Chinese innovative pharmaceutical companies have ignited investment enthusiasm with a series of hundred million dollar licensing Trades, successful IPOs, and a strong R&D pipeline, ushering in their own "DeepSeek moment."
From profitability to the explosive growth of BD, has the "DeepSeek" moment arrived for China's innovative drug industry?
Since the beginning of this year, $Hang Seng Hong Kong-Listed Biotech Index (800805.HK)$ Soared over 60%, surpassing the AI Sector's growth of 17%. Behind this wave is the enthusiasm of investors ignited by a series of billion-dollar licensing deals, successful IPOs, and a strong R&D pipeline from Chinese innovative drug companies.
Data shows that in the first quarter of 2025, the total value of mergers and licensing deals involving Chinese pharmaceutical companies doubled to $36.9 billion, accounting for more than half of the global total ($67.5 billion).
Dong Chen, Chief Asia Analyst at Baida Wealth Management in Hong Kong, stated that Chinese biotech companies are entering their own "DeepSeek" moment. He mentioned that there is still more upside potential ahead.
Yiqi Liu, Senior Investment Analyst at Exome Asset Management LLC in New York, commented:
Unlike 10 years ago, Chinese biotechnology is no longer just an emerging phenomenon, but a disruptive force reshaping global drug innovation.
The scientific evidence is solid, the economic benefits are remarkable, and the R&D pipeline is beginning to show results.
Core of the trend: double-driven by licensing Trade and IPOs.
Chinese innovative pharmaceutical companies have demonstrated an astonishing ability to attract capital since the beginning of 2025.
According to media reports, on May 19, $Pfizer (PFE.US)$ a $1.25 billion upfront payment for licensing.$3SBIO (01530.HK)$ Inc. a experimental cancer drug, and added a $0.1 billion equity investment; two weeks later, Pfizer $Bristol-Myers Squibb (BMY.US)$ announced an authorization at a maximum price of $11.5 billion.$BioNTech (BNTX.US)$ SE a cancer drug, while the latter had already been authorized by the Chinese company Biotheus Inc. back in 2023.
The IPO market is also booming. According to news from the Fenghuang Trading Desk, analysts from Founder Securities, Zhou Chaoze, Xu Rui, and Li Jiyang recently released Research Reports showing that $DUALITYBIO-B (09606.HK)$on April 15, the stock price doubled on its first day of listing in Hong Kong, and has increased by 189% so far; Jiangsu $HENGRUI PHARMA (01276.HK)$ On May 23, it rose 25% on the first day of listing, and currently has a cumulative increase of 31%.
This series of events has directly boosted market confidence in the Innovation Drug Sector, making the Hang Seng Hong Kong-Listed Biotech Index a star in the Asian market.
The business model has gained recognition, and a valuation reassessment is imminent.
The impressive performance of the Capital Markets is attributed to the enhanced profitability of Chinese innovative pharmaceutical companies—Chinese innovative pharmaceutical firms are breaking the stereotype of "continuous cash burn" and entering a new stage of validating their business models.
According to Founder Securities, the biggest boost to the current enthusiasm in the pharmaceutical Industry comes from the widespread recognition of the innovative drug business model. From a trend perspective, leading innovative drug companies are gradually entering a phase of turning losses into profits, breaking the market's inherent perception that innovative drug companies rely on continuous financing and cash burning, while the realization of BD project collections has also entered a normalized stage.
The report shows that, $BEIGENE (06160.HK)$ In the first quarter of 2025, achieved profitability under U.S. Generally Accepted Accounting Principles, with full-year revenue guidance of 4.9-5.3 billion USD.$INNOVENT BIO (01801.HK)$In 2024, Non-IFRS net income turned positive for the first time, reaching 0.33 billion RMB, and set a sales target of 20 billion RMB by 2027.$AKESO (09926.HK)$Product sales revenue exceeded 2 billion RMB, with EBITDA losses significantly narrowing to 0.2 billion RMB.
BD transactions experienced explosive growth, with strong global demand.
This improvement in profitability comes not only from the success of product commercialization but, more importantly, the normalization of BD (Business Development) licensing revenue.$Jiangsu Hengrui Pharmaceuticals (600276.SH)$The substantial increase in profits in the first quarter is primarily due to the upfront payment from BD, indicating that the value of the innovation pipeline is being systematically reassessed.
The report shows that as of June 8, 2025, Chinese enterprises have exceeded $2.5 billion in upfront payments for authorized transactions abroad, with a total amount exceeding $50 billion, reaching the level of the entire year of 2024. This phenomenon is referred to in the industry as China's biotechnology "DeepSeek moment," reflecting a fundamental enhancement of the position of Chinese innovative drugs in the global value chain.
Multinational pharmaceutical companies are facing tremendous pressure from patent cliffs. According to analysis, among the blockbuster drugs with global sales exceeding $5 billion in 2024, the total sales amount of products whose patents expire or are nearing expiration before 2030 is close to $200 billion. This huge gap drives strong demand from multinational pharmaceutical companies for Chinese innovative assets.
Moreover, China has now surpassed the United States in the number of new drug developments.
In the past decade, Chinese companies have entered clinical trials for 4,382 original innovative drugs, surpassing the United States with 4,009. In 2024, China had 704 original innovative drugs entering clinical trials for the first time, ranking first in the world.
Technological innovation: ADC, bispecific antibodies, GLP-1, etc. are driving the industry upward.
Technological innovation is the key driving force behind the rise of Chinese innovative drugs.
According to a report by Founder Securities, in the ADC (antibody-drug conjugates) field, the total amount of license-out transactions in China is expected to reach $10.24 billion in 2024, accounting for 20% of the total transaction amount.
The heat in the PD-(L)1/VEGF dual antibody sector has surged, with AKESO's total trading volume for eculizumab reaching 5 billion US dollars.
The global sales of GLP-1 weight loss drugs are expected to exceed 50 billion US dollars in 2024, with Chinese companies actively laying out multi-target and oral small molecule drugs.
In addition, TCE technology in the field of autoimmunity (such as CD3/CD19 dual antibodies) has also become a new hotspot for overseas expansion, with multiple transactions exceeding 1 billion US dollars in 2024.
Return of talent and policy dividends: long-term momentum for the industry.
Some analysts point out that the tense global trade situation has accelerated the return of talent to China's biotechnology industry.
Nicholas Chui, a fund manager at Franklin Templeton, stated that a large number of overseas research and development talents have recently returned to the country, significantly enhancing domestic research and development capabilities.
Jefferies analysts have also pointed out that many Chinese pharmaceutical companies have established partnerships with American companies, being regarded as service providers rather than product exporters, so the impact of increased U.S. tariffs on them is limited. This dual boost of talent and cooperation provides solid support for the long-term development of the industry.
However, not all investors are optimistic about this surge.
According to media reports, Bank of America Analyst Ethan Cui warned that some experts in the Medical field have planned to cash in at current high levels, preferring to choose Medical stagnation stocks with stable dividends and income growth.
In addition, some investors believe that the recent surge in authorized Trade may be a 'one-off deal', reluctant to assign excessively high valuation multiples to related companies.
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