Li Zhixin, Chief Pharmaceutical Analyst at Chengtong Securities, recently released a research report providing an in-depth analysis of the boom in China’s innovative drug sector in 2025. He stated that 2025 marks a pivotal year in the history of China’s innovative drugs, with qualitative leaps in out-licensing deals and pipeline commercialization.
Out-licensing (License Out) transactions have reached a record high in total value. According to statistics from third-party firm PHARMCUBE, in the first three quarters of the year, the number of China’s innovative drug out-licensing deals exceeded 100, with a total transaction value of US$92 billion, surpassing full-year 2024 figures in deal count and value. Chengtong Securities forecasts the annual total will likely exceed US$100 billion. Representative high-value BD deals, notable for both total value and upfront payments, include Hengrui Pharma/GSK and 3SBio/Pfizer. This surge in out-licensing reflects both international pharma giants’ recognition of the quality of China’s innovative drug R&D and domestic biotech firms’ ability to recoup R&D investment earlier, alleviating cash flow pressures.
Commercial pipelines continue to expand, improving corporate finances. According to the annual drug review report from the Center for Drug Evaluation (CDE), NMPA, 19, 40, and 48 Class I innovative drugs were approved for market from 2022 to 2024, respectively. Among these, 13, 34, and 39 were developed by Chinese companies, accounting for over 80% and establishing Chinese enterprises as the leading players on the innovative drug stage. In the first half of this year alone, Hengrui Pharma secured approval for six new Class I innovative drugs, and Innovent added five innovative drugs to the market. A-share listed biotech companies maintained revenue growth exceeding 70% for both 2023 and 2024, with 42% in the first half of 2025. Innovent was the first to report full-year positive Non-IFRS net profit and EBITDA in 2024, while BeOne achieved a net profit of RMB 1.14 billion in the first three quarters of 2025, signaling leading biotechs’ transition into Big Pharma status.
Chengtong Securities views the 2025 boom as a natural outcome, the result of converging favorable conditions:
1. Strong policy support. In July 2024, the Implementation Plan for Whole-Chain Support for Innovative Drug Development was issued, supporting development across the entire chain from R&D and market access to usage and payment. Multiple measures have been implemented to improve review efficiency and shorten approval times; in terms of payment, innovative drugs receive preferential policies for inclusion in the national medical insurance drug list.
2. Years of intensive R&D investment. The total R&D expenditure of listed Chinese pharmaceutical companies rose rapidly from around RMB 85.8 billion in 2020 to approximately RMB 140 billion in 2024, representing a CAGR of about 13%, significantly higher than the roughly 6% CAGR in revenue during the same period. In 2024, BeOne’s R&D spending reached RMB 14.1 billion, with Hengrui Pharma, Fosun Pharma, CSPC, and Sino Biopharm each exceeding RMB 5 billion.
3. A rich disease spectrum and cost advantages derived from a large population. China’s vast patient pool facilitates trial enrollment, while clinical costs are significantly lower than the global average. According to statistics by Frost & Sullivan, per-patient costs for Phase I trials in the Chinese mainland typically range from US$40,000 to US$60,000, and for Phase II and III trials from US$50,000 to US$70,000. In international multi-center trials, costs generally range from US$120,000 to US$180,000, with the cost of Phase II and III slightly higher than that of Phase I, approximately 2-3 times higher than those in the Chinese mainland.
4. Returnee talent bringing innovative ideas and technology. Most Chinese biotech companies were founded after 2010, with their founders and academic leaders predominantly having overseas study experience or R&D experience at multinational pharmaceutical companies. Despite smaller capital reserves and teams, they are more focused on drug discovery in niche markets, excel at achieving “0 to 1” breakthroughs, and possess higher R&D efficiency-as exemplified by BeOne’s intensive R&D efforts in hematological oncology.
Capital markets have reacted enthusiastically, boosting investor confidence. This year, driven by both the surge in out-licensing and strong operational fundamentals, the CSI Innovative Drug Industry Index rose by up to 57%, and the CNI HK Connect Innovative Drug Index (tracking Hong Kong-listed innovative drug stocks) surged by up to 140%, both significantly outperforming the CSI 300 and the CSI 300 health care indices. Assets under management (AUM) in products tracking these indices have expanded rapidly: funds linked to the CSI Innovative Drug Industry Index grew from RMB 14.3 billion last year to RMB 22.4 billion, while those tracking the HK Connect Innovative Drug Index grew from RMB 1 billion to nearly RMB 40 billion. This has boosted investor confidence./
Chengtong Securities believes China’s innovative drugs are stepping into the global spotlight. A 2024 Tsinghua University study published in Nature Reviews Drug Discovery indicates that as of 2024, first-in-class and fast-follower drugs accounted for over 43% of China’s total industry pipeline (up from 39% in 2021), with first-in-class drugs (representing new targets, therapies, or molecules) comprising 19% of active pipelines. Furthermore, according to statistics from Citeline and IQVIA, China is the world’s second-largest drug R&D hub, having hosted about 1/3 of global clinical trials in 2024, compared to only about 5% a decade ago, with huge growth potential from cost-effective R&D and clinical advancement.
As an integral part of the financial services sector under the state-owned China Chengtong Holdings Group Ltd., Chengtong Securities adheres to a development orientation focused on serving the real economy, supporting the high-quality development of central SOEs, and facilitating state capital operation strategies. Its research institute is driven by both macroeconomic and industry research, developing buy-side-oriented research with deep specialization in sectors such as pharmaceuticals, high-end manufacturing, TMT, renewable energy, and consumer goods.
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