Innovative drugs surge dramatically! Is this a rebound or a reversal?

Ask AI · Does the collective improvement in the performance of innovative drug companies signal a turning point for the industry?

Today (3/27), the innovative drug sector was completely boiling, surging with a jaw-dropping rally! The 100%-pure innovative drug HK Stock Connect ETF: E Fund (159570) Innovative Drugs rose more than 5%, with trading volume surging—more than RMB 3.0 billion in intraday turnover! “20CM Innovative Drug New Species” 科创 Innovative Drug ETF E Fund (589120) skyrocketed by more than 6%, with its gain ranking among the top ETFs across the whole market!

【New drug + performance + conference acceleration catalyzes the innovative drug sector!】

1. In terms of new drugs, Dizal Pharmaceutical announced that its self-developed novel lung cancer targeted therapy Suwozhe (generic name: Suwotirine tablets) achieved the primary study endpoint and delivered positive topline results in the international multicenter Phase III clinical study “Wukong 28” for first-line treatment of late-stage non-small-cell lung cancer with EGFR exon 20 insertion mutations as a monotherapy. Suwozhe became the first and only oral targeted drug that achieved a positive result in an international multicenter randomized controlled Phase III clinical study for first-line treatment of EGFR exon20ins NSCLC.

Baili Tianteng announced in a March 22 filing that the company recently received the “Drug Clinical Trial Approval Notice” that was formally approved and issued by the National Medical Products Administration (NMPA). The clinical trial application for the company’s self-developed innovative drug BL-ARC002 injection has been approved, and the company is allowed to carry out clinical trials for late-stage solid tumors.

2. On performance, Yun Ding New Origin released its annual results. Revenue for the full year increased 142% year over year to RMB 1.707 billion. It was the first time it turned from loss to profit under international financial reporting standards, recording a profit of RMB 187 million. Under international financial reporting standards, losses also narrowed significantly by 71%, and operating cash flow successfully turned positive. The increase in revenue was mainly because sales of Nairfukang in the already commercialized markets continued to rise.

Recently, Hong Kong drug companies have disclosed earnings in clusters, lifting the sector with strong performance. Lepu Bio turned to profit last year, with revenue up 1.54x year over year. Innovent Biologics reported 2025 revenue of RMB 31.629 billion, with net profit on revenue reaching a new high. Shijiazhuang Pharma Group reported 2025 revenue of RMB 26.006 billion, with cumulative amounts from out-licensing to external parties totaling USD 28.21 billion.

As of March 25, among the 32 constituent stocks in the HK Stock Connect Innovative Drug ETF E Fund (159570) benchmark index, 25 have already disclosed their 2025 performance, of which 15 have seen year-over-year growth in net profit attributable to shareholders.

Note: The constituent stocks of the benchmark index are shown for illustrative purposes only and do not constitute stock recommendations.

3. In terms of conferences, the AACR Annual Meeting will be held in San Diego, United States, from April 17-22, 2026. 104 Chinese pharmaceutical companies will bring more than 250 innovative drug programs to this conference. 92 ADC drug programs cover popular targets such as CDH17, Claudin18.2, HER2, and Nectin-4. 66 small-molecule drug programs cover targets such as KRAS, PRMT5, WRN, and CDK. Frontier technologies such as radiopharmaceuticals, DAC, cell therapy, and mRNA will also disclose preclinical data.

(Source: Guohai Securities 20260324 “China’s New Drugs Are About to Shine at the 2026 AACR Conference”)

【BD at the start of 2026 exceeds expectations, with major deals rolling out in dense clusters!】

From January to February 2026, the total BD deal value for China’s innovative drug sector reached USD 53.276 billion, with 44 deals. In just the first two months, the deal value surpassed any single quarter in 2025 and is close to the level of full-year 2024. The consideration value per single deal has continued to rise. In January to February 2026, the average upfront payment for BD transactions was USD 172 million, up sharply 230% from the USD 52 million in 2022. The continued rise in deal value indicates that a global collaboration trust framework for the value of China’s innovative assets is gradually being established. In the specific deal projects, Shijiazhuang Pharma and Zai Lab, respectively, entered platform-level strategic collaborations with AstraZeneca and Eli Lilly on multiple early-stage projects, achieving deep binding with multinational MNCs. Innovent? [Yilian] and Rongchang, respectively, out-licensed their core ADC and bispecific antibody products to Roche and AbbVie, exploring a new “IO+ADC” tumor first-line treatment paradigm. Sanct? and Rebo’s siRNA products successfully went overseas, achieving a “from 0 to 1” breakthrough in frontier small nucleic acid technologies.

