The Rise of China’s Biopharmaceutical Sector
In a recent meeting, Zhao Hong, chief doctor of China’s leading cancer hospital at the Chinese Academy of Medical Sciences, shared an impressive insight with fellow delegates. He mentioned that a little-known Guangzhou biotech firm had developed a cancer drug that outperformed the world’s best-selling medicine. This revelation caught the attention of investors and sparked discussions about the potential of China’s biopharmaceutical sector.
Zhao emphasized that China is currently experiencing a golden era for its biopharmaceutical industry. He pointed out that in the past year, China not only has the second-largest number of novel drugs under development but also witnessed a domestic drug surpassing the top-selling cancer medication globally. This success was likened to a “DeepSeek moment” for China’s drug industry, similar to the impact of the artificial intelligence start-up DeepSeek, which launched high-performing models at a lower cost than global competitors.
However, while the comparison may seem fitting, analysts and experts question whether Chinese drug companies can consistently produce breakthroughs on the level of Akeso’s ivonescimab. The complex and highly regulated nature of the pharmaceutical sector poses challenges for achieving significant advancements.
Akeso’s drug, ivonescimab, demonstrated remarkable results by delaying non-small-cell lung cancer progression for five months longer than Merck’s Keytruda, which generated $29.5 billion in sales in 2024. This achievement led to a surge in Akeso’s stock, contributing to a broader boom in the biotech sector driven by an unprecedented volume of licensing deals.
After a three-year slump, investors have returned to Chinese drug firms this year, encouraged by evidence that regulatory reforms over the past decade have fostered innovation and discouraged the copying of foreign medicines. The Hang Seng Biotech index has surged 107% this year, outperforming the Nasdaq Biotechnology Index’s 9.2% gain.
Cui Cui, Jefferies’ head of healthcare research for Asia, highlighted the significant increase in oncology trials conducted by Chinese companies, from 5% in 2014 to 39% of the global total last year. She noted that since 2022, Chinese firms have developed 639 drug candidates with “first-in-class” potential, a nearly fourfold increase compared to previous years.
The surge in investment in cutting-edge drug development has been accompanied by a dramatic reversal of three consecutive years of decline in fundraising activities. Mainland China and Hong Kong-listed pharmaceutical and biotech firms raised a combined $11.3 billion this year through 63 transactions as of September 18, according to Dealogic’s tally.
This enthusiasm is driven by multinational firms seeking to reduce drug costs and replenish their pipelines due to the upcoming expiry of patents on blockbuster products. The availability of mid-stage drug candidates from China at lower prices has prompted big multinationals to seek licensing deals with Chinese firms.
Zhang Song, founder of CTS Capital, noted that Chinese biotech firms have elevated their international competitiveness, deepened cooperation with overseas partners, and increased success in licensing their drug candidates. Medications developed by Chinese companies are now entering cutting-edge fields such as antibody-drug conjugates, bispecific antibodies, cell and gene therapies.
Despite these achievements, a gap still exists between China’s biotech development and that of multinational companies in terms of pipeline depth, R&D investment, and resilience in conducting long-cycle, high-risk projects. Most successful cases are based on known targets rather than the discovery of new ones, and many Chinese drug makers have yet to establish global sales teams and networks.
While the excitement around listed Chinese biopharmaceutical firms is evident, the private-equity market, dominated by professional and high-net-worth investors, has yet to show a recovery. Funding available to earlier-stage, higher-risk unlisted companies remains limited.
The Hong Kong rally in biotech stocks has attracted non-specialist investors more familiar with technology sectors. However, these investors often assume that the same success factors can be applied to biotech, which is not the case due to the science-based regulations throughout the supply chain.
Tony Ren, head of Asia healthcare research at Macquarie Capital, questioned the arrival of a “DeepSeek moment” for drug development, emphasizing that attempts to apply the “move fast and break things” motto to healthcare have largely been unsuccessful.
Helen Chen, head of L.E.K. Consulting’s China biopharmaceuticals and life sciences practice, highlighted different drivers supporting the current and previous stock booms. While the 2020-21 boom was due to a globally robust biotech capital market, today’s excitement is centered around the recognition of Chinese innovative assets and their potential role in the global biopharma market.
Chapter 18A, the Hong Kong stock exchange’s listing regime, allows new drug and medical device makers to float shares even without profit or revenue. Similarly, the Shanghai science and technology innovation board has enabled dozens of unprofitable biotech firms to list.
This year brought an upsurge in transactions by Chinese drug developers licensing candidates to overseas partners. Some 95 “out-licensing” deals worth $89 billion were struck by Chinese firms this year, accounting for 33% of the global total.
While these deals highlight the innovation capabilities of some industry leaders, the entire Chinese industry is still playing catch-up on the global stage. Chinese firms are leading in certain areas, but the median company is still a fast-follower.
For example, besides Akeso, Chinese firms Biotheus and 3SBio have also developed globally leading candidates in the area of cancer drugs that restore immune cells’ effectiveness and inhibit tumour blood vessel formation. Chinese firms are also making progress in obesity drugs, where over 60 candidates are under development.
Innovent Biologics, which licensed Eli Lilly’s candidate mazdutide for development in China, was the first domestic firm to launch a weight loss drug in the nascent but fast-growing China market in July. It was billed as the world’s first dual-target drug shown to suppress appetite to enhance weight-loss efficacy and reduce liver fat.
Suzhou-based finance professional Li Weijia, a participant in the late-stage clinical trial of mazdutide, expressed his support for more product choices from domestic firms. Li shed 22% of his weight from 108 kilograms over eight months and reversed his fatty liver condition.
However, when it comes to approval from the US Food and Drug Administration (FDA), Chinese successes are still at an early stage. Chinese firms accounted for only about 5% of the 58 drugs approved by the FDA or under expedited approval review processes since January last year, according to L.E.K. Consulting’s Chen.
Still, this marks a beginning. “This demonstrates that Chinese assets can obtain acknowledgement and approval by the US FDA,” she said. “I expect that the 5% is only the beginning, and the share will increase over time.”
