September 30 marks the last trading day before the National Day holiday. Many expected the market to close quietly, but the opposite happened—semiconductors dropped 2.75%, while pharmaceutical stocks surged across the board.

Today, the pharmaceutical index closed up 2.73%, with over 400 constituent stocks advancing. The innovative drug index rose 3.42%, with nearly all 82 constituent stocks in the green. Among individual stocks, CanSino Biologics hit the 20% daily limit just nine minutes after the open, with the largest buy order on the limit-up board once exceeding 800 million yuan. Joinn Laboratories hit the limit-up, Shanghai Model Organisms gained nearly 20%, GemPharmatech rose 8.46%, and PharmaBlock Sciences gained nearly 6%.

On the capital flow side, the pharmaceutical and biotech sector saw a net inflow of over 12.7 billion yuan from main funds throughout the day, ranking first across all industries. The innovative drug index recorded a turnover of 53.9 billion yuan, a volume increase of nearly 50% compared to the previous day. The innovative drug concept saw a net inflow of 6.5 billion yuan, ranking first among all concept sectors. Meanwhile, the Shenwan electronics sector saw a net outflow of 14.2 billion yuan from main funds, and semiconductors saw a net outflow of nearly 9.9 billion yuan. Funds seemed to move in unison—retreating from technology and flooding into pharmaceuticals, forming a very obvious seesaw effect.

But today's rally in pharma cannot be explained by the word "safe haven" alone.

Where the rally took root

Looking at sub-sector rankings, pharmaceutical-related concepts nearly swept the top half of today's A-share concept sector gainers. The vaccine chain surged collectively, making it the most eye-catching direction. CanSino Biologics closed at the 20% limit-up at 102.64 yuan, becoming the "overall leader" of the innovative drug/vaccine sector. Zhifei Biological surged 6.88%, Kangtai Biological rose 6.18%, and Walvax Biotechnology gained 5.49%. This was the first time since the end of industry destocking that the vaccine defense sector saw such concentrated capital inflow.

The CRO and laboratory animal sectors also stood out. Joinn Laboratories hit the limit-up (+10.00%), GemPharmatech rose 8.46%, Shanghai Model Organisms surged 19.87%, and PharmaBlock Sciences gained 5.97%. This phenomenon deserves close attention because strength in the CRO sector is typically seen as a "leading signal" of a recovery in global innovative drug investment and financing, meaning the market is starting to front-run the next round of innovative drug order cycles.

Among leading heavyweight companies, Hengrui Pharmaceuticals rose 3.46% to 47.20 yuan, WuXi AppTec gained 4.16% to 167.34 yuan, Asymchem Laboratories surged 5.30% to 188.62 yuan, Kelun Pharmaceutical rose 4.16%, BeiGene gained 1.91%, and Baili Tianheng rose 2.54%. Although these leading stocks were not at the top of the gainers list, the collective rise of heavyweight stocks means this is not merely thematic speculation, but a sector-wide value repair supported by fundamentals.

Additionally, Nhwa Pharmaceutical rose 5.72%. Yesterday, the company announced its first BD overseas licensing deal—granting global rights outside China for a self-developed Class 1 innovative drug for sleep disorders to Somnivera. The deal includes a $10.5 million upfront payment and up to $507 million in milestone payments, along with a 15% equity stake in the counterparty. This is the company's first-ever overseas licensing of a self-developed asset, directly igniting market enthusiasm for a reassessment of its innovative pipeline value.

The real driving force behind the surge

The core driver of today's market action comes from the continued intensification of China's innovative drug License-out narrative. Within the past 72 hours, multiple BD overseas licensing deals have been密集落地 in China.

The first deal: Hengrui Pharmaceuticals and Novo Nordisk. HRS-1596, a potential once-weekly oral GLP-1/GIP dual receptor agonist, with Novo Nordisk acquiring exclusive global rights outside Greater China. $300 million upfront payment, up to $2.3 billion in milestones, with a potential total of $2.6 billion. The transaction is expected to close in Q4 2026. The significance of this deal lies not in the amount itself, but in the counterparty. Novo Nordisk is the absolute leader in the global metabolic field, and its willingness to pay $300 million upfront for a domestic oral GLP-1/GIP dual-target molecule is itself a strong endorsement of the quality of domestic preclinical data.

The second deal: Sipuruibio and Merck. SPR2015, a preclinical oral KRAS G12D (ON) inhibitor. Merck paid $400 million upfront, with up to $2.13 billion in milestones. The transaction has been completed. What is most noteworthy about this deal is that SPR2015 is still in preclinical development and has not yet entered human clinical trials. Sipuruibio was founded at the end of 2024, with two previous financing rounds totaling approximately $65 million. Merck paying $400 million upfront for such a molecule is about six times Sipuruibio's total previous financing. In other words, a domestic molecule received dollar-denominated pricing from an MNC at the preclinical stage, rather than the previous model of "first generate clinical data, then discuss licensing."

