BD transactions become one of the exit routes: Investment logic in the biomedical and pharmaceutical field is changing.

Ask AI · How does a shift in investment logic affect financing for biotech and biopharmaceutical companies?

《Science and Technology Innovation Board Daily》 March 20 report (reporter Shi Shiyun) “Over the past one and a half years, investment confidence in the pharmaceutical industry has been significantly restored. On the one hand, it is inseparable from the perseverance and breakthroughs of domestic Biotech. On the other hand, capital’s exit methods have also become more diverse. While an IPO is one of the traditional routes, not every project can ultimately reach an IPO. Through BD, acquisitions, and other means, effective exits can also be achieved, which sends a positive signal to the industry.” He Xing, Chief Investment Officer and Partner of Honghui Fund, told reporters from 《Science and Technology Innovation Board Daily》.

After going through two years of industry downturn in 2022–2023, domestic biopharma investment and financing began to bottom out and stabilize in 2024. In 2025, it saw a clear recovery, showing a “V-shaped rebound” trend. According to relevant statistics, that year saw a total of 731 financing events, a year-on-year increase of 31% compared with 2024; the financing amount was about 59.378 billion yuan, a year-on-year increase of 17%; the average financing amount per deal was 80 million yuan.

“Two years ago, to raise the large amount of funding needed for clinical trials, our executive team visited investment institutions everywhere. We talked with others about our technology, our product’s prospects for commercialization, yet the fund-raising process was repeatedly blocked, and our capital chain was under pressure. By 2025, it turned out that investment institutions actually came looking for us proactively. In that moment, it suddenly felt like the sky had cleared and day had dawned.” In an on-the-ground investigation by reporters from 《Science and Technology Innovation Board Daily》, a company founder focusing on the cell therapy field said as much.

A warming up in financing does not mean that capital has started “casting money everywhere.” In an increasingly rational capital market, it has long stopped buying into nothing more than pure sentiment and concepts.

At the BIOCHINA2026 (11th) YiMao Biopharmaceutical Industry Conference held recently, the co-founder of a startup company in the monoclonal antibody space told reporters from 《Science and Technology Innovation Board Daily》 frankly that the company is currently advancing a seed round financing in the tens of millions of yuan range. But during initial engagement with investors, the other party said directly that it lacked core competitiveness and that the investment willingness was not strong. “Not being looked upon favorably inevitably takes a toll on us internally, but we will keep trying.” the co-founder said.

Behind this is the gradual shift in the investment logic for biopharma. After undergoing deep industry adjustments and capital clearing out, today’s capital has already said goodbye to the blind pursuit of a single target, popular tracks, and extensive, rough-edged deployments in the past. Instead, it is shifting focus to clinical value, technological barriers, and certainty in commercialization, and carrying out more precise screening of investment targets.

From chasing the number of pipelines to valuing data quality; from favoring track popularity to focusing on core competitiveness, capital is using stricter standards to redefine the value yardstick of biopharma. Only companies that truly have differentiated innovation, global cooperation capabilities, and commercialization potential can gain ongoing recognition in this round of recovery. Homogeneous companies lacking core competitiveness may still face dual tests of financing and survival.

As for specific investment criteria, He Xing gave examples based on Honghui Capital’s investment practices. He told reporters from 《Science and Technology Innovation Board Daily》 that for R&D-driven companies, we will first focus on their pipeline development progress, including whether projects are advancing as expected, whether they can move step by step from early-stage concepts to PCC (preclinical candidate compounds), and then achieve clinical POC (proof of concept) through R&D, while continuously pushing them forward.

“Drug R&D itself involves high risk. When projects encounter difficulties, we will communicate deeply with the team to determine whether external factors are affecting the project, or whether there are technical or R&D risks inherent in the project. If necessary, we will also make corresponding adjustments to the R&D strategy.” He Xing said.

In some other sub-sectors, for example, the medical aesthetics sector that has been all the rage in recent years, Honghui Fund also has an investment logic. As Gong Siying of Honghui Fund stated, against the backdrop of increasingly close industry cooperation between China and South Korea in medical aesthetics, Honghui Fund has already been positioning itself for cross-border medical aesthetics investments.

“On project screening, we first value technological innovation. Whether it is R&D of new materials or innovative development models for traditional products, these are core focus areas. At the same time, we also place high importance on the team and founders’ backgrounds. We prefer teams with deep industry experience, especially entrepreneurs who have a track record of successful ventures—such teams often have stronger capabilities in industry deployment and operations. In addition, for overseas investments, we also look at cross-border synergy. For example, for projects in Korea, we will prioritize targets that have China cooperation entry points, so as to promote deep linkage among the invested Korean companies and the invested companies in China, as well as the broader industrial ecosystem.” Gong Siying said.

To date, Honghui Fund has invested in multiple medical aesthetics companies in South Korea, including Cellark Bio, Plco Skin, and others.

In recent years, with a series of policies being implemented—such as the adjustment of the National Reimbursement Drug List becoming routine, continued tightening of controls on healthcare spending, and the expansion of the scope of centralized procurement—China’s domestic pharmaceutical industry has been accelerating its return to clinical value and the essence of innovation. The industry landscape has been continuously optimized and upgraded, which in turn has affected how the capital market plans and evaluates investment and financing.

In response, He Xing said: “China’s医保 reimbursement prices are currently still in a ‘low-lying area’ globally. This is mainly because China has a large population base, and医保 as the largest payer has very strong bargaining power. From an investment perspective, however, projects that only cover the China market will make investors more cautious, because the level of investment and market returns often do not match. For projects in the domestic market, the capital market will be more focused on major disease indications. With a large patient base and a clinical necessity, those projects fit the bill.”

“Globalization potential is a ‘must-have’ for screening targets. This includes a company’s overseas clinical capabilities, BD cooperation capabilities, and overseas-expansion channel planning. Only companies with globalization capabilities can break through the growth bottleneck of a single market. Taking innovative drugs entering China’s national医保 system as an example, these products often have strong international competitiveness. Such innovative drugs not only can enter developed countries, but also have broad room for imagination in developing countries along the ‘Belt and Road’ routes.” He Xing said.

For the track opportunities in the next 3–5 years, He Xing predicts that pharmaceutical investment will still be innovation-driven as the core, focusing on innovative drugs that address unmet clinical needs and can be manufactured at scale. At the same time, it continues to show strong confidence in consumer healthcare and medical device sectors that can go overseas by leveraging China’s supply-chain advantages.

Gong Siying also believes that in the medical aesthetics field, the recombinant botulinum toxin track may become a highly promising burst direction in the future. She pointed out that as a medical aesthetics “must-have” injectable product, the market space is large. However, traditional products based on natural extraction of botulinum toxin are currently constrained by production conditions and costs, and at the institutional level they can only be used as a lead-in product, with low profit margins.

“By comparison, recombinant botulinum toxin technology shows clear advantages. While ensuring product safety and effectiveness, recombinant technology can significantly improve biosafety and substantially reduce production costs. At the same time, it preserves reasonable profit margins for medical aesthetics institutions, increasing the motivation to promote the product and improving market penetration. Domestic companies have already achieved technological breakthroughs in the recombinant botulinum toxin sector. Dejin Bio, invested by Honghui Fund, is expected to get approved for an IPO in the next two years. With its dual advantages in both products and costs, it is expected to open up a new increment in market demand and reshape competitive dynamics in the botulinum toxin market.” Gong Siying said.

(Science and Technology Innovation Board Daily reporter Shi Shiyun)