China’s pharma stocks gain favours amid ‘greater’ progress of innovative drugs

Chinese pharmaceutical companies are experiencing a surge in global expansion as the industry continues its rapid growth trajectory, particularly with the imminent release of their third-quarter earnings reports. According to the Ministry of Industry and Information Technology, innovative domestic drugs have constituted 80% of all approved medicines within China for the first three quarters of the year.

Wang Weiming, chief engineer at the ministry, highlighted progress in multiple therapeutic areas, such as oncology, psychiatry, anti-infectives, gout, and rare diseases during a press conference in Beijing. In September, innovative drug out-licensing deals reached approximately US$130 billion, nearly matching the full-year 2025 level, as reported by the National Development and Reform Commission (NDRC).

Analyst Sun Yuanyuan of Industrial Securities noted that the sector's overall competitiveness is expected to grow, with core policy support and profit delivery remaining intact, and the risk-reward profile becoming increasingly favorable. Hansoh Pharmaceutical Group, a Hong Kong-listed biomedical company, recently entered into a collaboration agreement with Swiss healthcare company F. Hoffmann-La Roche for a portfolio of antibody-drug conjugate programs.

Under the agreement, Hansoh will lead early development up to global phase Ia clinical trials while Roche will handle global development beyond China. This arrangement provides Hansoh with an upfront payment of US$400 million, a US$110 million first-anniversary payment, and eligibility for over US$15 billion in future development, approval, and commercialization proceeds, along with tiered royalties on product sales.

Consequently, Hansoh's share price rose by 8.32% on Tuesday, and other innovative drug sector A-share market players, like Shanghai and Hong Kong-listed Joinn Laboratories, also experienced positive trading activity. Meanwhile, China has announced a public consultation on revisions to the export technology export list, proposing to include 40 key technologies, including five biomedicine technologies focused on cell and gene therapy, small nucleic acid therapeutics, and pathogenic microorganisms.

Industrial Securities' Sun believes these policy changes will not impact the sector's growth trend, as the restrictions do not apply to routine business development, CXO operations, or R&D services that do not involve ownership transfers.