The biopharmaceutical sector has recently regained momentum, with numerous stocks hitting record highs amid sustained capital inflows. Unlike the broad-based rally driven by valuation recovery seen in 2025, the market dynamics in 2026 are more rational, focusing on earnings delivery, R&D progress, and the execution of overseas licensing deals. Many companies reported strong 2025 annual results, with leading firms demonstrating stable profitability and business development (BD) authorizations entering a platform-based global expansion phase. Overall, the biotech sector is entering a new development stage characterized by a confluence of improving fundamentals and positive market sentiment.

In 2025, the biopharmaceutical sector was one of the hottest investment themes in the secondary market, with companies like Guang Sheng Tang and Shu Tai Shen leading the gains. After a period of high-level consolidation, a similar trend is re-emerging, but this time with stronger fundamental underpinnings, positioning the sector as a long-term leader in both mainland and Hong Kong stock markets.

Wind data shows that, prior to the Qingming Festival holiday, the biopharmaceutical index recorded consecutive gains over the past two weeks, rising by 3.03% and 4.86%, respectively. Looking at individual stocks, both leading players across four major sub-sectors (including two primary CXO companies serving the biotech industry) and potential dark horses from the second tier have experienced rapid appreciation. In the A-share market alone, the four major biotech leaders all posted gains this month, with Baili Tianheng surging 12.78% over just three trading days. Second-tier dark horses demonstrated even stronger performance, with stocks like Rongchang Biotechnology and Sansheng Guojian hitting all-time highs.

In the Hong Kong market during the same period, which had only two trading days before the holiday, Kangfang Biotech and Kelun Boteng Biotech-B rose nearly 30% since March, while Rongchang Biotechnology gained close to 40%. Biotech has once again become the leading sector in the secondary market. So, how does this current rally differ from last year's?

Liang Furui, a fund manager at Great Wall Fund, emphasized that the 2026 biotech market is expected to differ significantly from 2025. The 2025 rally was primarily driven by valuation repair and broad sector gains, benefiting from loose liquidity and improved sentiment. In 2026, with a changed macroeconomic environment, the market has become more rational. Companies demonstrating progress in commercial sales, R&D pipeline advancement, and overseas licensing collaborations, yet whose valuations do not fully reflect their value, are expected to achieve more relative gains.

Lin Song, a fund manager at Penghua Fund, stated, "Overall, innovation and global expansion remain the most noteworthy investment themes, with biopharmaceuticals being a primary sector that combines both logics." He added, "The biggest risk for biotech stocks is valuation. While the intrinsic value of a drug is typically assessed using standard discounted cash flow models, the long R&D cycle—even after successful launch, it takes 6-10 years for sales to ramp up—means estimating cash flows 10-15 years out. The market tends towards optimistic pricing, often overestimating both the probability of R&D success and the potential market size, making it difficult for positive news to exceed the expectations already priced in at each verification milestone."

Biotech Back in Focus Since March, Three Companies Hit Record Highs Data indicates the biotech sector has become a primary destination for recent capital inflows, ranking high among all market themes. From April 1st to 3rd, over 7 billion yuan in net main capital flowed in over just three trading days, with a single-day inflow of nearly 2.5 billion yuan on April 1st alone.

An anonymous investor noted that following geopolitical tensions in the Middle East, only a few sectors, including biopharmaceuticals and commercial aerospace, remained unaffected, making biotech a natural favorite for the market.

This propelled Rongchang Biotechnology, Sansheng Guojian, and Wanbangde to new share price highs. Wanbangde's stock price doubled in about a month; Rongchang Biotechnology and Sansheng Guojian rose approximately 76% and 36% respectively, after both had already surged over 150% in 2025. Even Jinyao Pharmaceutical, known for generics, saw seven consecutive limit-up gains recently, though the company clarified it focuses on generic drug R&D and has no innovative drug projects. This "case of mistaken identity" underscores the high market enthusiasm for the biotech sector.

Zhao Lei, a fund manager at ZhongOu Fund, commented, "The strong performance of the biotech sector stems from a dual push of fundamentals and market sentiment. After a decade of development, China's biopharmaceutical industry has gradually evolved into an asset class capable of accessing global markets with European and American pricing levels. Since 2024, industry data has consistently validated this trend, with significant scale in Chinese biotech out-licensing (BD) deals. From an industrial positioning perspective, China's R&D capabilities and product quality have gained global recognition, with R&D strength (measured by project numbers and first-in-class pipelines) now second only to the United States."

Another renowned healthcare fund manager at ZhongOu Fund, Ge Lan, signaled optimism by increasing her holdings. In the recently released 2025 annual report, she raised her stake in the ZhongOu Medical Innovation Fund she manages from the 500,000-1,000,000 share range in the first half of 2025 to over 1,000,000 shares.

