Industry catalytic events are intensive; innovative drugs enter the profit cycle initiation phase.

Ask AI · Has the profit turning point in the innovative drug industry already appeared, and is the investment value underestimated?

On April 1st, the innovative drug sector saw a strong rebound, with several stocks hitting the daily limit. By the close, JinYao Pharmaceutical hit four consecutive limit-ups, Kailaiying hit two, Ruizhi Medicine, Edi Pharmaceutical, and Guangsheng Tang experienced “20CM” limit-ups, Huiyu Pharmaceutical rose 17.90%, and Yifang Biotech and Chengda Pharmaceutical gained over 15%. In the Hong Kong market, the Hang Seng Biotech Index rose nearly 7%, with stocks like Rongchang Biotech, Junshi Biotech, and Sanyao Pharmaceutical up over 10%.

Multiple positive signals are being released simultaneously

From the news perspective, the world’s top academic conferences are about to begin, and market expectations for key data are heating up. The 2026 American Association for Cancer Research (AACR) Annual Meeting will be held from April 17 to 22 in San Diego, USA. As one of the largest and most influential academic events in oncology worldwide, the AACR Annual Meeting has always been an important indicator for the innovative drug industry. According to incomplete statistics, over 100 Chinese pharmaceutical companies will participate in AACR this year, presenting nearly 400 research results covering cutting-edge technologies such as ADC, bispecific antibodies, nuclear drugs, cell therapy, and mRNA. Chinese companies have achieved steady output across multiple mainstream tracks, with significant increases in project quantity density and technological coverage, fueling market anticipation for the release of major data.

Additionally, “going global” transactions continue to surge, accelerating the realization of the global value of Chinese innovative drugs. Data from the National Medical Products Administration show that in the first three months of 2026, the total external licensing (BD) transaction volume for Chinese innovative drugs exceeded $60 billion, nearly half of the total $135.7 billion for all of 2025. From a global perspective, the share of Chinese innovative drug BD projects and disclosed amounts since the beginning of the year are 20% and 75%, respectively. Among 21 major deals announced, 15 are Chinese transactions, accounting for over 70%.

Notably, in the first quarter of 2026, the average upfront payment for Chinese innovative drug BD deals reached $184 million, with the average total amount exceeding $2.7 billion, both setting new records. Galaxy Securities pointed out that as transaction enthusiasm continues to rise, China’s innovative drug overseas cooperation models are shifting from single-product licensing to platform-level strategic collaborations, which will drive a restructuring of valuation systems.

Meanwhile, policy dividends continue to be released, and the payment environment is being optimized. For the first time, the government work report of 2026 listed biomedicine as a new pillar industry, further elevating its strategic position; the first version of the commercial insurance innovative drug catalog has been officially implemented, and a multi-layered payment system of “new medical insurance + commercial insurance” is accelerating, continuously improving the payment environment for innovative drugs.

The industry is entering a period of profit realization

From an performance perspective, this round of innovative drug market has solid fundamental support. Many leading pharmaceutical companies’ 2025 annual reports show that the innovative drug industry has entered a profit turning point and commercialization phase. For example, BeiGene achieved its first full-year profit in 2025, with a net profit attributable to shareholders of 1.42B yuan. Innovent Biologics’ total revenue in 2025 surpassed 10 billion yuan, turning losses into profits for the year. Microport Scientific’s net profit attributable to shareholders in 2025 reached 53.46 million yuan, successfully reversing losses, with core product Seglitide sodium sales revenue increasing by 123% year-on-year.

Looking back at the market performance of innovative drugs since 2025, from April to September 2025, driven by major BD deals, the sector’s gains significantly outperformed the CSI 300 index. However, from September 2025 to March 2026, the innovative drug index lagged sharply behind the market. During this period, China’s trend of going overseas with innovative drugs remained strong, and more major BD deals continued to be finalized.

“The anticipation of BD and the pattern of event-driven trading have led to a dulling of the innovative drug sector’s BD transactions. After half a year of adjustment, expectations for innovative drugs have now reasonably normalized, and the market is paying more attention to clinical data quality and long-term market value. Recent clinical data releases are also validating the potential of Chinese innovative drugs,” said Hu Boxin, industry analyst at Huaxin Securities.

Fangzheng Securities believes that the pharmaceutical and biotech industry is currently in the startup phase of the profit cycle for innovative drugs, with leading companies already turning losses into profits and fundamentals significantly improving. After a correction of over half a year, the downside space for innovative drugs is limited, making them highly defensive. Unlike the period during the 2022 rate hike cycle, innovative drugs now have entered a profit cycle, with self-sustaining capabilities, and their valuations are less affected by changing expectations of interest rate cuts.

Reporter Liu Yang