According to a research report from Guotai Haitong (GTHT), the overall revenue of large pharmaceutical companies, small and medium-sized pharmaceutical enterprises, and commercialized biotech firms continued to grow in the first quarter of 2026. Notably, revenue from commercialized biotech companies increased by 46% year-on-year, demonstrating significant momentum. With the exception of some biological product companies affected by tax-related factors, most innovative drug companies performed well operationally, with some achieving results exceeding expectations or turning a profit for a single quarter. The report suggests that the current core investment themes in the innovative drug sector are centered on volume growth of innovative drugs, realization of business development (BD) deals, optimization of expense ratios, and inflection points in profitability. The firm maintains an "Overweight" rating on the industry.
Key views from GTHT are outlined below:
Pharmaceutical Sector Hits Record Highs in Both Revenue and Profit, Innovative Drug Industry Enters Operational Realization Phase In 2025, the combined revenue of the A-share and H-share pharmaceutical sectors reached RMB 462.8 billion, a year-on-year increase of 10.30%. Net profit attributable to shareholders reached RMB 55.0 billion, surging 77.41% year-on-year. Both revenue and profit set new historical records. Large pharmaceutical companies have largely digested the impact of volume-based procurement, with profits recovering to pre-procurement highs. Small and medium-sized pharmaceutical companies are accelerating their profit release, while commercialized biotech firms achieved a sector-wide profit for the first time on the back of high revenue growth. This indicates that the innovative drug industry is gradually transitioning from a period of heavy R&D investment into a phase of commercialization and profit realization.
Innovative Drug Sales and BD Revenue Form Dual Growth Engines, Industry Structure Continues to Optimize In 2025, revenue related to innovative drugs for pharmaceutical companies—comprising sales revenue from innovative drugs and BD revenue—totaled approximately RMB 194.0 billion, a 35% year-on-year increase. This figure now represents 42% of the total revenue for the pharmaceutical sector. Among this, revenue from innovative drugs for key A-share and H-share listed companies amounted to RMB 167.9 billion, up 29% year-on-year. BD revenue reached RMB 26.1 billion, doubling year-on-year. Furthermore, a significant portion of yet-to-be-confirmed BD revenue is expected to continue contributing to performance elasticity in 2026.
Expense Ratios Remain Stable, Economies of Scale Drive Continuous Improvement in Profitability From 2023 to 2025, the three major expense ratios for large and small-to-medium pharmaceutical enterprises remained generally stable, with the sales expense ratio declining year by year. This reflects improved industry compliance in operations and enhanced commercialization efficiency. At the same time, R&D investment continues at a high intensity, indicating a shift in pharmaceutical companies' business models from being traditionally sales-driven to increasingly driven by R&D and innovative products. Commercialized biotech firms benefit from rapidly expanding revenue scale, which significantly dilutes their sales expense ratios and further clarifies their profitability inflection points.
Key Companies Expected to Maintain High Growth in 2026, BD Confirmations and Innovative Drug Volume Growth to Support Performance Elasticity Looking ahead to 2026, key innovative drug companies are generally expected to maintain endogenous innovative drug revenue growth of over 25%, with sales revenue growth generally reaching over 10%. Several companies still have BD revenue pending confirmation, which could potentially further increase revenue growth to 25%-30% and drive profit growth exceeding 25%. Among commercialized biotech firms, companies like BeiGene and Innovent Bio are expected to accelerate profit release on the foundation of high revenue growth, while others such as Akeso, RemeGen, Junshi Biosciences, and Zensun are steadily moving towards breakeven or improvement.
Risk Factors: 1) Risks associated with R&D progress falling short of expectations; 2) Risks of drug sales underperforming expectations; 3) Policy risks; 4) Industry risks.
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