Hengrui Pharma’s Strategic Out-Licensing of HRS-1893 to Braveheart Bio: Assessing the NewCo Model’s Role in Maximizing R&D Value

In the evolving landscape of global pharmaceutical innovation, Chinese firms are increasingly leveraging strategic out-licensing and novel business models to maximize the value of their R&D pipelines. Jiangsu Hengrui Pharmaceuticals’ recent agreement to license its Phase III cardiac myosin inhibitor HRS-1893 to Braveheart Bio exemplifies this trend. The deal, valued at an initial $75 million in upfront payments and up to $1.013 billion in milestones, underscores Hengrui’s adoption of the NewCo model—a structure that has become central to its strategy for global expansion and risk mitigation [1].

Strategic Rationale Behind the HRS-1893 Deal

HRS-1893, an oral therapy for obstructive hypertrophic cardiomyopathy (oHCM), is currently in Phase III trials in China. By granting Braveheart Bio exclusive global rights (excluding Greater China), Hengrui secures immediate liquidity while offloading the commercialization risks associated with entering the U.S. and European markets. The upfront payment of $65 million—split equally between cash and Braveheart equity—alongside an additional $10 million upon technology transfer, provides Hengrui with $75 million in near-term proceeds [1]. This aligns with the company’s broader goal of monetizing late-stage assets without diverting internal resources from its core R&D priorities.

The financial structure of the deal also reflects a calculated balance between short-term gains and long-term upside. Hengrui retains royalties on net sales and is eligible for milestone payments tied to regulatory approvals and commercial performance. This approach mirrors the NewCo model’s core principle: sharing development risks with offshore partners while preserving equity stakes and future revenue streams [2].

The NewCo Model: A Blueprint for Global Partnerships

Hengrui’s NewCo strategy, first tested with its GLP-1 portfolio, involves spinning off key assets into offshore entities co-funded by global investors. In 2024, the company created Hercules (later Kailera Therapeutics) to manage its GLP-1 assets, securing $110 million in upfront payments and retaining a 19.9% equity stake. This model attracted $400 million in Series A funding from investors like Bain Capital, illustrating how Chinese firms can access international capital while maintaining partial ownership [3].

The NewCo model’s success lies in its ability to address two critical challenges: domestic pricing pressures in China and the high costs of global commercialization. By partnering with offshore entities, Hengrui mitigates regulatory and reimbursement uncertainties in foreign markets while leveraging investors’ expertise in navigating those complexities. As noted by industry analysts, this structure has become a “hybrid equity-licensing model” that offers greater flexibility than traditional licensing deals [4].

Broader Implications for Chinese Biotech

Hengrui’s approach reflects a broader shift in China’s biopharma sector from imitation to innovation. Between 2019 and 2023, Chinese firms accounted for 33 global out-licensing deals—double the number in 2019—many structured through NewCo frameworks [5]. This trend is driven by factors such as lower R&D costs, access to large patient populations, and regulatory reforms aligning with ICH standards. For instance, Hengrui’s collaboration with GlaxoSmithKline (GSK) highlights how Chinese innovators are now sought-after partners for global pharma giants seeking cost-effective R&D solutions [6].

However, the model is not without risks. Critics argue that ceding global commercial rights could limit long-term revenue potential, particularly if drugs achieve blockbuster status. Yet, for Hengrui, the immediate financial benefits and reduced exposure to market entry risks appear to outweigh these concerns. As of mid-2025, the company’s revenue has surpassed $53 billion, with R&D investments accounting for over 20% of its budget—a testament to its commitment to innovation despite out-licensing strategies [7].

Conclusion: A Model for the Future?

Hengrui’s HRS-1893 deal and its NewCo model represent a paradigm shift in how Chinese biotech firms engage with global markets. By combining upfront monetization, shared risk, and equity upside, the model offers a scalable solution for maximizing R&D value in an increasingly competitive landscape. For investors, the key question is whether this approach can be replicated across Hengrui’s pipeline and whether the company can maintain its innovation edge amid rising global competition.

As Chinese firms continue to export their drug candidates to international markets, the NewCo model may well become a blueprint for the next generation of biotech partnerships—one that balances agility, capital efficiency, and long-term growth.

Source:
[1] Hengrui Pharma signs deal with Braveheart Bio for HRS-1893 [https://www.pharmaceutical-technology.com/news/hengrui-braveheart-hrs-1893/]
[2] The NewCo Model: A Trending Approach by Chinese Biotech [https://arc-group.com/newco-model-chinese-biotech/]
[3] China's Biopharma Boom in Global Drug Licensing Deals [https://www.ecinnovations.com/blog/chinas-biopharma-boom-in-global-drug-licensing-deals/]
[4] Understanding the NewCo Model: A Popular Approach for Chinese Biopharma Companies [https://www.ecinnovations.com/blog/understanding-the-newco-model-a-popular-approach-for-chinese-biopharma-companies/]
[5] Ranking of Chinese Pharmaceutical Companies 2020–2025: Growth Leaders & Market Shifts [https://www.linkedin.com/posts/jenny-m-yu_astrazeneca-plans-independent-drug-supply-activity-7350466151220436992-KCpo]
[6] Chinese Pharmaceutical Companies Entering Global Market: The Case of Jiangsu Hengrui Medicine [https://www.researchgate.net/publication/361159733_Chinese_Pharmaceutical_Companies_Entering_Global_Market_The_Case_of_Jiangsu_Hengrui_Medicine]
[7] China's leap in pharma: slow and fast trends behind its rise [https://www.alexkesin.com/p/chinas-leap-in-pharma-slow-and-fasthtml]