Innovative Drug Sector Rebounds After Six Months; Leaders Enter Intensive Harvest Phase — Has The Profit Inflection Arrived?

On April 1, the innovative drug sector staged a broad rally, with Guangshengtang（广生堂）hitting the daily limit, Beida Pharmaceutical（北大医药）, Baili Tianheng（百利天恒）and Kailaiying（凯莱英）also closing at limit‑up, while Aidi Pharmaceutical（艾迪药业）advanced more than 18% and Yifang Biotech（益方生物）rose over 15%.

The sector had already shown signs of acceleration since last week, as the CSI Innovative Drug Industry Index climbed 11% over the prior seven days, reversing a prolonged consolidation that began in September 2025. Leading pharmaceutical groups reported strong 2025 annual results: Hengrui Medicine’s and BeiGene’s revenue mixes saw rising contributions from innovative drugs, and several biopharma companies including NuoCheng Jianhua（诺诚健华）and Rongchang Biotech（荣昌生物）returned to profitability. With the AACR meeting in April and the ASCO conference in late May to early June approaching, a concentrated flow of clinical data disclosures is expected to sustain momentum for valuation repair.

Annual reports indicate a structural improvement in revenue composition among market leaders. Hengrui Medicine reported RMB 31.629 billion in revenue for 2025, up 13.02% year‑on‑year, and net profit attributable to shareholders of RMB 7.711 billion, up 21.69%. Sales of innovative drugs reached RMB 16.342 billion, a 26.09% increase that raised their share of pharmaceutical sales to 58.34%, confirming innovative products as the company’s primary growth engine. Licensing revenue contributed RMB 3.392 billion, establishing a secondary growth trajectory beyond direct sales. Fosun Pharma reported RMB 9.893 billion in innovative drug revenue for 2025, up 29.59%, with the share of total revenue rising to 23.75%, an increase of 5.16 percentage points year‑on‑year.

Notably, a number of biopharmaceutical firms achieved turnaround results in 2025. BeiGene disclosed revenue of USD 5.343 billion (approximately RMB 38.7 billion), up 40.2% year‑on‑year, and net profit of USD 287 million compared with a net loss of USD 645 million in the prior year, marking a historic profitability inflection. Shenwan Hongyuan Securities reported that as of March 29, 71 pharmaceutical companies had published 2025 annual reports, with 32 recording positive net profit growth and 10 achieving growth rates above 40%, illustrating concurrent sector‑wide earnings recovery and structural differentiation.

Business development activity has surged, with external licensing transactions emerging as a major theme. According to NextPharma data, by March 25, 2026 Chinese innovative drug companies had announced 49 outbound BD deals in 2026, with upfront payments exceeding USD 3.3 billion and aggregate deal values approaching USD 57 billion. The first‑quarter transaction volume alone surpassed the full‑year total for 2024 and reached nearly half of 2025’s annual level, signaling growing global recognition of Chinese R&D capabilities and the rising importance of overseas licensing as a revenue stream. Hengrui Medicine’s RMB 3.392 billion in licensing income in 2025 exemplifies this trend.

Valuation repair combined with policy support has created a favorable entry window, according to multiple brokerage reports this week. Huaxin Securities observed that the industry’s business model is shifting from financing‑driven expansion toward a balanced model that integrates product commercialization, overseas licensing and selective financing, and that the sector’s valuation risk has been substantially released after more than six months of adjustment since late 2025. At the policy level, the 2026 Two Sessions designated biopharmaceuticals as an emerging pillar industry alongside integrated circuits and aerospace, with an explicit objective to build global competitiveness, thereby reinforcing the long‑term development foundation for innovative drugs.

The upcoming academic calendar is likely to provide near‑term catalysts for the sector. The AACR Annual Meeting, scheduled for April 17–22, historically features extensive participation from Chinese companies; in 2025, 126 Chinese firms presented nearly 300 studies, including more than 80 ADC programs and nearly 40 bispecific antibody projects. The ASCO Annual Meeting, to be held May 29–June 2, similarly included over 70 Chinese studies in 2025, with 11 selected as Late‑Breaking Abstracts. Guojin Securities highlighted several pipeline candidates—Akeso Biopharma’s PD‑1/VEGF bispecific, Kelun Botai’s TROP2‑ADC, YingEn Biotech’s B7H3‑ADC, CSPC Pharmaceutical’s EGFR‑ADC and NuoCheng Jianhua’s BCL‑2 inhibitor—as examples of assets whose forthcoming clinical readouts could further catalyze valuation recovery.

In sum, the recent sector rebound reflects both improving fundamentals and accelerating business development activity, while imminent clinical disclosures and supportive policy signals provide additional upside catalysts. Leading companies have begun to demonstrate revenue mix transformation and, in several cases, historic profitability turnarounds; licensing deals and conference‑driven data releases are likely to sustain the repair process.