Chinese innovative drugs are "selling like hotcakes" overseas! Hong Kong stocks soar by 60%. Is it a bubble or the starting point?

Text | Hai Ruojing, Hu Xiangyun

This summer, the bullish trend of innovative drugs in the Hong Kong stock market continues.

In the first half of this year, the stock prices of pharmaceutical companies such as HBM Healthcare, Gacelis Pharmaceuticals, and 3SBio soared by more than three times, and the stock prices of several companies doubled. The wave of innovative pharmaceutical companies going public in Hong Kong through IPOs has resurfaced. More than a dozen heavy - weight enterprises, including Hengrui Medicine and Ying En Biopharma, have successfully listed on the Hong Kong Stock Exchange. In addition, more than 30 healthcare companies have submitted listing applications, and nearly two - thirds of them are engaged in innovative drug research and development.

The recent recovery and rise of the innovative drug sector in the Hong Kong stock market are catalyzed by the frequent occurrence of large - scale overseas licensing BD transactions of innovative drugs. The essential driving force is the ample funds brought by the return of foreign capital and the south - bound capital, which can realize the fundamental value of enterprises.

In the first half of 2025, Chinese pharmaceutical companies completed more than 70 overseas licensing transactions, with a total upfront payment of 3.3 billion US dollars and a total transaction value of 48 billion US dollars. BD seems to have become the "nuclear weapon" for market value management of innovative pharmaceutical companies. Almost all companies that secure BD deals experience stock price increases. Some companies even pre - announce BD deals in advance to attract capital and boost stock prices.

At the individual stock news level, there are often "noises" that are difficult to distinguish between true and false, high and low. However, due to the optimism about the Chinese innovative drug sector, the Hong Kong stock innovative drug ETF has become the choice of many investors. Many Hong Kong stock innovative drug index products have highly emphasized features such as "high purity of innovative drugs" and "cumulative increase of more than 60%", attracting global funds to pour in.

Securities brokerages, investment banks, and consulting institutions have also actively participated in this new drug wave. After the BD deal between 3SBio and Pfizer with an upfront payment of up to 1.25 billion US dollars, in late June, Citi Research compiled a list of potential/realized transactions of Chinese pharmaceutical companies and proposed using the result of "BD transaction value divided by market value" to evaluate the extent to which the BD value has been reflected in the stock price. It pointed out that companies such as Ascletis Pharma, Fosun Pharma, Harmony Biosciences, and Junshi Biosciences have relatively high ratios, implying investment value.

Scale of overseas licensing BD of Chinese pharmaceutical companies in the first half of 2025

So, how will the future trend of innovative drugs in the Hong Kong stock market develop? Can the market value upsurge triggered by BD transactions continue to explode? How to evaluate the relationship between BD transactions and a company's market value/valuation? Four investors and practitioners focusing on the healthcare track analyzed their views on the market trend of Hong Kong stock innovative drugs and BD trends for 36Kr. There are both consensuses and non - consensuses.

Consensuses include: The asset quality and the reliability of clinical trial data of Chinese innovative pharmaceutical companies have been generally recognized by multinational pharmaceutical companies. The BD strategy of multinational pharmaceutical companies in China has shifted from the past "bargain - hunting" approach driven by cost and opportunity to a "strategic layout" that compares and selects assets within the global R & D pipeline system.

In terms of trends, three interviewees believe that BD will remain active in the next year, and the popular directions will still be oncology, autoimmune diseases (such as atopic dermatitis and lupus erythematosus), and metabolic diseases (such as weight loss and non - alcoholic fatty liver disease).

However, Bao Jun, the Chief Business Officer of Promis Biologics, believes that the pace of the BD market will slow down in the future. The explosion of new drug BD in the past two years is due to the concentrated release of more than a decade of clinical data accumulated by Chinese Biotech companies. However, the mature pipelines in the two popular fields of oncology and autoimmunity have basically been screened once. In the future, more opportunities may lie in less - popular fields such as CNS (central nervous system) diseases.

Regarding the evaluation of the value of BD transactions, all interviewees believe that the core lies in the upfront payment and the near - term visible milestone payments; the long - term sales royalties are too variable and have limited reference value. Through the transaction structure, the expectations of both the buyer and the seller for the asset value can be seen.

Furthermore, the BD transaction prices of Chinese innovative drugs are constantly approaching those of US biotech companies selling new drug assets. Generally speaking, for products entering Phase I clinical trials, the upfront payment is usually a few million US dollars; for those entering Phase II clinical trials, it is between 50 million and 100 million US dollars; for those entering Phase III clinical trials, it is around 100 million US dollars. If the upfront payment exceeds 100 million US dollars, it means that there are multiple buyers competing for the asset. The upfront payment and the recognition degree of the asset of new BD transactions can be compared according to this market situation.