The third deal: Nhwa Pharmaceutical and Somnivera, for overseas rights to a Class 1 innovative drug for sleep disorders, with a $10.5 million upfront payment, up to $507 million in milestones, and a 15% equity stake in the counterparty. Although the amount is not large, it opens new imaginative space for the narrative that second- and third-tier pharmaceutical companies' self-developed assets can also successfully go overseas.

The fourth deal: Akeso Biopharma's overseas partner Summit reached a strategic collaboration with AstraZeneca, with AstraZeneca investing $2 billion in a strategic equity investment in Summit.

These deals appearing in a short period of time once again validate the enormous success of China's innovative drug License-out.

The overlooked catch-up rally

Today's surge also has an overlooked backdrop—a catch-up rally. On September 18, ten government departments jointly issued the "15th Five-Year Plan for Pharmaceutical Industry Development," proposing that by 2030, the innovative drug industry scale should grow at an average annual rate of over 20%, first-in-class (FIC) drugs should account for over 25% of the global total, and above-scale pharmaceutical industrial enterprises should exceed 3.5 trillion yuan in operating revenue. The policy ceiling was explicitly raised, but at the time, due to the approaching long holiday and overseas disturbances, the sector's reaction was limited. Today's concentrated rally carries obvious characteristics of expectation correction.

Fundamental data for the innovative drug industry is also validating the growth logic. In the first half of 2026, the A-share innovative drug sector recorded operating revenue of 62.063 billion yuan, a year-on-year increase of 32.54%. Among this, second-quarter net profit attributable to parent company shareholders grew 390.19% year-on-year, and non-GAAP net profit attributable to parent company shareholders grew 608.77% year-on-year. Gross margin remained at a high level of 87.69%, with sales expense ratio at 25.10% and R&D expense ratio at 30.74%, both lower than full-year 2025 levels.

Within this, the core driver of revenue growth comes from the dual contribution of BD licensing income and core product volume growth. In 2025, the proportion of innovative drug revenue for leading pharmaceutical companies broke through the 50% critical threshold. Hengrui Pharmaceuticals's 2025 innovative drug out-licensing revenue reached 3.392 billion yuan, indicating that BD is no longer "telling a story" but a real contributor to the income statement.

Overseas expansion data shows that from January to August 2026, China's pharmaceutical overseas licensing transaction total reached $112.857 billion, exceeding full-year 2024 ($56.676 billion) and surpassing full-year 2025 by 79%. Chinese companies occupied eight of the global top 10 transactions. In the first half of 2026, the NMPA approved 55 innovative drugs for first-time marketing in China, including 36 Class 1 innovative drugs, of which 30 were domestic Class 1 drugs. These numbers mean that the rally in the innovative drug sector no longer relies solely on "R&D narrative," but is supported by real revenue, profits, and cash flow.

Of course, from a buy-side perspective, the disagreement is not about whether policies are favorable for innovative drugs, but whether the market can switch from valuation repair to earnings realization. Current valuations in the innovative drug sector are no longer cheap. As of September 24, the Shenwan pharmaceutical and biotech sector's price-to-earnings ratio (TTM, overall method) was 44.66 times, with a valuation premium of 236% relative to the CSI 300. On individual stocks, as of September 29, Hengrui Pharmaceuticals's PE (TTM) was 39.19 times, Mindray Medical 24.50 times, and WuXi AppTec 22.50 times. Leaders have returned to the upper end of their historical range. The market is currently pricing in "continued BD volume growth plus better-than-expected ESMO data," but if third-quarter BD amounts weaken sequentially or ESMO China data falls short of expectations, valuation elasticity will quickly converge.

Overall, today's surge in the innovative drug sector was mainly the concentrated realization of three things on the last trading day before the holiday. It is worth noting that the simultaneous strength of the CRO sector is often not the result of short-term event drivers, but a leading signal of an industrial cycle inflection point. Its implications carry more weight than a single day's gain. At the same time, in BD transactions, most of the billion-dollar figures are milestones—what actually lands is the upfront payment and early milestones. The case of Merck terminating its PARP1 inhibitor collaboration with Hengrui Pharmaceuticals reminds us that BD is not without setbacks. Therefore, while enjoying the dividends of valuation reassessment, investors should pay more attention to the sustainability of corporate pipeline quality, the realization pace of BD revenue, and the sector's ability to digest valuations at high levels.