Innovent Biologics' First Full-Year Profit Ignites Biotech Rally

The spotlight shifted to innovative drugs today. Following lithium batteries yesterday, innovative drugs took center stage on March 27. During the morning session, the innovative drug sector surged, with Meinuohua hitting the daily upside limit within five minutes of the opening. Ketuobio soared by 20%, while Wanbangde, Lianhuan Pharmaceutical, and Shuanglu Pharmaceutical also reached the daily limit. Rejing Bio and Yinuosi advanced more than 10%. The A-share innovative drug sector overall climbed 3%.

The Hong Kong market reacted as well. INNOVENT BIO surged over 7% at one point after reporting its first-ever annual profit, with a major strategic partnership accelerating the global value realization of its pipeline. This development ignited the entire biomedical sector.

Additionally, the core compound patent for Novo Nordisk's semaglutide expired in China. The expiration breaks the long-standing monopoly of this product, known as the "global drug king," and has sparked market enthusiasm for Chinese weight-loss drug concept stocks.

The innovative drug sector collectively surged on the morning of March 27, rallying over 3%. Wanbangde climbed to the daily limit, Lianhuan Pharmaceutical had previously hit the limit, and Meinuohua secured its fourth consecutive limit-up. Rejing Bio jumped over 15%, while more than ten stocks including Yinuosi, Haichuang Pharmaceutical, Shutaishen, Hengrui Pharmaceuticals, and Baili Tianheng rose over 6%.

In Hong Kong, innovative drug stocks also experienced a collective upswing, with the sector gaining nearly 3%. INNOVENT BIO led the gains, rising over 7%. On March 26, INNOVENT BIO released its 2025 annual report, revealing total annual revenue of RMB 130.42 billion, a year-on-year increase of 38.4%. Net profit attributable to shareholders reached RMB 8.14 billion, surging 959.72% year-on-year, marking the company's first full-year profit.

In its announcement, INNOVENT BIO stated that 2025 was a significant milestone in its history, achieving historic breakthroughs in business scale, profitability, and global innovation. Analysts believe that INNOVENT BIO, rooted in China, has the potential to rank among the world's top biopharmaceutical companies by 2030. Twelve of its 18 marketed products are included in the national reimbursement drug list. Products like Mazdutide and the PCSK9 monoclonal antibody in the cardiovascular-metabolic field are ramping up sales quickly, and the PD-1 monoclonal antibody in oncology has seen new indications added and included in the reimbursement list, driving a 44.6% increase in product revenue.

In 2025, the company received over $1.6 billion in upfront collaboration payments, with total deal values exceeding $22 billion. By building its own capabilities and pursuing strategic collaborations, such as the Co-Co model with Takeda, the company is expanding its global team and strengthening international R&D, regulatory, and commercial capabilities. INNOVENT BIO's turnaround is considered a milestone event, effectively challenging the market's stereotype of innovative drug companies as "high investment, low output" and serving as a significant catalyst for the sector's valuation reassessment.

Furthermore, the core compound patent for Novo Nordisk's semaglutide has expired in China. Semaglutide is a novel long-acting GLP-1 analog developed by Novo Nordisk. Its significant weight-loss and blood sugar-lowering effects have made it the top-selling prescription drug globally and a core engine for Novo Nordisk's performance growth. According to a report by CIC Consulting, the potential of the domestic GLP-1 drug market is substantial. It is estimated that by 2032, the market size for treating type 2 diabetes will reach RMB 68.8 billion, and the market for obesity treatment will hit RMB 42.7 billion, with the two core indications combined exceeding RMB 100 billion.

Stock price increases often stem from expectation gaps. Huatai Securities believes the Chinese innovative drug sector is at the beginning of a long cycle, with high-quality assets being exported globally, a potential not fully reflected in A/H-share valuations. The number and value of outbound licensing deals for Chinese innovative drugs have hit record highs, with their global share significantly increasing. The sustained growth of business development activities is highly predictable. There is a significant expectation gap regarding the contribution of these BD activities to sustained cash flow.

At major conferences between April and June, such as AACR, ASCO, and ADA, a large amount of clinical data will be disclosed. The readout of key data is expected to have a positive impact on the overall market. Platform companies generating continuous, high-value cash flow through ongoing BD deals represent a "China model" that is not yet fully valued. Innovative drug assets are relatively undervalued in A/H-shares, primarily due to systematic underestimation of overseas revenue by A/H capital markets and misjudgment of the predictability of future overseas cash flows for Chinese innovative drug companies. BD for platform companies is sustainable and is becoming a primary business model.

It is noteworthy that the 2026 Government Work Report proposed "building emerging pillar industries such as integrated circuits, aerospace, biomedicine, and low-altitude economy." Compared to the 2025 report's phrasing of "cultivating and strengthening emerging industries and future industries," the positioning of biomedicine has been significantly elevated, being placed for the first time at the level of an "emerging pillar industry," underscoring its enhanced strategic importance.

Guosheng Securities believes that for the pharmaceutical sector, this signifies that the policy positioning of biomedicine is being upgraded from "cultivating emerging tracks" to "an important pillar direction for economic growth and industrial upgrading." Within this, innovative drugs, as the highest value-added core segment of the biomedicine industry, stand to benefit particularly clearly.