The era of Innovative Drugs 3.0 is coming. How to seize the opportunity?

In recent times, the innovative drug sector in the market has become active again after a half-year lull. Analysts suggest that the innovative drug sector may be in a favorable phase of “earnings delivery and valuation repair,” and that an innovative drug 3.0 era—built around new quality productive forces and targeting global competitiveness—has quietly arrived. How can investors seize the opportunities of the innovative drug 3.0 era? (Statistical range: 2025.9.30-2026.4.1; Reference materials: Caixin Wall Street Insights, “Innovative drugs erupt again after half a year; leading companies enter a dense harvest period—has the earnings inflection point arrived?”, 2026.4.1; People’s Daily Health Client, “Song Ruilin from the China Pharmaceutical Innovation Promotion Association: China’s innovative drug industry is moving into the 3.0 era,” 2026.2.8)

A qualitative shift in the innovative drug industry, entering the “3.0 era”

Analysts believe that the innovative drug 1.0 era focused on solving “whether there is (a treatment),” the 2.0 era pursued “how good it is,” and then the underlying logic of the 3.0 era is to establish “how strong it is.” Overall, China’s innovative drugs may be standing at a crucial juncture for a leap in global competitiveness. (Reference materials: People’s Daily Health Client, “Song Ruilin from the China Pharmaceutical Innovation Promotion Association: China’s innovative drug industry is moving into the 3.0 era,” 2026.2.8)

① Leap in development stage

At present, innovation in biomedicine is showing three major trends: the complexity of frontier technologies, diversification of innovation subjects, and internationalization of regulatory standards. China’s domestic review and approval standards are deeply aligned with international systems, which not only enhances the global competitiveness of domestically developed innovative drugs, but also attracts international innovation outcomes to “launch first” in China. From the past “technology import,” to today “technology export,” China’s innovative drugs are gradually gaining more voice on the global stage, actively shaping a new industrial order and ecosystem. (Data source: NMPA, as of 2025.12.31; Reference materials: Economic Weekly Times, “China’s innovative drugs are surging like crazy: in-development drug pipelines account for 30% globally; pulling in over $130 billion in one year overseas,” 2026.3.2)

② Breakthroughs at multiple technology points

In recent years, China’s innovative drug sector has achieved breakthroughs across multiple technology fronts, covering several frontier directions. For example, at the AACR annual meeting scheduled to be held in the United States on April 17-22, 2026, 104 Chinese pharmaceutical companies will bring more than 250 innovative drug candidates to this conference. The 92 ADC drugs will cover popular targets such as CDH17, Claudin18.2, HER2, and Nectin-4. The 66 small-molecule drugs will cover targets such as KRAS, PRMT5, WRN, and CDK. Frontier technologies including nuclear medicine, DAC, cell therapy, and mRNA will also disclose preclinical data. (Reference materials: 21st Century Business Herald, “A-shares and Hong Kong shares’ pharma sectors surge; 104 Chinese pharma companies to bring 250-plus innovative drugs to AACR annual meeting,” 2026.3.27)

③ Commercialization takes off

Based on the 2025 annual report information already disclosed, a notable feature among major pharmaceutical companies at the top is that the revenue share from innovative drugs has broken through the 50% critical threshold, becoming the absolute engine of earnings growth. This means companies have successfully crossed the volume procurement cycle and entered an innovative harvest period. In addition, the high R&D investment of leading domestic pharmaceutical companies has begun to convert into tangible cash flows, which proves that their commercial capabilities have matured—not simply a “burning money” phase. (Reference materials: Xiangcai Securities, “Innovation is entering a harvest period; reshaping the logic of going overseas,” 2026.3.20)

Multiple drivers resonate together; innovative drugs may be a “long runway with deep prospects”

From the demand side, on the one hand, across many disease areas in our country, there are still numerous “treatment gaps,” and there remain large numbers of unmet clinical needs. On the other hand, population aging is a challenge faced by multiple countries today. By the end of 2025, China’s population aged 60 and above exceeded 320 million, accounting for more than one-third of the population aged 65 and above who simultaneously suffer from multiple chronic diseases.

