Drugdu.com expert's response:

The reasons for the rise in innovative drugs are mainly as follows:

Policy Support

Establishment of a Systematic Support System: The "Full-Chain Support Plan for the Development of Innovative Drugs" introduced in 2024 has constructed a systematic support system for the innovative drug industry, covering the entire process from R&D to commercialization. It highlights the synergistic effects of the three core areas: pricing mechanisms, medical insurance payments, and commercial insurance, ensuring that innovative drug companies can make profits from selling drugs, accelerating the speed at which innovative drugs are included in medical insurance lists, and shortening the post-launch market ramp-up period.

Advancement of Priority Review and Approval Policies: For instance, on May 29, 2025, 11 innovative drugs (including 7 Class 1 innovative drugs) were approved in a single day, setting a new high for the same period in the past five years and underscoring the direct boost that policies provide to R&D efficiency.

Support at the R&D End: The National Medical Products Administration has comprehensively deepened drug regulatory reforms, implementing requirements for key varieties such as "early intervention, tailored strategies for each enterprise, full-process guidance, and research-review linkage" to support pharmaceutical R&D innovation.

Payment-end Reforms: In 2025, the first version of the medical insurance Class C catalog was implemented, covering high-value innovative drugs (such as those for rare diseases and first-in-class drugs). Through a "basic medical insurance + commercial insurance" tiered payment model, the payback period for pharmaceutical companies was shortened. By the end of 2025, the "Commercial Health Insurance Catalog of Innovative Drugs" was implemented, opening up a second payment channel for high-value innovative drugs. The launch of the China Drug Price Registration System promoted the construction of a global pricing system, directly optimizing the profit models of innovative drug companies.

Sound Industrial Performance

Accelerated Overseas Expansion: Since 2020, Chinese innovative drugs have begun to achieve overseas business development (BD). In 2024 and 2025, BD accelerated. In 2025, Chinese innovative drugs accounted for 40% of global BD amounts, with transaction amounts and numbers reaching new historical highs. As of March 25, 2026, there have been 49 outbound BD events for Chinese innovative drugs, with upfront payments exceeding $3.3billionandtotalamountsnearing$57 billion. The transaction scale in the first quarter alone has surpassed the total for 2024 and is close to half of the total for 2025.

Global Competitiveness in New Technology Areas: China has demonstrated strong global competitiveness in new technology areas such as bispecific antibodies, antibody-drug conjugates (ADCs), and small nucleic acids.

Clinical Advantages: Clinical efficiency is extremely high, with clinical progress being several times faster than that overseas, enabling faster clinical development compared to foreign counterparts.

Talent Dividend: Higher efficiency can be achieved in early-stage R&D, allowing more and better drugs to be developed in a shorter period.

Mature Industry Chain: The innovative drug industry chain provides comprehensive support for various aspects such as R&D and production, making innovative drug R&D more mature.

Capital Dimension Support

Improved Financing Environment: In 2024, the United States entered a interest rate cut cycle, and interest rates are expected to gradually ease in the future, which is conducive to financing for innovative drugs and a reduction in financing costs.

Increased Capital Attention: After a large number of BD projects went overseas, innovative drug companies gained opportunities for further global development and also received more capital attention. Both the primary and secondary markets have shown increased investment enthusiasm for innovative drugs.

Industry Self-Development

R&D Progress Validates Strength: From the R&D perspective, an increasing number of innovative drug companies, based on the "Fast-Follow" strategy, have increasingly validated their "Me-Better" and even "Best-in-Class" pharmacological properties at the clinical level.

Improved Financial Performance: Starting in 2024, innovative drug companies have seen year-on-year revenue growth and a reduction in losses. In the first quarter of 2025, revenue increased, and losses further narrowed.

Technological Iteration as a Catalyst: China leads globally in the R&D progress of frontier areas such as ADCs and bispecific antibodies. Core varieties have entered a period of密集 (intensive) clinical data disclosure. Technological iteration serves as a short-term catalyst for stock prices, and the logic of revaluing R&D pipeline value is clear.

Market and Industry Trends

Low Valuations: Currently, the A/H valuations of the Hong Kong-listed innovative drug sector remain relatively low. Subsequently, with the disclosure of a large amount of data, if the data readings exceed expectations, a valuation repair rally can be anticipated.

Clear Industry Growth Path: Domestic innovative drug companies are transitioning from the BD overseas expansion stage to the commercialization stage. Leading companies have achieved profit breakthroughs. It is expected that the drug pricing system will accelerate its alignment with international standards within 3-5 years.

Clear Long-term Development Path: The popularization of the CoCo (Co-development and Co-commercialization) model, coupled with an increase in the proportion of pre-clinical project authorizations to 64%, indicates that the industry is expected to complete a qualitative transformation from a "major pharmaceutical country" to a "major pharmaceutical power," with a clear development blueprint for the next 5-10 years.