The semi-annual reports of the innovative drug sector show a starkly polarized situation: 60% of pharmaceutical enterprises are still struggling to survive, and "drug commercialization" remains the ultimate proposition.
The 2026 H1 earnings season has concluded, and China's innovative pharmaceutical industry has delivered a watershed performance. The sector is bidding farewell to the stage of burning cash to tell stories, and stepping into a value realization phase where profitability is the only hard truth.
This transformation is not a broad-based rally across the whole industry, but a differentiation driven jointly by three forces: surging commercialization volume, booming overseas licensing deals, and diversified capital sources. In this process, an industrial proposition that has plagued the innovative pharmaceutical sector for years is being verified: has the closed value loop from R&D investment to commercial returns been fully established?
When talking about the macro industrial changes in the first half of the year, Jin Chunlin, Director of Shanghai Health Development Research Center, summarized four "historic inflection points". First, the number of innovative drugs under development in China has surpassed that of the United States to rank first in the world, with 38 global innovative drugs approved intensively. The concentrated landing of "First-in-Class" achievements marks the shift from quantitative accumulation to qualitative leap. Second, BD (Business Development) overseas expansion has upgraded from sporadic transactions to normalized cooperation worth tens of billions of dollars. The top 20 global multinational pharmaceutical enterprises are purchasing Chinese self-developed assets in batches, and China's role has changed from a participant in the global industrial chain to a source of innovation. Third, the industrial positioning has been upgraded from a strategic emerging industry to an emerging pillar industry. The 2026 government work report clarified this status for the first time, driving a systematic re-evaluation of policies, capital and industrial expectations. Fourth, the revenue structure of large pharmaceutical enterprises has reached a turning point, with innovative drugs replacing generic drugs as the core growth engine.
Financial Inflection Point: From "Cash Burning" to "Self-Sustainability"
The first checkpoint for verifying the closed value loop is whether enterprises can achieve self-sustainability.
The 2026 H1 financial report data shows that a number of leading innovative pharmaceutical enterprises are crossing this threshold. Multiple long-loss-making leading innovative pharmaceutical companies including BeiGene and RemeGen have realized profitability for the first time or on a large scale. "In the past, most domestic innovative drugs still relied on financing to survive, and cash burning was the mainstream. But the ability to survive ultimately depends on self-generated cash flow. Therefore, it is an urgent financial proof for innovative pharmaceutical enterprises that revenue from drug sales can fully cover R&D expenditure," a senior pharmaceutical industry analyst told reporters.
Jin Chunlin pointed out in an interview with *National Business Daily* that this change is not a simple cyclical prosperity fluctuation, but a landmark event for the innovative pharmaceutical industry to transform from a pure R&D investment period to a commercial value realization period. "This is the concentrated return of large-scale R&D investment since 2015. Core products have entered the stage of commercial volume growth, coupled with three catalysts of accelerated medical insurance access, indication expansion and overseas licensing, making sunk costs being converted into quantifiable cash flow."
BeiGene is the most representative sample of this trend. In the second quarter, the company's total global revenue reached 1.7 billion US dollars, a year-on-year increase of 30%, and GAAP (Generally Accepted Accounting Principles) net profit reached 237 million US dollars, a year-on-year increase of 151%. The global sales of its core product zanubrutinib reached 1.248 billion US dollars (about 8.386 billion RMB), of which the US market contributed 893 million US dollars (about 6 billion RMB), a year-on-year increase of 31%. The company has achieved profitability for several consecutive quarters, and has significantly raised its full-year revenue guidance to 6.6 billion to 6.8 billion US dollars, with operating profit guidance raised to 1 billion to 1.1 billion US dollars.
In the first half of 2026, BeiGene's product revenue accounted for more than 98% of total revenue, and the revenue driving force has shifted from licensing income or non-recurring items to product sales. The global sales of zanubrutinib have exceeded 16 billion RMB, which also proves that high investment can correspond to high returns on the commercial side, rather than being well-received but not profitable.
RemeGen has taken another path to turn losses into profits. In the first half of 2026, the company's revenue reached 5.853 billion RMB, a year-on-year increase of 433%; the net profit attributable to shareholders reached 4.662 billion RMB, compared with a loss of 450 million RMB in the same period last year. The net cash flow from operating activities jumped from -246 million RMB to 4.214 billion RMB, turning positive from negative.
