also retains the option to expand rights in China for up to $150M in option payments.

Insight: These deals demonstrate China’s transition from a manufacturing base to a globally competitive innovator. Licensing allows Chinese firms to access Western commercialization expertise, de-risk development, and retain domestic rights — a strategy that is reshaping the global pharmaceutical landscape.

6) Five Cross-Cutting Trends Reshaping Pharma and Biotech

1. Conditional Investment Flows: Companies demand predictable state support and favorable regulatory conditions before committing capital-intensive projects.
2. Blockbuster Dependency Risk: Over-reliance on single products increases vulnerability to competition and payer pushback.
3. Consolidation & R&D Focus: Portfolio triage, selective internal pipelines, and strategic licensing deals are becoming standard to maintain innovation productivity.
4. Manufacturing & Supply-Chain Localization: Investments increasingly favor regions with policy clarity, resilient supply chains, and predictable returns (e.g., U.S. hubs).
5. Geopolitical & Market Complexity: China’s large but volatile market underscores both opportunity and risk, particularly for vaccines and high-demand therapies.

7) Policy as a Strategic Determinant

UK: Risk of losing capital-intensive R&D projects; AstraZeneca, Merck, and Eli Lilly have all recently paused or cancelled major UK investments, underscoring that policy clarity, reimbursement frameworks, and reliable state support are essential to retain future commitments.

China: While licensing deals mitigate commercial risk, inconsistent regulatory approvals, fluctuating pricing, and unpredictable market demand — as seen with Merck’s Gardasil pause and Sanofi’s exit of Praluent — create uncertainty for foreign and domestic companies. At the same time, China’s regulatory and policy environment has evolved to increasingly support innovation, encouraging companies to develop novel therapies rather than incremental products.

US: Predictable regulatory pathways, intellectual property protection, and commercial stability continue to make the U.S. an attractive hub for R&D and manufacturing.

8) Regional Implications: UK / US / China

9) Strategic Recommendations

For UK policymakers:

• Ensure clear, credible long-term support packages for R&D and manufacturing.
• Streamline drug approval and reimbursement pathways.
• Offer targeted incentives to prevent talent and industrial attrition.

For companies:

• Prioritize geographic flexibility and portfolio stress-testing.
• Embrace partnerships, licensing, and selective M&A to hedge risk.
• Optimize workforce and pipeline to maintain efficiency without sacrificing innovation.

10) Conclusion & Outlook

The 2025 pharma and biotech landscape is marked by rapid strategic realignment, cost rationalization, and geographic prioritization. Merck’s UK pullbacks, Lilly’s UK Gateway Labs pause, Novo Nordisk’s workforce reductions, and AstraZeneca and GSK’s cautious investments highlight the growing importance of predictable operating environments and operational efficiency.

China continues to emerge as a global innovation hub, with out-licensing deals such as Hengrui’s partnerships with Merck and GSK, and Pfizer/3SBio, illustrating how strategic partnerships are reshaping the global pharmaceutical ecosystem.

Outlook: Companies will likely continue focusing on portfolio optimization, selective licensing, and geographic flexibility. Policymakers must provide clear R&D support and regulatory clarity to retain investment, while investors should prioritize resilient, innovation-driven strategies.

The industry is entering a faster, more competitive, and interconnected era — those who balance efficiency with innovation agility and strategic global partnerships will be best positioned to thrive.

Sources

1. Merck & Co., Inc. “Merck to Scrap London Discovery Centre, Relocate R&D to U.S.” Merck News Release, 2025.
2. BioSpace. “2025 Pharma Layoff Tracker.” BioSpace, 2025.
3. FirstWord Pharma. “Sanofi Exits Praluent in China.” FirstWord Pharma, 2025.
4. Hengrui Medicine Co., Ltd. “HRS-5346 and HRS-9821 Strategic Partnerships with Merck and GSK.” Corporate Press Release, 2025.
5. Pfizer & 3SBio. “Global Licensing Agreement for SSGJ-707.” Corporate Press Release, 2025.
6. Novo Nordisk. “2025 Global Workforce Reductions and 2025 Guidance Update.” Novo Nordisk Press Release, 2025.
7. AstraZeneca. “Cancellation of Speke Vaccine Plant Expansion.” AstraZeneca Press Release, 2025.
8. GSK. “UK Life Sciences Investment and Market Competitiveness Update.” GSK Corporate News, 2025.
9. China National Medical Products Administration (NMPA). “Regulatory and Market Reforms Supporting Innovation.” NMPA Reports, 2015–2025.
10. Robertson, Joanna. “Eli Lilly pausing investment in UK as report warns against ‘limited’ NHS uptake of new drugs.” The Pharmaceutical Journal, 11 September 2025
11. AstraZeneca pauses UK research expansion worth £200m. BBC, 12 Sept 2025

Disclaimer: This article is for informational purposes only and does not constitute medical or investment advice. Readers should consult primary literature and official regulatory sources for verification.