The innovative drug sector has emerged as China’s hottest investment theme, with leading pharma funds like Huitianfu Hong Kong Advantage Selection delivering 78% YTD returns. The rally follows a surge in cross-border licensing deals, including six major China-foreign partnerships announced in May alone. Fund manager Liang Furui (Great Wall Pharma) highlights these BD transactions as validation of China’s growing biotech innovation capabilities, particularly in oncology and cell therapy pipelines attracting global pharma giants.
While deal momentum remains strong, skepticism grows about sustainability. Rongtong Pharma’s Wan Minyuan warns current valuations exceed even the 2021 CXO bubble, with many pre-revenue biotechs trading at 10x+ sales. The divergence between commercial-stage firms with approved drugs and pipeline-dependent startups has widened sharply, raising risks of a correction should clinical trial setbacks or funding pressures emerge.
Market participants face a bifurcated opportunity – established players with FDA-approved drugs and global partnerships offer relative safety, while high-risk/high-reward bets on early-stage platforms demand rigorous pipeline analysis. With A-share biotech indices up 60% YTD, prudent position-sizing and focus on companies with near-term commercialization catalysts may prove essential as the sector enters a potentially volatile second half.
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