Compiled and tabulated by 36Kr

Regarding the future market trend of Hong Kong stock innovative drugs, Ding Yameng, the founding managing partner and chief operating officer of Joy Capital, believes that the Hong Kong stock market is shifting from the manufacturing valuation system to the innovative asset valuation system. Driven by multiple catalysts such as asset maturity, BD monetization, and capital return, the Hong Kong stock innovative drugs may continue to rise.

Wang Xun, the chief investment officer of Huagai Capital, believes that the market has currently recovered to 40% of the peak level in 2021, and there may be another 20% of phased recovery space.

An anonymous biopharmaceutical investor pointed out that even if a few new drug pipelines are returned by the buyer, it does not represent a systematic risk. As long as there are no core violations such as clinical data fraud, the reputation of Chinese innovative drugs going global can be maintained. If the current Hong Kong stock market trend is not over - exploited, it is likely to rise in fluctuations.

Here are their self - statements (edited):

"The pace of the entire BD market is likely to slow down in the future"

Bao Jun: Chief Business Officer of Promis Biologics

(In November 2024, BioNTech acquired Promis Biologics and its core bispecific antibody drug PM8002 for 800 million US dollars; this year, the drug was sold to multinational pharmaceutical company BMS for an upfront payment of 1.5 billion US dollars and a total milestone payment of 9 billion US dollars)

The rise of the Hong Kong stock innovative drug market this year can be attributed to BD transactions as one of the core factors. Another important reason is that the performance of US biotech companies has been relatively poor, so some funds have flowed to Asia. Currently, the Hong Kong stock market highly values the BD capabilities of innovative pharmaceutical companies, which have even become an "invisible threshold" for listing in Hong Kong. It is said that it is quite difficult for innovative pharmaceutical companies without BD deals to list in Hong Kong now.

In the past, although there was enthusiasm for BD overseas, people still believed that the best proof of value realization was product commercialization. Moreover, there were doubts in the market about whether the remaining assets of a company would be sufficient for listing after selling pipeline rights. However, the IPO of Ying En Biopharma has gradually dispelled these doubts. They have not yet had any products approved, but they have already carried out many BD deals. (Note: The potential total transaction value of multiple new drug BD deals of Ying En Biopharma exceeds 5 billion US dollars. Since its listing in April 2025, the total market value of the company has exceeded 25 billion Hong Kong dollars)

Now, investors' thinking has changed. If an innovative pharmaceutical company can license out its pipeline, it verifies the company's capabilities in R & D and BD. Therefore, companies capable of BD have received attention and favor from market investors.

This change is related to the increasing maturity of the domestic innovative drug BD market.

In 2023, the industry mainly discussed oncology ADC (antibody - drug conjugate). However, now the types of drugs in BD deals are becoming more diverse, such as bispecific antibodies; the corresponding market space for drugs is also expanding, such as autoimmunity and metabolism. On the other hand, the international community has increasingly recognized the quality of Chinese clinical trial data. The buyers are more diverse, including not only multinational pharmaceutical companies but also small and medium - sized companies and funds coming to China to purchase pipelines.

All companies pay attention to industry trends, and there is also a "herd" effect. Seeing the frequent BD deals of other multinational pharmaceutical companies, companies that have not made a move or whose headquarters have responded slowly will also review their internal processes and make changes. They will pay more attention to the assets submitted by Chinese companies.

Since the quality of Chinese assets has been recognized and the number of buyers coming to view and acquire pipelines has increased, the BD transaction prices of Chinese innovative drugs are constantly approaching those of US Biotech companies in BD deals. If a buyer deliberately suppresses the price, it is impossible to obtain high - quality assets.

In the first half of 2025, Chinese assets in the oncology field contributed nearly 50% of the global upfront payments

From the perspective of transaction execution, I pay more attention to who the buyer is. If the buyer of a BD deal is a multinational pharmaceutical company, it is of great significance, indicating that the product has been carefully investigated, its quality is acceptable, and the buyer truly values this market. In the case of NewCo transactions, funds will not invest casually, and NewCo companies usually have a single asset and will also attach great importance to the subsequent development of the product.

In the past two or three years, many people said that "Chinese innovative drugs were sold at a low price or under - priced." I think this is purely imaginary. If the transaction is with a multinational pharmaceutical company, the price is basically reasonable.