Lin Cun, Chairman of private equity firm Senrui Investment, believes, "The recent primary trend in biotech stocks is fundamentally supported by the robustness of the industry's own logic. 2026 remains a year of resonance between earnings delivery and global expansion progress. Significant catalysts from academic conferences are expected in the coming months, and after nearly six months of adjustment since last October, current valuations appear attractive."

Sector Companies Report Positive Earnings, Biotech Stocks Approach Inflection Point From a policy perspective, the 2026 Government Work Report elevated biomedicine from an "emerging industry" to an "emerging pillar industry" for the first time, ranking it just below integrated circuits and aerospace. This indicates high-level policy recognition for the sector's development achievements, suggesting continued state support.

Fundamentally, many biotech companies are entering a period of concentrated earnings release, approaching an inflection point. This is evident in the disclosed 2025 annual reports and the upcoming 2026 Q1 reports.

For example, Hengrui Pharmaceuticals delivered a high-quality 2025 report, with annual revenue reaching 31.629 billion yuan, up 13.02% year-on-year, and net profit attributable to shareholders surging 21.69% to 7.711 billion yuan. The benefits of its innovation strategy accelerated, with innovative drug sales hitting 16.342 billion yuan, a 26.09% increase, accounting for 58.34% of total drug sales and becoming the core growth driver. Additionally, out-licensing contributed 3.392 billion yuan in revenue, forming another important growth engine.

Another representative company, Zai Lab, established a historic profitability inflection point, achieving its first annual net profit. The company reported total operating revenue of 38.205 billion yuan, up 40.4% year-on-year. Driven by product revenue growth and improved operational efficiency, net profit attributable to shareholders reached 1.422 billion yuan. Product revenue grew 39.9% to 37.77 billion yuan, primarily fueled by sales of Brukinsa (zanubrutinib), products licensed from Amgen, and tislelizumab.

Beyond these two recognized leaders, Sansheng Guojian reported the highest earnings growth among disclosed A-share biotech firms. Its annual report showed revenue surging 251.8% to 4.2 billion yuan, net profit attributable to shareholders skyrocketing 311.5% to 2.9 billion yuan, and adjusted net profit soaring 1025.0% to 2.77 billion yuan. This explosive growth was mainly due to breakthroughs in its innovative pipeline and international collaborations, particularly a global exclusive licensing deal with Pfizer for the PD-1/VEGF bispecific antibody SSGJ-707, valued over $6 billion, which included an upfront payment of approximately 2.8 billion yuan recognized during the reporting period, directly driving the profit surge.

Furthermore, among mainland biotech companies reporting 2025 results, an increasing number turned profitable, with about ten achieving profitability for the first time in their history.

For instance, Rongchang Biotechnology reported total revenue of 3.251 billion yuan, up 89.36% year-on-year, and achieved a net profit of 710 million yuan, turning a profit, driven by rapid sales expansion of its core products, Telitacicept and Disitamab Vedotin, in China.

Nuo Cheng Jian Hua not only turned profitable but saw net profit surge to 642 million yuan, also attributed to contributions from its core products, Orelabrutinib and Tafasitamab.

Discussing biotech earnings, fund managers Ding Yang and Tan Donghan from ICBC Credit Suisse noted three impressive aspects of the 2025 reports: First, "elephants dancing," with many companies reaching billion-yuan revenue scales and their innovative drug revenue growing at 25%-30% or faster, indicating biotech and its supply chain are the highest-growth sub-sectors in healthcare. Second, "batch profitability," as many firms passed the breakeven point in the past two years, with upfront and milestone payments from overseas licensing providing an additional boost. Third, "comprehensive recovery of the biotech supply chain," as improved domestic drug R&D sentiment led to order inflection points for CRO companies reliant on domestic revenue in H2 2025, with earnings inflection points expected in 2026.

Lin Cun added, "More companies are expected to achieve profitability in 2026-2027, entering an earnings release phase. We note the significant contribution of BD revenue to Rongchang Biotechnology's 2025 profit; this business model is noteworthy. In the future, biotech firms may not only profit from core operations but also generate sustained cash flow from BD, forming healthier revenue structures."

Accelerated Institutional Research Includes Traditional Chinese Medicine Innovation Recently, institutional investors have increased research efforts in biotech, extending beyond Western medicine to include innovative Traditional Chinese Medicine (TCM) companies.

Wind data shows a researcher from Jiao Yin Fund conducted an on-site meeting with Zuoli Pharmaceutical, discussing its product "Wuling Capsule and its competitors." The company stated that according to Menet data, Wuling Capsule ranked first in market share within the TCM nervous system category in urban and county public hospitals over the past two years.

