Innovative drug sector, a collective rebound

Question AI · How to unlock the growth potential of innovative drugs amid the surge in overseas BD transactions?

Written by: Tairuo

On March 27, the innovative drug sector collectively rose.

Shutai Shen, Shiyao Group, Baili Tianheng, Medicy, and Kanghong Pharmaceutical all saw significant increases.

Policy tightening was the core reason for the last round of major adjustments in the pharmaceutical sector, but now, the domestic policy environment for innovative drugs has clearly become more relaxed.

In 2024, innovative drugs made their first appearance in the government work report. In 2025, the government work report went further, providing specific guidance and direction from various dimensions including industry, funding, and development direction. More critically, it stated that the Class B medical insurance directory will be released in 2025, indicating that the era of incremental payment for innovative drugs is imminent.

Domestic policies have supported the lower limit of innovative drugs, while overseas BD has directly opened up the upper limit.

A research report by Huafu Securities shows that from 2020 to 2024, the total amount of innovative drug BD transactions increased from $9.2 billion to $52.3 billion, with the upfront payment amount rising from $600 million to $4.1 billion.

Entering 2025, innovative drug BD transactions have completely taken off, with an increasing number and larger scale—Sihuan Pharmaceutical secured a contract with Pfizer worth over $6 billion, Germany’s BioNTech crazily resold its Promis BNT327 for $11.1 billion, and Shiyao Group is about to finalize three potential BD deals totaling $5 billion each… Since the beginning of the year, the total amount of innovative drug transactions abroad has reached $45.5 billion, nearly matching last year’s total in less than six months.

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

When all negative factors have been fully priced in, any slight change can bring significant elasticity, especially such a remarkable marginal improvement; this is a fundamental underlying logic for the revaluation of innovative drugs at present.

However, if it is only better than its past self, innovative drugs cannot have the current market influence and attention.

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

Out of the 184 ADC pipeline-related studies selected for the 2025 ASCO conference, 89 are from China, accounting for about 48.4% of the total; Chinese companies released about 34 dual-antibody studies, representing approximately 49% of all dual-antibody research. Global researchers published a total of 54 “Late Breaking Abstracts” (LBA), with 11 LBAs led by Chinese researchers. Ten years ago, there was only one oral report from China at ASCO, and there were zero LBA projects that attracted international market attention.

In 2015, there were only 124 original innovative drug R&D pipelines in China, but by 2024, this number has reached 704, ranking first in the world. In 2015, only 9 self-researched FIC innovative drugs from Chinese companies entered clinical trials, accounting for less than 10% globally. By 2024, this number has surged to 120, with a share exceeding 30%.

Looking far ahead, the great journey of Chinese innovative drugs has just begun.

On one hand, local biotech companies have achieved overwhelming advantages over their overseas counterparts with extremely low R&D costs (about 1/3 to 1/5 of those in the US) and faster R&D speeds. So far, Chinese companies lead the world in the number of pipelines in fields such as cell therapy, ADC, and dual antibodies, maintaining the top 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 face patent expiration in the global market. MNCs like Merck, Novartis, AstraZeneca, Pfizer, Roche, and GSK urgently need to replenish their R&D pipelines to maintain market competitiveness.

In 2024, China’s outbound licensing transaction amount accounted for 30% of the global total, and by 2025, the outbound transaction total has risen to over 40%. Utilizing the License-out model to realize the globalization of technological value and fill the market gap after the MNC patent cliff is a vast opportunity for Chinese innovative pharmaceutical companies.

From an investment perspective, whether or not innovative drugs have peaked in the short term will not affect the continued elevation of related high-quality targets in their long-term valuation centers. According to Huafu Securities’ estimates, from 2020 to 2025, China’s licensed projects are expected to generate approximately $8.2 billion in net profits, with a potential market value increase of up to $81.7 billion calculated at a 10x PE ratio.

Still, the same point: an era of brilliant stars has arrived. The pharmaceutical sector has been one of the worst-performing sectors in the capital market over the past five years, but it may also be one of the best-performing sectors in the next five years.

Disclaimer

This article contains information related to publicly listed companies and represents the author’s personal analysis and judgment based on information publicly disclosed by listed companies in accordance with their legal obligations (including but not limited to interim announcements, periodic reports, and official interaction platforms). The information or opinions in this article do not constitute any investment or other business advice, and Market Value Observation assumes no responsibility for any actions taken based on the adoption of this article.

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