BD opening red! China's innovative drugs saw impressive foreign licensing transaction volume, nearing half of last year's annual total in the first three months.

According to the news from the National Medical Products Administration, in the first three months of this year, the total amount of outbound authorized transactions of innovative drugs in China exceeded 60 billion US dollars, close to half of the annual total in 2025. As of March 27, China has approved 10 new innovative drugs for 2026, including 2 imported and 8 domestic ones. China has made a historic breakthrough in innovative drugs, maintaining a good momentum and potential for development. Data previously disclosed by the Administration shows that in 2025, China approved 76 new innovative drugs for the whole year, reaching a historical high. The total amount of outbound authorized transactions of innovative drugs also reached a historical high, with a total of 157 transactions that year, with a first payment of 7 billion US dollars and a total amount of about 135.7 billion US dollars, doubling from 2024. Innovative Drug BD (Business Development) is the core business model for pharmaceutical companies to integrate innovative drug resources globally and maximize commercial value through buying and selling, cooperation, and other means. Outbound authorization transactions of innovative drugs (Licensing-out) are one of the core components of BD. Currently, the outbound activities of domestic innovative drugs in China continue to be active. On March 4, SINO BIOPHARM (01177) and DeQi Medicine (06996) announced major BD on the same day, respectively with a total consideration of over 1.53 billion US dollars and over 1.18 billion US dollars, authorizing Sinochem and UCB to Rovalpituzumab tesirine (JAK/ROCK inhibitor) and ATG-201 (CD19/CD3 bispecific antibodies). On February 8, INNOVENT BIO (01801) announced a strategic cooperation with Eli Lilly and Company to jointly promote the global research and development of innovative drugs in the fields of oncology and immunology. This agreement is their seventh cooperation. According to the agreement, Lilly will have the exclusive development and commercialization license for the relevant project outside Greater China, while INNOVENT BIO will retain all rights in Greater China. INNOVENT BIO will receive an upfront payment of 350 million US dollars, up to 8.5 billion US dollars in milestone payments, and sales royalties. On January 30, CSPC PHARMA (01093) signed an authorization agreement with AstraZeneca to develop innovative long-acting peptide drugs using the group's proprietary sustained-release drug technology platform and peptide drug AI discovery platform. Under the agreement, CSPC PHARMA will receive a prepayment of 1.2 billion US dollars, milestone payments of 3.5 billion US dollars, a maximum of 13.8 billion US dollars in sales milestone payments, and sales royalties. In addition, many Chinese biotech companies have reached major cooperation agreements with MNCs using cutting-edge technology platforms: ShenZhen SiBiono GeneTech will authorize Roche for preclinical RNAi therapies (200 million US dollars upfront payment + 1.5 billion US dollars milestone payment); Transcenta will authorize Novartis with blood-brain barrier shuttle technology antibody (165 million US dollars + 1.5 billion US dollars); SIMCERE PHARMA (02096) will authorize Toll-like receptor 1 and 9 agonists (TL1A/IL-23p19) dual antibody SIM0709 to Boehringer Ingelheim (42 million euros + 1.016 billion euros); Ruibo Biotech (06938) will authorize 6 MASHsiRNA assets to Madrigal (60 million US dollars + 4.4 billion US dollars). These four transactions are all preclinical assets. According to Huatai's analysis, from a global perspective, the proportion of Chinese innovative drug BD projects and disclosed amounts accounts for 20% and 75% respectively since the beginning of the year. Among the 21 major transactions that have been completed, 15 are China-based transactions, accounting for over 70%. The institution believes that the continuous growth of BD has high predictability based on the increasing interest in Chinese assets from MNCs and overseas PE institutions. The institution believes that Chinese innovative drug companies and American biotech companies have fundamentally different business models, with Chinese companies having a larger advantage in terms of pipeline size. Firstly, there will be continuous BD every year, and secondly, large BD transactions (first payments exceeding 500 million USD/total amounts exceeding 2 billion USD) and continuous medium and small BD have a high probability of bringing continuous or even increased cash flow to companies (based on the continuously accumulating research and development milestones and upcoming sales royalties). Currently, the market usually only considers the contribution of the first payment to the valuation of the company, which the institution believes undervalues the value of milestone income. Soochow stated that BD income has become an important source of funds for Chinese innovative drug companies. By calculating "cash and cash equivalents/annual R&D expenses," the financial strength of the innovative drug sector can be evaluated. Overall, the pharmaceutical sector has sufficient funding, with the majority of companies maintaining a research and development funding coverage of more than one year, effectively supporting the progress of subsequent clinical trials, pipeline expansion, and technological innovation. This has laid a solid financial foundation for the long-term high-quality development of the industry and provided sufficient time for the technological breakthroughs and commercialization of innovative drug companies. The government work report for 2026 proposes to "build integrated circuits, aerospace, biomedicine, and low-altitude economy as emerging pillar industries." Compared to the description in the 2025 report of "nurturing and developing emerging industries and future industries," the positioning of the biopharmaceutical industry has significantly shifted, placing it for the first time under the category of "emerging pillar industries." Guosheng believes that for the pharmaceutical sector, this means that the policy positioning of biopharmaceuticals is advancing from "nurturing emerging tracks" to "important directions for economic growth and industrial upgrading," with innovative drugs as the core and most valuable part of the biopharmaceutical industry, the direction of benefit is particularly clear. CMB International pointed out that the positioning of the biopharmaceutical industry as an emerging pillar industry indicates that the policy dividends throughout the entire chain will continue to be released. The breakthrough in AI pharmaceutical technology and the explosion of Chinese innovative drug BD abroad are resonating, and the industry fundamentals are expected to accelerate towards improvement. The current cooperation of Chinese innovative drugs going out has been upgraded from single pipeline authorization to platform-level cooperation, and the systematic recognition of the research and development capabilities of China Meheco Group by multinational pharmaceutical companies is increasing. This article is reprinted from "Cai Lian She"; edited by Wang Qiujia for GMTEight.