Global pharma giants turn to Chinese biotech to tap innovation, valuation growth

Major pharmaceutical companies are increasingly investing in China's rapidly growing biotech sector, as highlighted during the Global Health Summit in Hong Kong. Xu Chenming, head of Hong Kong-based Citic Securities' healthcare group, noted that these multinational firms are shifting focus from asset-heavy operations to partnerships with innovative Chinese companies.

This move aims to foster innovation and help Chinese biotech firms compete on a global scale, according to Xu. For instance, AstraZeneca recently formed a joint venture with CSPC Pharmaceutical Group to construct a drug manufacturing facility in Shijiazhuang, Hebei province. The joint venture, where AstraZeneca holds a 49 percent stake, will initially focus on manufacturing and supplying products to the global market.

Similarly, Mölnlycke, a Swedish provider of wound care and surgical products, joined forces with Zhende Medical, a domestic medical care and protection items supplier, to combine their portfolios and co-develop future products. Jiang Yu, chairman of Huatai United Securities, emphasized that cross-border deals for innovative drugs in China have reached a record US$110 billion in the first half of 2026, which is about 80 percent of last year's total.

However, Chinese healthcare companies still trail behind their US counterparts in terms of valuations, with only four mainland-listed healthcare companies valued over US$20 billion, constituting just 18 percent of the sector's market cap. In contrast, the US has 73 healthcare companies exceeding this threshold, accounting for 85 percent of total market cap.

The investor interest in Hong Kong-listed biotech and healthcare stocks has been on the rise since the past two years, as the Hong Kong capital market has made a full recovery. Leung Chuen-yan, a partner for healthcare investment at Hong Kong-based Value Partners Group, pointed out that investors in biotech IPOs in Hong Kong or those investing after listings are increasingly international.

In the first half of the year, 11 companies in Hong Kong raised a total of HK$14.1 billion (US$1.8 billion) through initial public offerings, with seven biotech companies listing pre-profit during the period.