Innovative drug sector stages a collective rebound

On March 27, the innovative drug sector collectively surged.

Companies such as Staidson, CSPC Pharma, Baili Tianheng, Medicilon, and Kanghong Pharmaceuticals all rose significantly.

The tightening of policies was the core reason for the previous major adjustment in the pharmaceutical sector, but now, the domestic policy environment for innovative drugs has significantly eased.

In 2024, innovative drugs appeared in government work reports for the first time. In 2025, the government work report went further, providing specific guidance and setting the tone from various dimensions including industry, funding, and development direction. More critically, it proposed that the Class C medical insurance directory will be released in 2025, indicating that the era of incremental payment for innovative drugs is on the horizon.

Domestic policies have supported the bottom line for innovative drugs, while overseas business development has directly opened up the upper limit.

Research reports from Hua Fu Securities show that from 2020 to 2024, the total value of BD transactions in innovative drugs increased from $9.2 billion to $52.3 billion, while upfront payments rose from $600 million to $4.1 billion.

Entering 2025, BD deals for innovative drugs have skyrocketed both in number and scale — CSPC Pharma secured a mega deal worth over $6 billion from Pfizer, Germany's BioNTech transferred Pumi’s BNT327 in an $11.1 billion deal, and CSPC Pharma is about to finalize three BD deals with potential individual amounts of $5 billion each... Since the beginning of the year, the total value of overseas transactions in innovative drugs has reached $45.5 billion, nearly reaching last year's total within just half a year.

The ASCO conference has always been regarded as the largest and most academically prestigious conference in the global oncology field. At the recently concluded 2025 ASCO conference, there were 73 oral presentations from China, setting a new record high.

When all negative factors have been fully priced in, even the slightest change can bring significant elasticity, let alone such a pronounced marginal improvement. This forms the basic underlying logic for the current revaluation of innovative drugs.

However, if they were only better than their past selves, innovative drugs wouldn't have the kind of market influence and attention they currently enjoy.

From 2015 to 2024, China’s pharmaceutical industry completed a historic leap from follower to leader in just ten years.

Among the 184 ADC pipeline-related studies selected for the 2025 ASCO conference, 89 were from China, accounting for approximately 48.4% of the total. Chinese companies released around 34 bispecific antibody studies, making up roughly 49% of all bispecific antibody research. Global researchers collectively published 54 'late-breaking abstracts' (LBAs), of which 11 were led by Chinese researchers. Ten years ago, there was only one oral presentation from China at ASCO, and zero LBAs drawing significant international market attention.

In 2015, China had only 124 original innovative drug pipelines under development; by 2024, this figure had reached 704, ranking first globally. In 2015, only nine First-in-Class innovative drugs developed by Chinese enterprises entered clinical trials, accounting for less than 10% of the global total. By 2024, this number had surged to 120, with the proportion exceeding 30%.

Looking ahead, the grand journey of China's innovative pharmaceuticals has only just begun.

On one hand, domestic Biotech firms have already outpaced their overseas counterparts with extremely low R&D costs (about one-third to one-fifth of those in the U.S.) and faster R&D speed. As of now, Chinese companies lead globally in the number of pipelines under development in areas such as cell therapy, ADCs, and bispecific antibodies, maintaining a leading position in 716 research tracks.

On the other hand, multinational pharmaceutical companies are about to face a patent cliff. It is reported that by 2037, 27 blockbuster drugs with sales exceeding $4 billion in 2024 will lose patent protection in the global market. MNCs such as Merck & Co, Novartis, AstraZeneca, Pfizer, Roche, and GSK urgently need to replenish their R&D pipelines to maintain their market competitiveness.

In 2024, the amount of China's outbound licensing deals accounted for 30% of the global total, and by 2025, this figure had risen to over 40%. Leveraging the License-out model to realize the globalization of technological value and fill the market gap left by MNCs' patent cliffs represents the vast opportunity for China's innovative pharmaceutical companies.

From an investment perspective, regardless of whether the innovative drug sector has peaked in the short term, it will not affect the long-term ability of high-quality assets to continue raising their valuation benchmarks. According to estimates by Hua Fu Securities, China's licensed projects from 2020 to 2025 are expected to generate approximately $8.2 billion in net profit, implying a potential market capitalization increase of up to $81.7 billion based on a 10x PE ratio.

To reiterate, an era of shining stars has arrived. Pharmaceuticals have been one of the worst-performing sectors in the capital markets over the past five years, but may well become one of the best-performing sectors in the next five years. $CSPC PHARMA (01093.HK)$$Staidson (300204.SZ)$$Sichuan Biokin Pharmaceutical (688506.SH)$

By Tai Luo

Disclaimer

This article contains content related to listed companies, reflecting the author's personal analysis and judgment based on information disclosed by these companies in accordance with their legal obligations (including but not limited to interim announcements, annual reports, and official interactive platforms). The information or opinions presented in this article do not constitute any form of investment or other business advice. Market Value Observer assumes no responsibility for any actions taken as a result of adopting the content of this article.

——END——

47K Views