Since the beginning of 2026, several domestically developed new drugs have been successively approved for market launch. Furthermore, policy support for innovative drugs has intensified, facilitating their "China-first launches." The convergence of these multiple positive catalysts has once again propelled the innovative drug sector into the market spotlight!
Short-term catalysts are emerging densely, driving a significant uptick in the sector's prosperity. In the near term, a series of industry-specific events are fueling the sector's upward momentum. These include the finalization of major out-licensing agreements, the convening of top-tier global medical summits, and better-than-expected earnings reports from leading companies. These developments collectively validate the industry's positive trajectory and have substantially boosted market confidence. 1. Catalysts from Major Collaboration Events On the evening of January 12, a leading innovative drug company announced the signing of an out-licensing agreement for its self-developed PD-1/VEGF bispecific antibody drug. The agreement involves a $650 million upfront payment and potential milestone payments reaching up to $4.95 billion. Analysis suggests that the cash flow from this deal will further bolster the company's R&D funding, securing financial support for the development of its subsequent pipeline products. As out-licensing collaborations by innovative drug companies continue to advance, the R&D capabilities of domestic biopharmaceutical firms are increasingly gaining recognition in the international market. 2. Catalysts from Industry Conferences and Expectations The 44th J.P. Morgan Healthcare Conference was held in the United States from January 12 to 15. Several Chinese innovative drug companies participated, including 7 presenting in the main forum and 17 exhibiting in the Asia-Pacific segment. The conference reportedly highlighted two major trends: gene and cell therapy, and AI-integrated medicine. Analysis indicates that this conference is expected to serve as a crucial platform for domestic drugmakers to showcase their core product pipelines and advance overseas business development collaborations, advising close attention to significant announcements during the event. 3. Earnings Validation and Trend Reinforcement On January 12, a leading domestic CXO company released its 2025 earnings pre-announcement, forecasting revenue of approximately RMB 45.456 billion, a year-on-year increase of 15.84%, and net profit attributable to shareholders of about RMB 19.151 billion, surging 102.65% year-on-year. Additionally, Wind data shows that as of January 12, around 130 A-share listed companies had disclosed their 2025 earnings forecasts. From an industry perspective, companies in the pharmaceuticals and biotechnology sector demonstrated notably strong overall performance.
The long-term investment thesis remains robust, suggesting the innovative drug sector may be entering a "value realization phase." The concentrated occurrence of major short-term events reflects a profound transformation in the underlying logic of China's innovative drug industry development. As the scale of business development (BD) out-licensing continues to expand, collaboration models upgrade, and an increasing number of projects progress to overseas clinical validation and even commercial profit-sharing stages, the long-term investment rationale for the innovative drug sector is becoming increasingly solid.
BD (Out-licensing) Has Entered a Harvest Phase
Both 2024 and 2025 were landmark years for China's innovative drug out-licensing (BD) activities. Specifically, domestic pharmaceutical companies concluded 94 license-out deals in 2024, with a total deal value of $51.9 billion, including $4.1 billion in upfront payments. In 2025, these figures saw substantial further growth, with the number of deals, total value, and upfront payments rising to 157 deals, $135.655 billion, and $7 billion, respectively. Professional analysis notes that with multiple milestone payments being received in 2025, market confidence in the "value realization" of China's innovative drugs continued to strengthen.
Transaction Models Upgrade, Showing a "Deep Binding" Trend
In terms of transaction structures, the industry is exhibiting a clear shift from "early-stage licensing" towards "deep collaboration." On one hand, the New-Co model remains active. Unlike traditional one-time BD transactions, this model achieves risk-sharing and long-term profit-sharing through equity linkages, initially expanding the strategic depth of BD cooperation. On the other hand, advanced collaboration forms such as Co-Development and Co-Commercialization (Co-Co) are continuously emerging, reflecting the gradually increasing bargaining power of Chinese pharmaceutical companies in product partnerships.
The Next Phase Hinges on Clinical Data and Sales Royalties
The complete lifecycle of out-licensing for domestic innovative drug companies can be divided into three stages: deal signing, overseas clinical validation, and profit thickening from sales royalties as partners' commercialization scales up. From the current industry standpoint, most BD transactions by domestic innovators are concentrated in the first two stages—completing the deal and initiating overseas clinical validation. Looking ahead, as more pipeline assets advance to late-stage clinical data readouts and the post-approval royalty phase, these milestones are poised to become highly anticipated positive catalysts. Institutions suggest that against the backdrop of multiple positive factors resonating—including technology iteration driving the revaluation of high-growth segments, globalization efforts entering a "realization phase," and the continuous improvement in BD deal quality—the domestic innovative drug sector possesses significant potential for valuation recovery. For investors with a long-term positive outlook on China's innovative drug sector, relevant ETF tools offered by Yinhua Fund may be of interest:
Hong Kong Innovative Drug ETF (Code: 159567) and its feeder funds (Class A: 023929; Class C: 023930) Innovative Drug ETF (Code: 159992) and its feeder funds (Class A: 012781; Class C: 012782)
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