The key variable for this leap is the exclusive licensing agreement signed between RemeGen and AbbVie for the PD-1/VEGF dual antibody RC148 — 650 million US dollars in down payment was recognized as revenue, contributing more than 70% of the total revenue. In addition, the commercial sales of its marketed products telitacicept and disitamab vedotin also reached 1.34 billion RMB, a year-on-year increase of 22.3%, proving that its in-house commercialization system is maturing.
The industrial significance of this financial inflection point lies in: leading enterprises have proved with financial data that China's original innovative drugs can make profits through sales, rather than relying on storytelling and financing to sustain operations.
Qualitative Change in Overseas Expansion: From "Selling Rights and Interests" to "In-depth Cooperation"
From going through the doubts of "selling premature assets" and "multinational pharmaceutical enterprises buying assets at low prices", to gaining recognition for "exchanging time for space" and "obtaining high prices for high value", BD transactions have become a way to demonstrate the value of domestic new drugs, while the model itself is also undergoing qualitative changes.
In the first half of 2026, there were 81 outbound licensing transactions for Chinese innovative drugs, with a total potential amount of about 110 billion US dollars, exceeding 80% of the total amount of last year. What is more critical than the transaction amount is the change in cooperation models.
In the first half of the year, License-out (outbound licensing) no longer only refers to receiving down payments, but has introduced sales sharing and joint commercialization. This means that Chinese innovative drugs can not only sell at high prices in markets such as the United States, but also substantially participate in profit distribution. The closed loop of ensuring sales volume in the domestic market and securing profits in overseas markets is starting to operate smoothly from the source.
For example, according to statistics, 5 of the 20 cooperation projects between Innovent Biologics and Pfizer adopt the in-depth cooperation model of co-development and co-commercialization. Hengrui Medicine has reached a global strategic cooperation with Bristol-Myers Squibb, with 5 innovative projects under joint R&D, allowing Hengrui to participate in global commercialization.
Meanwhile, the buyer landscape has also changed from "selling to MNCs (multinational pharmaceutical companies)" to "diverse buyers". Innovent Biologics has reached an exclusive licensing agreement with Spero Therapeutics for the CD40L antibody IBI355, with a total transaction value of about 1.1 billion US dollars. It is worth noting that Spero is a US Biotech (biotechnology company) with a market capitalization of only several hundred million US dollars that has just completed a strategic transformation. It mortgaged the future milestone payments it will receive from GSK to financiers, and bet on the Phase II development of the drug with 105 million US dollars in non-dilutive financing.
At the same time, Haisco announced in August that it has signed an exclusive licensing agreement with US startup Sentivera Therapeutics, Inc., authorizing the latter the global development, production and commercialization rights of a preclinical oral small-molecule asset for autoimmune diseases outside China. Sentivera and Metsera, which was sold to Pfizer at a high price of tens of billions of US dollars, were incubated by the same group of top US capital operators.
The logic behind multinational pharmaceutical enterprises being willing to share profits and decision-making power, and pay high prices for early pipelines is that the global bargaining power of Chinese innovative pipelines has been substantially improved.
Ecosystem Verification: Opening Up Exit Channels in the Primary Market
The aforementioned analyst believes that the final verification of the value closed loop of domestic innovative drugs does not lie in how much a single product sells, but in whether early-stage capital can achieve orderly exit — which is the premise for the entire innovative pharmaceutical investment and financing ecosystem to continue operating. For unprofitable biotech companies, the end point of the R&D investment closed loop does not necessarily have to be profitability, but can also be acquisition or market capitalization revaluation.
She cited the example that in July this year, Novartis's acquisition of Myricx Bio is a typical case. This ADC (antibody-drug conjugate) startup spun out from Imperial College London in 2019 was eventually acquired for 1.5 billion US dollars after seed round financing and a 114 million US dollars Series A financing in 2024. Early investor Brandon Capital achieved considerable returns for its investors.
"The significance of this case is that it verifies the feasibility of the path from academic origin discovery to VC (venture capital) early incubation, to clinical data verification, and finally to MNC acquisition exit. Although this case took place in Europe, it has clear reference value for China's innovative pharmaceutical ecosystem. When primary market capital sees a clear exit path, 'patient capital' has reasons to stay in this sector."
At the same time, the valuation system for domestic innovative drugs is also being restructured. In the first half of this year, large manufacturers such as Hengrui and Innovent introduced or acquired pipelines from small and medium-sized Biotechs through BD. As a representative of traditional pharmaceutical enterprises in transformation, Hengrui Medicine recorded a revenue of 15.456 billion RMB in the first half of 2026, a year-on-year decrease of 1.94%, and its non-recurring profit deducted net profit decreased by 12.71% year on year. Its innovative drug revenue increased by 16.38% year on year, which is not outstanding compared with the high growth of its peers; while generic drug revenue decreased by 16.07% year on year, which significantly dragged down its performance.
