According to the Star Daily on March 27, innovative drug concept stocks experienced a surge in the secondary market today. By the close, the Hang Seng Innovative Drug Index had risen over 5%, with INNOVENT BIO, 3SBIO, and Kelun-Bio all increasing by over double digits. In the A-share market, Beijing Aosaikang Pharmaceutical and Chengdu Kanghong Pharmaceutical Group hit the upper limit, while Maiwei Biomedical and Yifang Biomedical also saw increases.

Recently, there has been a flurry of announcements regarding external licensing transactions for domestically produced innovative drugs. First, on March 21, Hebei Bo Pharmaceutical announced a strategic cooperation with AstraZeneca to jointly develop a next-generation multispecific antibody therapy targeting immune diseases, tumors, and other various diseases. As the project licensor, Hebei Bo Pharmaceutical will not only receive a $0.175 billion upfront payment but also gain a $0.105 billion equity investment from AstraZeneca for subscribing to 9.15% of the latter's newly issued shares.

A similar case soon occurred again. On March 24, weight loss giant Novo-Nordisk announced it would purchase UNITED LAB's new weight loss drug UBT251 for an upfront payment of $0.2 billion. The following day, Merck again purchased Jiangsu Hengrui Pharmaceuticals' lipoprotein oral small molecule project for up to $1.77 billion in milestone payments to gain exclusive rights for the development, production, and commercialization of HRS-5346 outside the Greater China region.

Recently, Shanxi Securities stated that in the field of innovative drugs, where going overseas is most challenging, Chinese companies are gradually entering developed countries' markets through license out, international multi-center clinical trials, and dual reporting in China and the U.S.

In fact, the current frequency of license out cases is not a coincidence. On one hand, many pharmaceutical companies lack the capability to control the entire chain of drug R&D, clinical trials, regulatory approval, and global sales. Jiangsu Hengrui Pharmaceuticals Chairman Sun Piaoyang has stated, "Unlike the export of new energy vehicles, which can sell locally once produced, pharmaceuticals sold in international markets require clinical trials and approvals from local regulatory agencies, which entails significant investment."

More importantly, choosing to conduct external licensing transactions is not merely a reluctant move. Hitgen Inc. Chairman Li Jin believes that some small and medium-sized biomedical companies, through external licensing, entrust clinical trials, product applications, and product sales to an international partner with global capabilities, which is a positive development. In this process, companies gain not only direct economic returns but also experience in product development, clinical trial approvals, application for market licenses, and production and sales as they face the international market.

On the other hand, according to analysis from Head Leopard Research Institute, the current major pricing mechanism for pharmaceuticals is based on medical insurance negotiations. Pharmaceutical companies are competing for market share by adopting a strategy of exchanging low prices for sales volume. For drug production companies primarily driven by R&D, price reductions pose significant obstacles for sustained innovation. Against this backdrop, the broad global clinical demand, pressure of cost control from medical insurance, and pricing advantage abroad will jointly drive Chinese pharmaceutical companies to accelerate the process of going overseas.

In the current situation where the chill of the capital winter has not yet dissipated, the transition of going overseas from a "multiple-choice question" to a "must-answer question" has become a consensus among major Innovative Drugs companies. It is worth mentioning that many overseas multinational pharmaceutical companies are also gradually showing a willingness to increase local collaborations. Just recently (on March 21), AstraZeneca announced its investment plan in China, spending $2.5 billion. This pharmaceutical giant will establish its sixth Global Strategy R&D Center in Peking and has reached multiple R&D and production cooperation agreements, with the local workforce expected to increase to 1,700.

AstraZeneca stated that this five-year investment plan is part of its strategic partnership with the People's Government of Beijing Municipality and the Management Committee of the Beijing Economic-Technological Development Area. It also includes cooperation agreements reached with three companies: HAPLO (Heptares), Yuan Si Biotechnology, and Shenzhen Kangtai Biological Products, as well as the recently announced $0.16 billion acquisition agreement of Faber in China.

Northeast Securities has analyzed that the number of BD transactions for new drug companies in China has significantly increased compared to previous years, with transaction amounts rising noticeably. In the future, the overseas market for domestically produced Innovative Drugs is expected to become more active. TOP MNCs (multinational pharmaceutical companies) recognize the R&D capabilities of local Chinese enterprises and have a stronger willingness to provide high valuations; on the other hand, in four highly prosperous sectors, the overall R&D progress of domestic new drugs is commendable, and domestic pharmaceutical companies with strong R&D capabilities are expected to compete with foreign enterprises in the global market.

HTSC believes that the overseas expansion of China's Innovative Drugs and Medical Devices is already taking shape and is continuing to grow rapidly. Considering the higher prices in overseas markets and a more stable market structure, Innovative Drugs and medical devices that already have assets overseas or possess sustainable overseas capabilities are expected to become the most prominent sector in market performance by 2025. The overseas asset re-evaluation of Innovative Drugs, large medical devices, IVD, and certain high-value consumables is expected to become the main line of the pharmaceutical structural market in 2025. The CXO sector is expected to further recover.