Chinese Biotech Innovators Push Overseas as Sector Faces Reckoning

China’s innovative drug industry, after enduring several years of shrinking valuations and a near halt in IPO activity, is displaying early signs of a rebound. This resurgence is evidenced by major cross-border licensing deals that have reignited global attention and lifted sector stock prices, indicating a potential positive shift. However, despite headline-grabbing transactions and the buoyant reaction from markets, industry experts caution that this upturn may prove selective, as persistent structural and financial challenges continue to loom [para. 1][para. 2].

Investors are currently willing to support projects and companies that demonstrate unique advantages and strong global competitiveness, yet access to capital remains difficult. Li Sheng of Roland Berger notes that the industry is still undergoing significant structural realignment, which complicates overall recovery efforts [para. 3].

High-profile deals in 2024 thrust China’s biopharmaceutical sector back into the global spotlight. Pfizer paid $1.25 billion upfront for rights to a cancer therapy from 3SBio in May, with the possibility of the total deal value surpassing $6 billion. Shortly after, BioNTech and Bristol Myers Squibb paid $1.5 billion upfront for a drug they acquired from Chinese startup Biotheus [para. 4]. These deals, notable for their international buyers and substantial upfront payments, have excited the market and garnered attention from investors outside typical biotech circles [para. 5].

Market data reflects this renewed investor interest: Shares of 3SBio’s Shanghai-listed unit doubled following the Pfizer announcement, the CSI Innovative Drug Index increased by over 17% year-to-date, and the Hang Seng Biotech Index in Hong Kong surged nearly 62%, with biotechnology ETFs leading gains [para. 6]. This comes after a severe four-year downturn (2021–2024), during which valuations halved and IPO activity nearly ceased, driving many biotechs into penny-stock territory [para. 7].

Despite signs of recovery, skepticism remains. Liu Dan of Pivotal bioVenture Partners observes that while some valuations have bounced back, investor diligence is high and only companies with clear international potential are attracting capital. Of the approximately 10,000 biopharma firms in China, only a small fraction have secured significant partnerships, portending a likely industry shakeout [para. 8][para. 9]. This shakeout is a correction for past overvaluation, speculation, and underdeveloped R&D, says Fang Yang of CEC Capital. Only companies with robust assets and global ambitions are thriving, and analysts anticipate a clearer industry outlook by the end of 2025 [para. 10][para. 11].

The sector is now entering a phase marked by tighter funding and increased scrutiny, where survival depends on developing innovative drugs and building ties with global pharmaceutical giants [para. 12][para. 13]. The emphasis has shifted toward producing internationally competitive products, starting trials in China and then partnering abroad to complete studies due to the high costs involved [para. 14].

Industry players remain cautious about execution, as timing missteps can cost firms lucrative deals. Long-term relationships and experienced intermediaries are crucial for bridging knowledge gaps between Chinese and global companies [para. 15][para. 16][para. 17]. Familiarity with the Chinese market gives multinational corporations an advantage, while others may require more groundwork to engage with China’s innovators [para. 18].

Attention is focusing on emerging therapies, notably PD-1/VEGF bispecific antibodies for cancer and GLP-1 drugs for obesity, areas where Chinese firms lead but face increasing saturation. Oncology remains dominant, constituting 40% of R&D pipelines, with interest also strong in autoimmune, Alzheimer’s, and weight-loss treatments [para. 19][para. 20][para. 21]. Despite challenges, experts believe blockbuster drugs may still emerge from these competitive fields [para. 22].