Guo Xiangbo, a healthcare fund manager at TianHong Fund, researched Teyi Pharmaceutical, a TCM company championing innovation. When asked about key secondary products for promotion, Teyi Pharma mentioned adhering to a "1+N" product strategy, focusing on its core cough relief tablet while cultivating other products like皮肤病血毒丸,降糖舒丸,独活寄生颗粒, and脑乐静胶囊, aiming to improve channel efficiency and marketing impact.

Caitong Fund researched Aidi Pharmaceutical on March 31st. The company's revenue increased over 70% year-on-year, with a significantly reduced net loss. Regarding sales trends for its HIV innovative drug since early 2026, Aidi Pharma said it overhauled its sales structure and strategy starting Q4 2025, including team expansion, policy optimization, and restructuring the marketing department, laying a solid foundation for sustained sales growth.

Hong Kong Biotech Stocks Also Rally, New Dark Horses Emerge Beyond A-shares, Hong Kong-listed biotech stocks are also active. Liang Furui, known for identifying Hong Kong biotech opportunities, saw his flagship fund rank 15th among over 5,000 funds for both the past week and month.

His full-year portfolio holdings included five Hong Kong biotech stocks: Xinda Biotech, Ying'en Biotech-B, Kelun Boteng Biotech-B, Kangfang Biotech, and Sansheng Pharmaceutical. The best performers year-to-date are Kelun Boteng-B and Kangfang Biotech, both up over 20%.

Liang noted that the strong 2025 Hong Kong biotech market attracted many mainland drugmakers for IPOs, with many still queuing. However, the relatively subdued early-2026 market has slowed the listing pace. He expects new HK-listed biotech firms in 2026 to have earlier-stage pipelines, with significant quality divergence, leading to substantial post-IPO performance variation based on company quality and pricing.

He predicts the investment logic will shift from "broad sector beta" to "high-quality individual alpha," with stock price drivers moving from "valuation repair" to "verification of sales, R&D, and overseas expansion execution." The quality of R&D catalysts and BD deals, and their impact on short-term stock prices and long-term growth, are crucial.

Dual listings in Hong Kong have become a trend since last year. Companies that have successfully listed in both markets include Zai Lab, Junshi Biosciences, Rongchang Biotechnology, Nuo Cheng Jian Hua, and Hengrui Pharmaceuticals. At least four other biotech firms, including Dizhe Pharmaceutical, Maiwei Biotech, Xinlitai, and Zejing Pharmaceutical, are steadily progressing towards A+H listings. Lin Cun stated that Hong Kong listings help supplement cash flow, enhance international influence, and build credibility for global cooperation, with the HK market's global uniqueness likely to attract ongoing international capital allocation.

The resurgence of the Hong Kong biotech market is driven more by earnings factors compared to mainland-only listed firms, as loss-making biotech companies have been listed longer in HK, and profitability can have a more dramatic impact on their shares. Besides Zai Lab, Xinda Biotech also turned profitable for the first time in 2025.

Meanwhile, 2025 results for Hong Kong-only listed biotech firms were also commendable. Hansoh Pharma saw revenue increase approximately 22.6% and annual net profit rise about 27%, marking the third consecutive year of over 20% growth.

China Biologic Products, regarded as a dark horse, achieved record highs in both revenue (31.83 billion yuan, up 10.3%) and adjusted net profit (4.54 billion yuan, up 31.4%), with four consecutive reporting periods of double-digit growth. A company representative highlighted that innovative product revenue surpassed 15.22 billion yuan, growing 26.2%, solidifying its position in the top tier and demonstrating high growth sustainability.

WuXi XDC, which saw significant gains last year but has consolidated recently, also reported strong 2025 results: revenue up 46.7% to 5.94 billion yuan, gross profit surging 72.5% to 2.14 billion yuan, and adjusted net profit jumping 69.9% to 1.56 billion yuan. Its backlog of orders soared 50.3% to $1.49 billion by year-end. The company emphasized strategic layouts, including acquiring controlling interest in Dong Yao Pharma and accelerating new drug conjugate opportunities, while expanding its global supply chain.

Multiple Sectors Flourish, 2026 Breakthroughs Anticipated Beyond investment factors like macro policy, earnings, and valuation, the industry itself demonstrates China's biotech strength.

Kaiyuan Securities noted that Hengrui Pharmaceuticals, with its deep pipeline, is expected to report data across multiple indications; Kelun Boteng Biotech-B's core product Sac-TMT may disclose key data validating its platform; Junshi Biosciences will present data on its key pipeline JS207; Jishi Pharmaceutical's CS2009 will update early clinical data; Kangfang Biotech will continue updating Phase III results for its bispecific antibody; Xinda Biotech will disclose early clinical data for multiple pipelines, including IBI363; companies like Ying'en Biotech-B, Lepu Biotech, Weilizhibo, and Jingfang Pharmaceutical are also expected to report key pipeline data.