Because the evaluation of the value of innovative drug assets is a rational process, and there is also a consensus in the industry on methodology. Commonly used tools include the NPV (net present value) valuation model. However, there may be differences between buyers and sellers in predicting the market prospects of a specific pipeline, such as the future market share of a certain indication. These differences need to be gradually resolved through subsequent negotiations and can also be addressed by setting milestone payments.

Regarding upfront payments, under normal circumstances, for products entering Phase I clinical trials, the upfront payment is usually a few million US dollars; for those entering Phase II clinical trials, it is between 50 million and 100 million US dollars; for those entering Phase III clinical trials, it is around 100 million US dollars. One variable is whether there is competition from other buyers. If there is only one buyer in negotiation, it is difficult to negotiate a very high upfront payment. The BD deals with upfront payments exceeding 100 million US dollars that we are seeing now are likely to have multiple buyers competing.

However, the "sky - high price" deal between 3SBio and Pfizer (SSGJ - 707, a PD - 1/VEGF bispecific antibody, with an upfront payment of 1.25 billion US dollars and a total price of 6.08 billion US dollars) is also accidental. The popularity of oncology bispecific antibody drugs is largely due to the fact that last year, the PD - 1/VEGF bispecific antibody AK112 of Kangfang Biotech defeated "Keytruda" in a single - agent "head - to - head" Phase III clinical trial, stimulating the market.

This is difficult to replicate. Imagine if BeiGene fully licenses out its head - to - head BTK, the commercial value would also be very high. Will there be many BD pipelines that are sold only after completing head - to - head clinical trials with US assets in the future? It's impossible.

Therefore, BD prices cannot continue to rise. For pipelines that have reached Phase II clinical trials, an upfront payment of 50 million to 100 million US dollars is the norm.

Moreover, the pace of the entire BD market is likely to slow down in the future. The market explosion in the past two years is the result of the concentrated release of more than a decade of clinical data accumulated by Chinese Biotech companies. However, the mature pipelines in the two popular fields of oncology and autoimmunity have basically been screened once. For those buyers who lost in the "battle" for popular targets, they may still look for similar products in the market.

For example, I personally believe that there may be one or two more deals in the PD - 1/VEGF field. As for other opportunities, they may lie in less - popular fields such as CNS (central nervous system) diseases.

However, there are also some variables. For example, will more overseas funds come to China to "search for bargains"? Compared with multinational pharmaceutical companies, they are more willing to look at pipelines in the earlier R & D stages or make direct investments, which may lead to an increase in the BD transaction volume of early - stage projects; another way of layout is to bring US assets to China for R & D, which is more cost - effective and efficient.

"The Hong Kong stock market has recovered to 40% of the peak level, and there is still room for growth"

Wang Xun: Chief Investment Officer of Huagai Capital, with more than 10 years of experience in BD at multinational pharmaceutical companies

In April this year, Ying En Biopharma raised nearly 20 billion Hong Kong dollars through its IPO, exceeding our expectations (Huagai Capital invested in Ying En Biopharma in Series B in 2021). This also made me realize that the Hong Kong stock market is undergoing systematic recovery. If it were last year or two years ago, it would definitely not have been possible to raise such a large amount.

In May, the deal between 3SBio and Pfizer with an upfront payment of 1.25 billion US dollars was also unexpected, setting a new record for the upfront payment of Chinese new drug BD deals. In 2023, Pfizer spent 43 billion US dollars to acquire ADC giant Seagen. It was thought that they would take some time to digest it, but unexpectedly, they made another large - scale deal so soon.

In the past five years, the overseas licensing of Chinese innovative pharmaceutical companies has been growing linearly. This is due to industrial accumulation. Chinese pharmaceutical companies have developed some best - in - class products, and multinational pharmaceutical companies are willing to pay for these assets. Each multinational pharmaceutical company has its own BD focus. For example, Pfizer wants to strengthen its oncology business, Sanofi is interested in autoimmunity, AstraZeneca focuses on oncology and respiratory diseases, and Novartis pays attention to cardiovascular diseases. However, oncology drugs still remain an important foundation, and autoimmunity and weight loss have also become important directions.

Eight or seven years ago, it was very difficult for multinational pharmaceutical companies to find new drug assets in China that they were interested in. They did not have a dedicated RD Search & Evaluation team in China. The Corporate BD department where I was working at that time mainly dealt with large - scale transactions such as company mergers and acquisitions, license - outs, and asset divestitures.

However, in the past three to five years, multinational pharmaceutical companies have recruited people with scientific R & D backgrounds to join their BD teams to discover and research early - stage new drug projects.