(Source: 20260304 “BD Exceeds Expectations in Innovative Drugs; Globalization Collaboration Reconstructs Value”)

【The innovative drug sector has abundant funds and strong sustainability in R&D investment!】

Dongwu Securities said that BD revenue and post-listing fundraisings provide funding support for R&D by innovative drug companies. From 2024/1/1 to 2026/3/21, post-listing fundraising in Hong Kong and A-share biotech and biopharma sectors totaled about RMB 70 billion, supporting R&D investment in innovative drug pipelines. According to data statistics, from 2024/1/1 to 2026/3/21, the total amount of A-share biotech and biopharma sector fundraising via follow-on offerings was RMB 11.8 billion, and fundraising via issuing convertible bonds totaled RMB 2.5 billion. From 2024/1/1 to 2026/3/21, post-listing fundraising in the Hong Kong biotech and biopharma sector totaled HKD 63.2 billion. On the BD revenue side, as of 2026/3/21, China’s innovative drug overseas BD total package has already reached USD 57.1 billion in 2026, with an upfront payment of USD 3.3 billion and a number of deals reaching 53. BD revenue has become an important funding source for China’s innovative drug companies.

Dongwu Securities evaluates whether the funding situation of the innovative drug sector is sufficient by calculating “cash and cash equivalents / annual R&D expenses.” Overall, at present the pharmaceutical sector has sufficient funding. Most companies still maintain the ability to cover R&D funding for more than one year, which can effectively support the advancement of subsequent clinical trials, pipeline expansion, and technological innovation. It also lays a solid financial foundation for the industry’s long-term high-quality development, and provides ample time windows for technology breakthroughs and commercialization transformation of innovative drug companies.

Figure: Fund positioning of constituent stocks in the HK Stock Connect Innovative Drug ETF (159570) benchmark index

Note: Constituent stocks are shown for illustrative purposes only and are not intended as stock recommendations.

(Source: 20260322 “BD Volume Expansion and Further Financing; Cash Flows Are Ample for Innovative Drug Leaders [Dongwu Pharma Zhu Guoguang Team]”)

【Short-term volatility for innovative drugs doesn’t change long-term growth!】

Oriental Securities believes that although the innovative drug sector has continued to experience persistent volatility since the beginning of the year due to concentrated expression of expectations and sentiment, the long-term trends of accelerating globalization, breakthroughs in innovative technologies, and industrial upgrades have not fundamentally changed. The underlying logic that innovative drugs will perform well in the medium-to-long term has not wavered. Considering that the valuations of high-quality leading companies have entered a reasonable range, after volatility in sentiment stabilizes, it suggests actively focusing on investment opportunities positioned at lower levels. Mainly focus on the following three key themes:

1. Shift attention from “whether it can go overseas” to “progress after going overseas.”

In the past period, the market focused more on upfront payments and total deal package amounts for out-licensing. When specific numbers are difficult to surpass market expectations, short-term trading opportunities have already been fully played out. The core of China’s innovative drug overseas expansion has switched from “whether it can go overseas” to the overseas clinical deployment progress of products, key data readouts, and milestone achievements. The degree of “overseas monetization” will be particularly critical in the future. For example, Pfizer recently stated it will continue推进 SSGJ-707’s global Phase 3 enrollment and expand multiple indications, as well as clinical development in combination with ADC. Summit also updated progress on the HARMONi-3 trial during its earnings call. The squamous subgroup is expected to complete enrollment in the second half of this year. It may conduct interim PFS data analysis and read out the final PFS data in the first half of next year. Overall, how domestic drugs deliver overseas will become a key focus for the industry.

