On October 31, innovative drug concept stocks such as 3SBio, Stemirna, Gensight Biologics, RemeGen, Sinomab, and Baili Tianheng experienced a collective surge.

The previous downturn in the pharmaceutical sector was largely driven by policy tightening. However, the domestic policy environment for innovative drugs has now significantly eased. In 2024, innovative drugs were mentioned for the first time in the government work report. By 2025, the report went further, providing specific directives and guidance across multiple dimensions, including industry support, funding, and development direction. A key highlight was the announcement of the 2025 National Reimbursement Drug List (Category C), signaling the imminent arrival of incremental payment mechanisms for innovative drugs.

While domestic policies have set a floor for the sector, overseas business development (BD) deals have pushed the ceiling higher. According to a recent Huafu Securities report, the total value of innovative drug BD transactions surged from $9.2 billion in 2020 to $52.3 billion in 2024, with upfront payments increasing from $600 million to $4.1 billion. In 2025, the momentum has accelerated—3SBio secured a $6 billion+ deal with Pfizer, Germany’s BioNTech flipped BN327 for $11.1 billion, and Sino Biopharmaceutical is set to close three BD deals worth $5 billion each. So far this year, outbound licensing deals in the innovative drug sector have totaled $45.5 billion, nearing last year’s full-year figure in less than six months.

The ASCO conference, regarded as the world’s premier oncology event, featured a record 73 oral presentations from China in 2025, underscoring the country’s growing influence. With all negative factors already priced in, even marginal improvements can trigger significant revaluation—a fundamental logic driving the current rebound in innovative drug stocks.

However, the sector’s current market impact and attention stem from more than just incremental progress. From 2015 to 2024, China’s pharmaceutical industry completed a historic leap from follower to leader. At this year’s ASCO, Chinese companies contributed 89 out of 184 ADC pipeline studies (48.4%) and 34 out of 69 bispecific antibody studies (49%). Chinese researchers also led 11 of the 54 Late-Breaking Abstracts (LBAs). A decade ago, China had just one ASCO oral presentation and zero LBAs.

In 2015, China’s original innovative drug pipeline numbered just 124; by 2024, it reached 704, ranking first globally. Similarly, China’s share of first-in-class (FIC) drugs entering clinical trials rose from under 10% (9 drugs) in 2015 to over 30% (120 drugs) in 2024.

Looking ahead, China’s innovative drug sector is just beginning its ascent. Domestic biotech firms now outpace global peers with lower R&D costs (about 1/3 to 1/5 of U.S. levels) and faster development cycles. Chinese companies lead in pipeline volume for cell therapies, ADCs, and bispecific antibodies, ranking first in 716 R&D tracks. Meanwhile, multinational pharma giants face a "patent cliff," with 27 blockbuster drugs (2024 sales >$4 billion each) losing exclusivity by 2037. Companies like Merck, Novartis, AstraZeneca, Pfizer, Roche, and GSK are scrambling to replenish pipelines—a gap Chinese innovators are poised to fill.

China’s share of global out-licensing deals rose from 30% in 2024 to over 40% year-to-date in 2025. By monetizing technology globally through License-out models and addressing post-patent-cliff demand, Chinese innovators are charting a vast new frontier.

From an investment perspective, whether the sector has peaked short-term is irrelevant to the long-term upward trajectory of high-quality players. Huafu Securities estimates China’s licensing projects from 2020-2025 will generate $8.2 billion in net profit, implying an $81.7 billion market cap boost at a 10x P/E.

In summary, a golden era for innovative drugs has arrived. While pharma was among the worst-performing sectors in the past five years, it may well rank among the best in the next five.

Disclaimer: This article reflects the author’s analysis based on publicly disclosed information by listed companies. It does not constitute investment or commercial advice, and Market Cap Observer assumes no liability for actions taken based on this content.