The Hang Seng Biotechnology Index has risen over 60% since January, surpassing the "DeepSeek moment" of Chinese innovative drugs over AI

From Profit to BD Explosion, Has the "DeepSeek" Moment Arrived for China's Innovative Drug Industry?

Since the beginning of this year, the Hang Seng Biotechnology Index has surged over 60%, surpassing the AI sector's increase of 17%. Behind this wave is the enthusiasm of investors ignited by a series of billion-dollar licensing deals, successful IPOs, and strong R&D pipelines from Chinese innovative pharmaceutical companies.

Data shows that in the first quarter of 2025, the total value of mergers and acquisitions and licensing deals involving Chinese pharmaceutical companies doubled to $36.9 billion, accounting for more than half of the global total ($67.5 billion).

Dong Chen, Chief Asian Strategist at Baida Wealth Management in Hong Kong, stated that Chinese biotech companies are entering "their own 'DeepSeek' moment." He indicated that there is still more room for growth in the future.

Yiqi Liu, Senior Investment Analyst at Exome Asset Management LLC in New York, commented:

“Unlike ten years ago, Chinese biotech is no longer just an emerging phenomenon, but a disruptive force reshaping global drug innovation.”

“The scientific basis is solid, the economic benefits are remarkable, and the R&D pipeline is beginning to show results.”

Core of the Boom: Dual-Driven by Licensing Deals and IPOs

Chinese innovative pharmaceutical companies have demonstrated astonishing capital-raising capabilities since the start of 2025.

According to media reports, on May 19, Pfizer authorized a experimental cancer drug from 3SBio Inc. with a $1.25 billion upfront payment and an additional $100 million equity investment; two weeks later, Bristol Myers Squibb announced a licensing deal with BioNTech SE for up to $11.5 billion for a cancer drug, which the latter had already licensed from Chinese company Biotheus Inc. in 2023.

The IPO market is equally booming. According to news from Chasing Wind Trading Desk, a recent research report by analysts Zhou Chaoze, Xu Rui, and Li Jiyang from Founder Securities shows that Duality Biotherapeutics Inc. saw its stock price double on its first day of trading in Hong Kong on April 15, with a cumulative increase of 189% to date; Jiangsu Hengrui Medicine's stock rose 25% on its first day of trading on May 23, with a current cumulative increase of 31%.

This series of events has directly boosted market confidence in the innovative drug sector, making the Hang Seng Biotechnology Index a star in the Asian market.

Business Model Recognized, Valuation Reassessment Imminent

The impressive performance of the capital market is attributed to the enhanced profitability of Chinese innovative pharmaceutical companies—these companies are breaking the stereotype of "continuous cash burning" and entering a new stage of business model validation.

Fangzheng Securities pointed out that the biggest boost to the current enthusiasm in the pharmaceutical industry comes from the widespread recognition of the innovative drug business model. From a trend perspective, leading innovative pharmaceutical companies are gradually entering a phase of turning losses into profits, breaking the market's inherent perception of continuous financing and cash burning by innovative drug companies, while BD project payments are also entering a normalized realization stage.

The report shows that BeiGene achieved profitability under U.S. Generally Accepted Accounting Principles in the first quarter of 2025, with full-year revenue guidance reaching USD 4.9-5.3 billion; Innovent Biologics is expected to achieve positive Non-IFRS net profit for the first time in 2024, reaching RMB 330 million, and has set a sales target of RMB 20 billion by 2027; Kintor Pharmaceutical's product sales revenue exceeded RMB 2 billion, with EBITDA losses significantly narrowed to RMB 200 million.

Explosive Growth in BD Transactions, Strong Global Demand

This improvement in profitability comes not only from the success of product commercialization but, more importantly, from the normalization of BD (business development) licensing revenue. Hengrui Medicine's significant profit growth in the first quarter is mainly attributed to the inclusion of BD upfront payments, indicating that the value of the innovative pipeline is undergoing systematic reassessment.

The report shows that as of June 8, 2025, Chinese companies' upfront payments for external licensing transactions have exceeded USD 2.5 billion, with a total amount exceeding USD 50 billion, reaching the level of the entire year of 2024. This phenomenon is referred to in the industry as the "DeepSeek moment" of Chinese biotechnology, reflecting a fundamental enhancement of the position of Chinese innovative drugs in the global value chain.

Multinational pharmaceutical companies are facing immense pressure from patent cliffs. According to analysis, among blockbuster drugs with global sales exceeding USD 5 billion in 2024, the total sales of products whose patents will expire or are nearing expiration before 2030 amount to nearly USD 200 billion. This significant gap drives strong demand from multinational pharmaceutical companies for Chinese innovative assets.

In addition, China has surpassed the United States in the number of new drug R&D.

In the past decade, the number of original innovative drugs developed by Chinese companies that have entered clinical trials for the first time reached 4,382, exceeding the 4,009 from the United States. In 2024, China had 704 original innovative drugs entering clinical trials for the first time, ranking first in the world.

Technological Innovation: ADC, Dual Antibodies, GLP-1, etc. Drive the Industry Upward

Technological innovation is the key driving force behind the rise of innovative drugs in China.

A report from Founder Securities shows that in the ADC (Antibody-Drug Conjugate) field, the total amount of license-out transactions in China will reach USD 10.24 billion in 2024, accounting for 20% of the total transaction amount.

The popularity of the PD-(L) 1/VEGF dual antibody track has surged, with the total transaction amount for CanSino Biologics' evosheld reaching USD 5 billion.

The global sales of GLP-1 weight loss drugs are expected to exceed USD 50 billion in 2024, with Chinese companies actively laying out multi-target and oral small molecule drugs.

In addition, TCE technology (such as CD3/CD19 dual antibodies) in the autoimmune field has also become a new hotspot for going abroad, with multiple transactions exceeding USD 1 billion in 2024.

Talent Return and Policy Dividends: Long-term Momentum for the Industry

Some analysts point out that the tense global trade situation has accelerated the return of talent to China's biotechnology industry.

Nicholas Chui, a fund manager at Franklin Templeton, stated that a significant number of overseas research talents have returned to the country recently, significantly enhancing domestic R&D capabilities.

Jefferies analysis also pointed out that many Chinese pharmaceutical companies have established cooperative relationships with American companies, being viewed as service providers rather than product exporters, thus the impact of U.S. tariff increases on them is limited. This dual support of talent and cooperation provides a solid foundation for the long-term development of the industry.

However, not all investors are optimistic about this wave of growth.

According to media reports, Bank of America analyst Ethan Cui warned that some experts in the medical field have planned to take profits at the current high levels, preferring to choose healthcare stocks with stable dividends and income growth.

In addition, some investors believe that the recent concentrated outbreak of licensing transactions may be a "one-time deal," unwilling to assign excessively high valuation multiples to related companies.

Risk Warning and Disclaimer

The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances Based on this investment, the responsibility lies with the investor