For example, Hengrui Pharmaceuticals gained approval in early 2026 for Rilafusp alpha injection, the world's first approved anti-PD-L1/TGF-βRII bispecific antibody fusion protein. STAR market-listed Zejing Pharmaceutical received approval for its recombinant human thyrotropin alfa (Zesuning), the first innovative product in China for post-operative assessment of differentiated thyroid cancer.

Zai Lab's Sotoclax is somewhat unique; although approved on December 30, 2025, it officially supplied the market on January 13 this year, with the first prescriptions issued the next day. It is China's first and only BCL2 inhibitor for treating mantle cell lymphoma. The company highlighted its global first approval in China and priority review status from the US FDA, with a Phase 3 trial for a fixed-duration combination therapy already enrolling patients.

Regarding investment opportunities, Lin Cun emphasized, "China's biotech sector is now in a blossoming stage. We continuously monitor FIC product R&D progress, including advanced candidates like Kangfang's AK112, Kelun Boteng's SKB264, Baili Tianheng's BL-B01D1, and Xinda Biotech's IBI363. At the ASCO meeting in May-June, we focus on data readouts for Kangfang's Ivonescimab in first-line squamous lung cancer; positive, competitive results could be a key milestone for Chinese biotech globalization."

Liang Furui noted continuous upgrades in solid tumor treatment technologies, beyond new targeted therapy breakthroughs, core treatment regimens are evolving from immuno-oncology + chemotherapy to upgraded IO + chemo or novel targeted + IO (with or without chemo), potentially moving towards upgraded IO + novel targeted therapy. The clinical data for targeted + IO combinations is still insufficient, and related stock valuations do not yet reflect this trend, making it a key focus area.

Out-Licensing Continues to Exceed Expectations, BD Enters Phase 2.0 Another driver for the biotech rally since 2025 is out-licensing. In Q1 2026, the total value of Chinese biotech out-licensing deals surpassed $60 billion, nearly half of the 2025 total of $135.7 billion. Huatai Securities statistics show Chinese deals accounted for over 70% of major transactions year-to-date.

Timeline-wise, each month of Q1 saw a major licensing event: - January: Shiyao Group signed a deal with AstraZeneca for a $1.2 billion upfront payment, up to $3.5 billion in milestones, and potential sales milestones up to $13.8 billion. - February 8th: Xinda Biotech entered its seventh strategic collaboration with Lilly to co-develop innovative drugs in oncology and immunology globally. Lilly obtained exclusive rights outside Greater China, with Xinda receiving a $350 million upfront and up to approximately $8.5 billion in milestones and royalties. - March 4th: China Biologic Products licensed Rovaxicitinib to Sanofi for a total consideration of $1.53 billion. The company called it a landmark breakthrough for globalizing late-stage assets from a local Big Pharma, setting a record for BD deals in the cGVHD field in China and marking the start of its global innovation output.

Lin Cun analyzed that these collaborations reflect a shift from single pipeline exports to platform-based global expansion, with drugmakers becoming more involved in MNCs' early R&D processes. BD has moved from Phase 1.0 (focus on upfront payments) to Phase 2.0 (focus on milestone fulfillment), with upfronts typically comprising only 7%-9% of the total deal value. He cautioned that milestone income depends on achieving clinical and commercial milestones, carrying uncertainty, but overall, China's biotech global expansion is still in its early stages with significant long-term potential.

Liang Furui stated, "BD is just one form of collaboration for Chinese biotech globalization. Initially, companies receive only small upfront and near-term milestone payments; future milestone payments and sales royalties better reflect the drug's value and deal quality."

According to Tan Donghan and Ding Yang, post-earnings season, further catalysts for biotech may come from a series of academic conferences. Major global oncology conferences in April, June, October, and December will feature preclinical and clinical data from numerous Chinese innovators. Beyond oncology, Chinese companies are increasingly prominent in conferences for metabolic diseases, rheumatology, and immunology. Promising data presented at these events could fuel market expectations for subsequent overseas licensing. They are particularly watching for OS data readouts for PD-1/VEGF bispecifics in NSCLC, further data for PD-1/IL-2 bispecifics in first-line NSCLC, as well as potential data for bispecific ADCs and dual-toxin ADCs. In autoimmune diseases, Phase 2 proof-of-concept data for long-acting TSLP/IL13 bispecifics and Phase 2/3 data for TYK inhibitors in psoriasis and IBD are highly anticipated.