2. Cutting-edge technologies have kept breaking through, and there is potential to lead overseas.

Chinese companies have gradually taken the lead in frontier therapy areas such as small nucleic acids and cell therapies. By leveraging better clinical data, they could become global transaction-core assets: 1) The year when small nucleic acids break through is here. It is no longer limited to rare diseases and metabolic diseases. Breakthroughs in delivery technology are enabling a systematic entry into more chronic disease treatment scenarios, with enormous commercial value. For example: several companies including Haisiy, BiVision, and Rebo have actively invested in delivery technologies for fat, the central nervous system, and the kidneys. 2) In vivo CAR-T has been preliminarily validated as effective, and technical path certainty has improved. With advantages including simpler production and use processes and lower costs, it is expected to become a mainstream direction. Against the backdrop of strong MNC demand, multiple deals may be achieved in the future.

3. Excellent commercialization performance, with profitability turning points arriving early.

Top innovative drug companies are entering a positive feedback loop of “product volume ramp-up leading to R&D replenishment.” As core products of innovative drug companies step into the commercialization cycle, with rapid volume expansion supported by social medical insurance and commercial insurance, performance could exceed market expectations. Oriental Securities believes that this year could be the key window for the sector to turn losses into profits, and the 3-4 month earnings season will become an important validation point. Leading companies’ commercialization capabilities are outstanding, and some innovative drug companies’ earnings also have high growth potential; value could be revalued.

(Source: Oriental Securities 20260306 “Short-term Volatility Doesn’t Change Long-term Growth”)

【Follow China’s hard-core innovative drug forces, and recognize new-quality productive forces—choose the HK Stock Connect Innovative Drug ETF E Fund (159570)】

The benchmark index of the HK Stock Connect Innovative Drug ETF E Fund (159570) allocates 100% to innovative drugs! As of February 27, the top ten constituent stock weights were 73.54%, concentrating the essence of HK Stock Connect innovative drugs!

Source: Guozheng Index website, 2026/2/27. Constituent stocks are shown for illustrative purposes only and do not constitute stock recommendations.

The benchmark index of the HK Stock Connect Innovative Drug ETF E Fund (159570) is an innovative drug index with higher elasticity. As of February 13, since the second half of 2023, the cumulative gain has exceeded 70%, and the Hong Kong-listed healthcare sector index leads!

2023/7/1-2026/2/13

The underlying assets are Hong Kong stocks, so you can trade with T+0!

Follow China’s hard-core innovative drug forces, and recognize new-quality productive forces—choose the HK Stock Connect Innovative Drug ETF E Fund (159570), with an off-exchange connection (Class A: 021030; Class C: 021031)!

Risk warning: Funds involve risk; invest with caution. The individual stocks mentioned in the article are only used as objective illustrations of index constituent stocks and do not represent any investment recommendation. Any views, analysis, and forecasts in this article do not constitute investment advice of any kind to readers. The above funds all belong to relatively high risk categories (R4) and are suitable for investors who, after customer risk tolerance assessment results, are classified as aggressive (C4) or above. The fund’s investment scope includes Hong Kong stocks and will face unique risks arising from differences in the investment environment, investment targets, market systems, trading rules, and so on. When investors apply for subscription/redemption of ETF fund shares, the subscription/redemption agent brokers may collect commissions according to a standard not exceeding 0.50%, which includes related fees collected by the securities exchange, the depository and other relevant institutions. For the sales fees of other funds, please refer to the relevant legal documents such as the prospectus and product information summary. When investors apply for subscription/redemption of ETF fund shares, the subscription/redemption agent brokers may collect commissions according to a standard not exceeding 0.50%, which includes related fees collected by the securities exchange, the depository and other relevant institutions. For the sales fees of other funds, please refer to the relevant legal documents such as the prospectus and product information summary.

The benchmark index of the HK Stock Connect Innovative Drug ETF E Fund (159570) is the Guozheng HK Stock Connect Innovative Drug Index. Over the most recent 5 complete years (2021-2025), its annual returns were -21.59%, -25.60%, -22.80%, -10.50%, and 59.83%, respectively.