At the broader level of small and medium-sized Biotechs, enterprises lacking core self-sustainability capabilities are still struggling to survive. The share price of Nothisland plummeted the day after its first gene therapy new drug was approved, and continued to fall in subsequent trading sessions, with its market value evaporating by about 50%, reflecting that the capital market may be losing patience with the model that only has pipelines but no profits. The aforementioned analyst believes that at least 60% of Biotechs are still struggling to survive, and their R&D investment has not yet seen the dawn of returns.
This trend can also be seen from the data of the Hong Kong Stock Exchange 18A board: according to data from Pharmcube, as of May 2026, the number of 18A companies with a market capitalization of less than 1 billion Hong Kong dollars has increased to 12, which have basically lost their financing capabilities; the number of companies with a market capitalization between 1 billion and 2 billion Hong Kong dollars has increased to 15, which are on the verge of losing financing capabilities. This means that a considerable number of listed Biotechs at that time were unable to obtain new capital support through the public market.
In the first half of 2026, China's innovative pharmaceutical industry completed the first verification of the value closed loop from R&D investment to commercial returns — leading enterprises took the lead in proving the feasibility of the business model that original innovative drugs developed in China can generate huge profits.
However, this closed loop has only verified the survival logic of the top 20% leading enterprises, and has not yet solved the survival problem of the remaining 60% of enterprises. Fei Fan, Co-Lead Partner of Life Sciences & Healthcare Sector of EY Greater China, stated publicly that China's Biotech sector is experiencing three-tier differentiation in 2026: leading enterprises with global transaction capabilities obtain pricing close to global standards, mid-tier enterprises focusing on the domestic market face dual pressures of valuation and financing, and trailing enterprises face divestment or market exit.
Jin Chunlin emphasized that the sustainability of profitability needs to be viewed in different tiers. Leading enterprises represented by BeiGene and Innovent Biologics have formed a positive cycle of "R&D — launch — sales — re-R&D", with profitability featuring endogeneity and scale effect; while the profitability of some small and medium-sized enterprises relies on BD licensing or loss-reduction transition, which belongs to phased value realization, and their business model closed loop has not yet been formed. "For leading enterprises, profitability is a sign of sustainability; for trailing enterprises, it is more of a near-death phased test."
Meanwhile, Jin Chunlin also reminded that domestic innovative drugs still have obvious shortcomings before forming a mature commercial closed loop. First, the original innovation capability is weak, with most developments still being fast-following and improvement, and there is a generational gap with Europe and the United States in first-in-class targets and basic translation research. Second, the BD bargaining power is insufficient, with the domestic down payment accounting for only 5.8% of the transaction amount, far lower than the global level of 15%~25%. Third, core equipment and materials such as high-end bioreactors, culture media, and chromatographic fillers still rely on imports. Fourth, the difficulty of commercial access to hospitals has not been fully resolved, and hidden barriers such as low frequency of pharmacy and therapeutics committees and high hospital cost control pressure still exist. Fifth, the payment system is supported by a single pillar, and the scale of commercial insurance is far from enough to support reasonable pricing of innovative drugs.
He concluded that the batch profitability in the first half of 2026 is "the concentrated breakthrough of China's innovative pharmaceutical industry after ten years of hard work", proving that the chain from R&D to global recognition and then to commercial realization has been successfully established. "But this is only the end of the first half. The core proposition of the second half is model verification — how to convert one-time pipeline asset realization revenue into sustainable product sales revenue and stable operating profit." He said that this is still the only ultimate way out for innovative pharmaceutical enterprises, and differentiation and market exit among enterprises will be inevitable.
(Disclaimer: The content and data in the article are for reference only, and do not constitute investment advice. Investors shall be responsible for any risks arising from their operations based on this article.)
Original Title: One Drug of a Chinese Pharmaceutical Giant Generated 8.3 Billion RMB in Sales in 3 Months, With 6 Billion RMB Contributed by the US Market. The H1 Reports of Innovative Drugs Show a Two-Tiered Scenario: 60% of Pharmaceutical Enterprises Are Still Struggling to Survive, and "Drug Sales" Remain the Ultimate Proposition
This article is from WeChat Official Account "National Business Daily", Author: Chen Xing, Editors: Duan Lian, Wei Guanhong, Du Hengfeng, Proofreader: Liang Luyue, Published with authorization from 36Kr.