Innovative drugs are "popping up"—is this a rebound or a reversal?

Ask AI · How will the overseas expansion model upgrade for innovative drugs reshape the global landscape?

The “innovative drugs” sector, which had been booming in the first half of last year, fell silent for a full half-year—then suddenly “came alive” again!

Some friends might say: Isn’t it just that it dropped a lot and bounced a bit? Don’t jump to conclusions yet. Let’s stitch together information and data from all sides and break it down properly. The underlying logic behind this round of gains may be changing.

The first—and most hard-core—change is that the way “going overseas” is being done has changed. In just one year last year, the total amount of cross-border licensing for China’s innovative drugs reached $135.6 billion, accounting for “half the sky” globally! What’s even more explosive is that in just the first three months of this year, the total amount of cross-border licensing for China’s innovative drugs has already exceeded $60 billion—basically, “rushing out of the gate,” finishing what it took half a year last year within a single quarter.

Once you’ve outperformed yourself, then outcompete the world. In the first two months of this year, among the upfront payments paid by global pharmaceutical companies, nearly 90% were taken by Chinese pharmaceutical companies. What does this mean? It means we are no longer “junior brothers” who just follow the big players to pick up experience—we have become a core supplier that global pharma is fighting to “pay for.”

Moreover, the “stance” of China’s innovative drug going overseas is also different. Today’s deals are no longer just simple licensing. More and more transactions adopt the NewCo model. At its core, it packages R&D capabilities and platform capabilities as a whole to maximize value output. For the market, this translates into visible cash flow—no longer “selling dreams.”

Second, the most crucial point: China’s innovative drug companies are starting to really “make money”! Over the past two years, when everyone invested in innovative drugs, they looked at pipelines, targets, and stories. Deep down, people were still uneasy, worried it might be a bottomless pit. But now, as 2025 annual reports have rolled out in large numbers, a key signal has been released: a large number of innovative drug companies have finally crossed the profitability inflection point—turning from losing money every year into achieving their first time in profit! Revenue is rising, expenses are falling, and cash flow is improving; listed products are also continuing to expand sales. The market has sharp eyes. The pricing logic for innovative drugs is gradually shifting from “speculating on expectations” to delivering real “performance.”

Third, there’s another major catalyst coming! In May and June, the U.S. Clinical Oncology meeting—ASCO, as we commonly call it—will be held. This is the largest and most authoritative gathering in global oncology, and it’s also the “race track” where all the innovative drug companies compete on the same stage to see who’s best. At that time, domestic companies won’t be short on bringing forward the most battle-tested technologies and clinical data to “go head-to-head” with multinational giants—such as GLP-1 and small nucleic acids, which are directions the market is paying close attention to. If the data comes in above expectations, that becomes a catalyst for the entire sector.

And after more than half a year of adjustment, innovative drugs’ valuations are still at a low level, and institutional holdings have dropped to a low point as well. With lighter chips and improved fundamentals, it also creates the possibility of a “double boost” from both “valuation repair” and “earnings growth.”

Right now, the innovative drugs industry is gradually entering a “golden period” in which it can not only tell overseas expansion stories, but also back it up with profits. The country has listed biopharmaceuticals as a “strategic emerging pillar industry,” and top-level design is being further intensified. We still have strong confidence in the rise of China’s innovative drugs. We believe this is also why many investors are paying attention to the 20cm-bucket innovative-drug ETF (589720). It already has a scale of more than one billion, and last Friday (March 27), it also saw volume of more than 5 million shares.

Of course, as an interest-rate-sensitive sector, innovative drugs still needs attention to short-term market liquidity. Recently, rising global uncertainty has increased market volatility, and sectors with high sensitivity like innovative drugs are inevitably affected and shake around. Everyone can patiently observe and wait for the right time.

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