GTHT Securities has released a research report expressing a positive outlook on the development of China's innovative drug industry. This view is based on the sector's high-growth momentum, the robust fundamental performance of listed companies, and current low valuations. The firm is optimistic about the following areas: 1) Core recommendations of large-cap stocks currently at low valuations; 2) Biotech companies with potential for business development (BD) deals by 2026; and 3) The established industry trend for bispecific antibodies.

GTHT Securities outlines its main points below. The sector appears oversold, presenting a compelling value proposition. The innovative drug index has fallen back to levels seen before the last market upswing (May 2025), highlighting its attractiveness. Listed companies are demonstrating confidence through share buybacks and increased holdings. Since June, multiple listed firms have initiated intensive share repurchase or holding increase programs, using real capital to show support for their companies. Examples include Jiangsu Hengrui Pharmaceuticals Co., Ltd., Akeso, Inc., 3SBio Inc., Sichuan Baili Pharmaceutical Co., Ltd., and Duality Biologics.

BD Activity in 2026: Higher Volume, Superior Quality, and a Hot Market Trend

Since the beginning of the year, Chinese innovative drug companies have collectively completed 88 out-licensing deals, securing upfront payments totaling US$5 billion and cumulative deal values reaching US$94.4 billion. These three metrics show significant year-on-year growth, with upfront payments and total deal value already reaching 70% of the full-year 2025 figures. Furthermore, as of June 9, 2026, Chinese innovative drug companies and leading multinational corporations (MNCs) have completed 27 transactions, with cumulative upfront payments of US$4.3 billion and total deal values of US$78.5 billion. These figures show accelerated growth compared to 2025 and account for 39%, 56%, and 75%, respectively, of all MNC transactions during the same period.

Global Phase III Readouts and Impending Commercialization for Licensed Assets

Assets from previously licensed pipelines are beginning to report global Phase III trial results, paving the way for worldwide sales. Summarized data indicates that eight licensed innovative drugs are expected to report global Phase III results in 2026. Among these, the TROP2 ADC SKB264 (developed by Kelun-Biotech & Merck & Co.) and the HER2 ADC DB1303 (developed by Duality Biologics & BioNTech SE) have already reported positive results. The PD-1*VEGF bispecific antibody AK112 (developed by Akeso, Inc. & Summit Therapeutics Inc.) is expected to report pivotal results for first-line squamous non-small cell lung cancer (sqNSCLC) in the second half of 2026. Additionally, over ten previously licensed innovative drugs are planned to initiate or add new global Phase III clinical trials in 2026, indicating a period of密集 overseas validation for domestic innovative drugs.

Rapid Market Expansion and Strong Growth for Leading Pharma Companies

Benefiting from policy support and a wave of密集 domestic innovative drug approvals, the innovative drug revenue of China's leading listed companies totaled approximately RMB167.9 billion in 2025, a year-on-year increase of 29%. This figure represents only about 10% of China's total drug expenditure. The innovative drug sales revenue of these leading companies grew at rates between 20% and 60%, demonstrating strong performance momentum. Chinese innovative drug companies continued their robust growth into 2026. In Q1 2026, major pharmaceutical firms reported solid performance, with growth accelerating compared to 2025. Some companies experienced substantial growth due to revenue recognition from BD deals. GTHT Securities believes that, supported by strong endogenous innovative drug business growth and ongoing BD revenue recognition, the full-year 2026 performance of leading pharmaceutical companies is expected to remain favorable.

The report also notes potential risks including political risk, changes in global healthcare policies, slower-than-expected product approval progress, product iteration risk, and delays in对外合作进度.