The era of Innovative Drugs 3.0 is here; how to seize the opportunity?

Recently, the innovative drug sector in the market has become active again after a half-year pause. Some analysts point out that the innovative drug sector may be in a favorable stage of “performance realization and valuation repair,” and an era of Innovation Drug 3.0, centered on new quality productivity and aimed at global competitiveness, has quietly arrived. How to seize the opportunities of the Innovation Drug 3.0 era? (Statistical period: September 30, 2025 - April 1, 2026; Reference materials: Wall Street Insights “Innovation Drugs Rebound After Half a Year, Leading Companies Enter Intensive Harvest Period, Is the Profit Turning Point Coming?” April 1, 2026; People’s Daily Health Client “China Pharmaceutical Innovation Promotes Association Song Ruilin: China’s Innovation Drug Industry Moves Toward 3.0 Era,” February 8, 2026)

Qualitative Change in the Innovation Drug Industry, Entering the “3.0 Era”

Some analysts believe that the 1.0 era of innovation drugs solves “whether it exists,” 2.0 era pursues “how good it is,” and the underlying logic of the 3.0 era is to establish “how strong it is.” Overall, China’s innovation drug industry is currently standing at a critical point of rising global competitiveness. (Reference: People’s Daily Health Client “China Pharmaceutical Innovation Promotes Association Song Ruilin: China’s Innovation Drug Industry Moves Toward 3.0 Era,” February 8, 2026)

① Development Stage Leap

Currently, biopharmaceutical innovation shows three major trends: increasing complexity of cutting-edge technologies, diversification of innovation entities, and internationalization of regulatory standards. China’s approval standards are deeply aligned with the international system, which not only enhances the global competitiveness of domestically innovative drugs but also attracts international innovative achievements to debut in China. From the past “technology introduction” to now “technology export,” China’s innovative drugs are gradually gaining more voice on the global stage, actively shaping a new industry order and ecosystem. (Data source: National Medical Products Administration, as of December 31, 2025; Reference: Times Weekly “China’s Innovation Drugs Surge: 30% of Global R&D Pipeline, Over $130 Billion in One Year from Overseas Markets,” March 2, 2026)

② Multiple Technological Breakthroughs

In recent years, China’s innovative drug field has achieved multiple technological breakthroughs across various frontier directions. For example, at the AACR Annual Meeting scheduled in the U.S. from April 17-22, 2026, 104 Chinese pharmaceutical companies will showcase over 250 innovative drugs. Among them, 92 ADC drugs target popular markers such as CDH17, Claudin18.2, HER2, Nectin-4; 66 small-molecule drugs target KRAS, PRMT5, WRN, CDK; frontier technologies like nuclear medicine, DAC, cell therapy, and mRNA will also present preclinical data. (Reference: 21st Century Business Herald “A-shares and Hong Kong pharmaceutical sectors surge, 104 Chinese pharma companies to showcase over 250 innovative drugs at AACR,” March 27, 2026)

③ Commercialization Begins

From the disclosed 2025 annual reports, a prominent feature of leading pharmaceutical companies is that the revenue share of innovative drugs has surpassed the 50% threshold, becoming the main driver of performance growth. This indicates that companies have successfully navigated the centralized procurement cycle and entered the harvest phase of innovation. The high R&D investment by domestic leading pharmaceutical firms has begun to translate into substantial cash flow, validating their commercialization capabilities rather than remaining in a pure “burning money” stage. (Reference: Xiangcai Securities “Innovation Enters Harvest Period, Reconstructing the Logic of Going Global,” March 20, 2026)

Multiple Drivers Resonating, Innovation Drugs May Be a “Long Slope with Thick Snow”

From the demand side, on one hand, many “treatment gaps” still exist across numerous disease areas in China, with substantial unmet clinical needs. On the other hand, population aging is a challenge faced by many countries. By the end of 2025, China’s population aged 60 and above exceeded 320 million, with over one-third of those aged 65 and above suffering from multiple chronic diseases.

(Reference: Guangming Online “Focusing on Clinical Needs, Building a Sustainable Health Ecosystem with Innovation,” December 20, 2025; Xinhua News Agency “Science and Health | Making Medical Visits Warm, Accelerating the Implementation of One-Stop Diagnosis and Treatment for Elderly Multimorbidity,” April 1, 2026)

From the supply side, data from the National Medical Products Administration shows that in 2025, China approved 11 first-in-class innovative drugs, 4 of which were independently developed domestically. China’s R&D pipeline now accounts for about 30% of the global total, ranking second worldwide. Analysts believe that due to rapid R&D speed and high cost-effectiveness, future BD (business development) transactions in China are expected to remain substantial. (Data source: NMPA, as of December 31, 2025; Reference: Times Weekly “China’s Innovation Drugs Surge: 30% of Global R&D Pipeline, Over $130 Billion in One Year from Overseas Markets,” March 2, 2026)

From the policy perspective, the “14th Five-Year Plan” first elevated biopharmaceuticals to a “new pillar industry” alongside integrated circuits and aerospace. This positioning means comprehensive, long-term policy support covering basic R&D, industrial chain security, and market access. Meanwhile, the first edition of the “Commercial Health Insurance Innovation Drug List” has been implemented, providing differentiated pricing space for innovative drugs. (Reference: Guojin Securities “Innovation Drug Sector: Policy, Going Global, and Profitability Triple Resonance,” March 31, 2026)

From the capital side, in the primary market, according to Pharma Magic data, global biopharmaceutical financing in Q1 2026 increased by over 20% year-on-year. In the secondary market, the valuation of the innovation drug sector continues to recover, regaining investor favor. In BD transactions, the number and amount of Chinese innovative drug industry BD deals have hit new highs this year, with large-scale and ongoing small-to-medium deals likely to bring sustained or growing cash flow to companies. (Reference: Guojin Securities “CXO Industry: Innovation Drug Going Global and Cycle Turning Resonance,” March 30, 2026; Economic Observer “The ‘Valley of Value’ for Innovation Drugs,” March 26, 2026; Huatai Securities “Pharmaceuticals: BD China Model - Sustainable Cash Flows Expected to Reshape Valuation,” March 30, 2026)

From the technological perspective, since 2026, China’s AI-driven drug development has continued to demonstrate global competitiveness. Internationally, domestic AI pharmaceutical companies have reached significant pipeline cooperation and licensing agreements with multiple multinational pharmaceutical firms, showcasing China’s strength in AI drug development. Domestically, collaboration among Chinese companies is accelerating, not only achieving billion-level commercialization in high-barrier disease areas (such as central nervous system) but also deepening infrastructure development in “AI + automation robots,” non-clinical drug large models, and other foundational fields. (Reference: 21st Century Business Herald “Frequent Heavyweight Collaborations, AI Drug Development Reshaping Industry Landscape,” March 24, 2026)

In the long term, China’s innovative drug industry, leveraging significant cost advantages and efficient R&D systems, is transforming from a “follower” in the global market to an indispensable “core participant,” with long-term growth potential opening up. (Reference: Guojin Securities “Innovation Drug Sector: Policy, Going Global, and Profitability Triple Resonance,” March 31, 2026)

Compared to individual stock investments, related products such as the Huaxia Innovation Drug ETF (159992) and its linked funds (A: 012781; C: 012782), Hong Kong-listed Innovation Drug ETF Huaxia (159567) and its linked funds (A: 023929; C: 023930), feature lower fees and transparent holdings, helping diversify idiosyncratic risks associated with single assets and providing investors with a convenient tool to grasp the overall industry development opportunities with one click.

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