Innovative drug sector surges! Collective profitability, industry turning point fully established

On March 27, the A-share innovative drug concept rose, with stocks such as Shutai Shen (300204.SZ), Rejing Bio (688068.SH), Ketu Bio (300858.SZ), Wanbangde (002082.SZ), Xinlitai (002294.SZ), Lianhuan Pharmaceutical (600513.SH), and Zhaoyan New Drug (503127.SH) all hitting the daily limit.

In terms of news, Hengrui Medicine reported innovative drug revenue of 16.3 billion yuan in its 2025 annual report, a year-on-year increase of 26%, accounting for nearly 60%, and provided guidance for over 30% growth in 2026, confirming the profitability inflection point. Meanwhile, several innovative drug companies like Nocankanghua, Yunding Xinyao, and Jingtai Holdings collectively turned profits in 2025, marking the industry’s official entry into a phase of profit realization.

Multiple Innovative Drug Companies Achieve Profitability

As a “barometer” of the domestic innovative drug industry, Hengrui Medicine’s 2025 annual report undoubtedly became a catalyst for the sector’s rise.

According to the annual report data, the company achieved operating revenue of 31.629 billion yuan in 2025, a year-on-year increase of 13.02%. The innovative drug business performed brilliantly, achieving sales revenue of 16.342 billion yuan, a year-on-year increase of 26.09%, with its share of total pharmaceutical sales rising to 58.34%, just a step away from 60%, completely breaking free from dependence on generic drug business and achieving a fundamental transformation from “combined generics and innovation” to “innovation-led”.

It is worth noting that the high growth in Hengrui Medicine’s innovative drug revenue is not reliant on a single product but presents a “multi-point blossom” pattern. The annual revenue from anti-tumor products reached 13.24 billion yuan, an 18.52% year-on-year increase, while non-tumor product revenue surged to 3.102 billion yuan, up 73.36% year-on-year, with the commercialization results of its pipeline continuously being released.

More significantly for the industry, Hengrui Medicine clearly provided guidance for over 30% growth in innovative drug revenue in 2026. This optimistic expectation is supported by the company’s strong pipeline reserves and commercialization capabilities. By the end of 2025, Hengrui Medicine had received approval for seven new drugs within the year, with its pipeline covering multiple core therapeutic areas, including oncology, autoimmune diseases, and metabolic disorders. Several products are in crucial Phase III clinical stages and are expected to achieve commercialization within the next 1-2 years. Additionally, the company’s innovative drug licensing business has seen significant results, achieving 3.392 billion yuan in licensing revenue in 2025, having reached licensing cooperation with several multinational companies such as MSD and GSK, which not only brought in stable cash flow but also validated the global competitiveness of domestic innovative drugs.

The confirmation of Hengrui Medicine’s profitability inflection point is not an isolated case but a reflection of the overall recovery of the innovative drug industry. Today, several innovative drug companies, including Nocankanghua, Yunding Xinyao, and Jingtai Holdings, which disclosed their performance simultaneously, have all delivered impressive “turning losses into profits” results, collectively announcing the arrival of the industry’s profitable era. Among them, Nocankanghua achieved a net profit of 120 million yuan in 2025, a significant turnaround from a loss of 380 million yuan in the same period last year; Yunding Xinyao realized a net profit of 80 million yuan, ending several years of consecutive losses thanks to the commercialization of a core ADC drug; Jingtai Holdings achieved a net profit of 75.609 million yuan in its 2025 interim report, relying on breakthroughs in AI drug development technology and the expansion of its CDMO business, becoming one of the first companies in the AI innovative drug field to achieve profitability.

Leading Companies Expected to Increase Market Share

From industry data, the recovery of the innovative drug sector is not accidental but a necessary result of the resonance of three major factors: policy, capital, and technology.

Looking back at the development history of China’s innovative drug industry, the past decade has gone through three stages: “barbaric growth—bubble squeeze—rational return.” From 2018 to 2022, influenced by multiple factors such as centralized procurement price reductions, research and development failures, and capital withdrawal, many innovative drug companies fell into losses, with some even facing delisting risks, and the sector’s valuation remained sluggish. However, starting in 2023, the industry has seen marginal improvements, with policies continuously releasing dividends, optimizing the drug centralized procurement mechanism, and accelerating new drug approvals, significantly shortening the conversion cycle of research and development results. The normalization of medical insurance negotiations combined with the expansion of commercial insurance catalogs has provided multiple payment pathways for innovative drugs, alleviating the pressure on companies to “exchange price for volume.”

On the capital front, the financing environment for the innovative drug sector continued to improve in 2025, with large overseas authorization (BD) transactions frequently occurring. As of March 21, 2026, the total package for 2026 Chinese innovative drug overseas BD has reached 57.1 billion USD, with a down payment of 3.3 billion USD, totaling 53 cases. The total package is equivalent to 41% of the entire 2025 year, exceeding the full-year level of 2024, and the down payment amount of 3.3 billion USD is equivalent to 46% of the entire 2025 year. This high prosperity in BD overseas trends not only brought ample cash flow to innovative drug companies but also proved that the technological strength of domestic innovative drugs has gained global market recognition.

In the future, leading companies with core technologies, rich pipeline reserves, and strong commercialization capabilities will continue to seize market share, achieving dual enhancements in performance and valuation. In contrast, those small and medium-sized pharmaceutical companies that lack core competitiveness, have disordered pipeline layouts, and weak commercialization capabilities will gradually be eliminated from the market, leading the industry from “a hundred flowers blooming” to a healthy development pattern of “removing the false and retaining the true.”

Among them, Innovent Biologics achieved a turnaround in 2025 with a revenue growth of 38.42%. The core product, Sintilimab, continues to expand through indication extensions, while also deploying potential products like Ma Shidu peptide, with ongoing improvements in commercialization capabilities and steadily rising market value.

BeiGene, on the other hand, has core technological advantages in hematologic oncology and solid tumors. In 2025, its R&D pipeline continues to break through, with multiple data readouts expected within the year in areas such as ADCs and bispecific antibodies. Its product’s commercialization advancement in the global market has kept stock prices in A-shares, Hong Kong stocks, and U.S. stocks on an upward trend, making it one of the leading targets with both technological strength and commercialization potential.

Rongchang Bio is expected to achieve a net profit of approximately 716 million yuan in 2025, making a remarkable turnaround from a loss of 1.468 billion yuan in the same period last year. The core driving force comes from the rapid growth of domestic sales of Tislelizumab and Vedicizumab, as well as significant technical licensing revenue from the exclusive overseas authorization of Tislelizumab.