(Reference materials: Guangming.com, “Focus on clinical needs and build a sustainable health保障 ecosystem through innovation,” 2025.12.20; Xinhua News Agency, “Science and Health | Make care more humane—‘one-stop’ diagnosis and treatment for elderly comorbidities is accelerating implementation,” 2026.4.1)

From the supply side, data from the NMPA shows that in 2025, there were 11 first-in-class innovative drugs approved in China, of which 4 were independently developed in China. China’s in-development new drug pipeline already accounts for about 30% globally, ranking second worldwide. Analysts say that, due to fast R&D and high cost-effectiveness, BD transactions in the future Chinese market are expected to remain significant. (Data source: NMPA, as of 2025.12.31; Reference materials: Economic Weekly Times, “China’s innovative drugs are surging like crazy: in-development drug pipelines account for 30% globally; pulling in over $130 billion in one year overseas,” 2026.3.2)

From the policy side, the “15th Five-Year Plan” (first time) elevates biomedicine to the level of “emerging pillar industries” alongside integrated circuits and aerospace. This positioning implies that policy support will be comprehensive and over a long time horizon, covering all links from fundamental research, to industrial chain security, to market access. Meanwhile, the rollout of the first version of the “Commercial Health Insurance Innovative Drug Catalogue” provides differentiated pricing space for innovative drugs. (Reference materials: Guojin Securities, “Innovative drug sector: the triple resonance of policy, going overseas, and profitability,” 2026.3.31)

From the capital side, in terms of financing in the primary market, according to data from PharmaMagic, in Q1 2026 the global biomedicine financing amount increased by more than 20% year over year. In the secondary market, the valuations of the innovative drug sector have continued to repair and have returned to being favored by capital. In BD transactions, this year, the number and amount of BD deals in China’s innovative drug industry have once again hit new highs compared with the same periods in previous years. There is a high probability that large BD deals and continuously ongoing mid-sized and small BD deals will bring companies sustained—possibly even growing—cash flows. (Reference materials: Guojin Securities, “CXO industry: resonance between innovative drug going overseas and cyclical inflection points,” 2026.3.30; Economic Observer, “The ‘value trough’ of innovative drugs,” 2026.3.26; Huatai Securities, “Pharma: BD China model—sustainable cash flows are expected to reshape valuations,” 2026.3.30)

From the technology side, since 2026, the global competitiveness of China’s AI drugmaking has continued to stand out. Externally, domestic AI drugmaking companies have reached major pipeline cooperation and authorization transactions with multiple multinational pharmaceutical companies, fully showcasing China’s strength in AI drugmaking. Internally, collaboration among domestic companies is also accelerating—not only enabling commercialization cooperation at the scale of hundreds of millions of units in certain high-barrier disease areas (such as the central nervous system), but also driving deep co-building on foundational infrastructure such as “AI + automated robotics” and non-clinical drug foundation models. (Reference materials: 21st Century Business Herald, “Major collaborations occur frequently; AI drugmaking is reshaping the drug R&D industry landscape,” 2026.3.24)

In the long run, the innovative drug industry in China—driven by notable cost advantages and an efficient R&D system—is transforming from a “follower” in the global market into an indispensable “core participant,” and the space for long-term industrial growth is opening up. (Reference materials: Guojin Securities, “Innovative drug sector: the triple resonance of policy, going overseas, and profitability,” 2026.3.31)

Compared with individual stock investment, funds such as Invesco Great Wall? (159992) and its linked fund(s) (Class A: 012781; Class C: 012782), and the Yinxiang Hong Kong Stock innovative drug ETF (159567) and its linked fund(s) (Class A: 023929; Class C: 023930) have the advantages of relatively low fees and transparent holdings. They help diversify non-systematic risks arising from a single underlying asset, providing investors with a convenient “one-click” tool to capture industry-wide development opportunities.

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责任编辑：郭栩彤