Latest Cover Story | China’s Innovative Drugs: The “DeepSeek Moment” (AI Translation)

最新封面报道｜中国创新药“DeepSeek时刻”

Summary:

In 2024 and 2025, China’s innovative pharmaceutical sector witnessed record-breaking Business Development (BD) deals, particularly with major international partners, signifying a pivotal shift in its global industry status. In May 2025, Shenyang-based 3SBio made headlines by signing a deal with Pfizer for its PD-1/VEGF bispecific antibody SSGJ-707, receiving a $1.25 billion upfront payment and up to $4.8 billion in milestone payments—the highest upfront payment ever for a Chinese drug licensing deal. Additionally, Pfizer purchased $100 million in 3SBio shares. Soon after, BioNTech reached an agreement with Bristol-Myers Squibb (BMS) for its PD-(L)1/VEGF bispecific antibody BNT327 (originally acquired from China’s Pumis), receiving a $1.5 billion upfront payment, $2 billion in non-contingent anniversary payments by 2028, and up to $7.6 billion in milestone payments, with costs, profits, and losses split equally. BioNTech acquired Pumis (a six-year-old Zhuhai-based firm) for $800 million, marking its strategic pivot to oncology after COVID-19 vaccine revenues declined. Both transactions drew intense market attention and boosted stocks in China’s innovative drug sector, with the sectoral index rising significantly in both A-shares and Hong Kong markets.[para. 1][para. 2][para. 3]

These deals highlighted the growing confidence in and leadership of Chinese pharmaceutical companies, particularly in dual-innovation drugs like PD-(L)1/VEGF bispecifics. The first globally approved drug targeting these points—Akeso’s AK112—originated in China, fueling international competition. The trend of Chinese drug “out-licensing” (license-out) to global partners, including through NewCo models, has become a mainstream business strategy, with upfront license-out payments surpassing primary market financing by 2024. Industry experts note this “BD wave” both boosts market sentiment and supports business sustainability, leveraging China’s abundant pipeline, talent, and competitive cost structure.[para. 4][para. 5][para. 6]

The resurgence follows a multi-year slump, with China’s innovative drug sector index dropping almost 56% from 2021 to end-2024, and related stocks underperforming. Recently, however, high-profile BD deals, strong clinical data at global conferences, and improving financials (e.g., BeiGene and Innovent turning profitable) rekindled investor interest. Market optimism is reinforced by the pipeline’s depth—Chinese sponsors accounted for 39% of global oncology trials in 2024, up from 2% in 2009.[para. 7][para. 8]

Major multinationals face “patent cliffs” and need to replenish late-stage pipelines, accounting for their aggressive asset acquisition strategies focused on next-generation cornerstones like PD-1/VEGF bispecifics, expected to supersede Merck’s Keytruda ($29.5 billion sales in 2024).[para. 9][para. 10][para. 11] While global top-tier pharma like Pfizer and BMS offer the highest valuations and greater development resources, most Chinese assets are still best-in-class or incremental innovations rather than first-in-class, and smaller biotechs remain important buyers.[para. 12][para. 13]

While BD deal prices for Chinese assets still trail Western peers—typically at 30-50% the level—they are rising as local experience grows, ensuring profitability due to China’s lower R&D costs and faster advancement cycles. The industry’s structure is gradually shifting, with leading companies able to sell valuable pipelines abroad, replenish cash, and reinvest in development, even as the sector remains highly competitive, especially in crowded tracks like PD-(L)1/VEGF bispecifics and GLP-1s. Investors now value internationalization potential and out-licensing opportunities more than IPO prospects, expecting future breakthroughs in oncology, autoimmune, metabolic, and CNS diseases, and broader application of enabling technologies like ADCs and CGT.[para. 14][para. 15][para. 16][para. 17][para. 18]

In summary, China’s innovative drug sector is experiencing a historic “DeepSeek moment,” with high-value international BD deals redefining business models. To sustain momentum, Chinese firms must enhance product quality, global competence, and strategic timing, as the industry moves from survival to global competition and collaboration.[para. 19][para. 20][para. 21]