China’s biopharma sector enters the New Year on a high 

A wave of lucrative licensing deals, drug approvals and positive policy moves spurred a pharmaceutical rally in 2025, but bigger biotechs are seeing more of the benefits

Key Takeaways:

• The value of outbound licensing and drug development deals by Chinese pharmaceutical firms surged 161% in 2025 to nearly $136 billion
• The Chinese authorities are keen to accelerate the flow of innovative drugs onto the market through regulatory and insurance channels

By Molly Wen

After a long hibernation, Hong Kong’s biopharma sector sprang to life last year, as new drugs began to realize their medical and market potential.

The Hang Seng Healthcare Index (HSHCI) surged 76% in 2025, outperforming the broader Hang Seng benchmark and far outpacing a gain of nearly 26% by pharmaceutical stocks listed in mainland China.

Propelling the explosive growth was a record influx of Chinese capital into Hong Kong equities, as well as healthier earnings for some drugmakers.

According to data compiled by the Securities Times, the so-called southbound capital flows into Hong Kong from Chinese investors, largely enabled by Stock Connect programs, reached a net HK$1.4 trillion ($180 billion) in 2025. The amount ploughed into the healthcare sector surged nearly 126% to HK$540 billion from the previous year, boosting liquidity.

At the same time, sector companies enjoyed a bonanza of licensing and partnership deals to develop their experimental drugs. Business development (BD) transactions potentially worth more than $130 billion helped to boost drugmakers’ earnings, lifting equity trading volumes and share prices.

However, the gains were not evenly dispersed across the biopharmaceutical industry. The main winners were companies with standout drug prospects, established commercial pipelines and a steady stream of money from licensing deals, while investors were more wary of firms that rely on a single product or are far from bringing any of their discoveries to the market.

Among the gainers were providers of outsourced drug services, as sustained investment delivered robust and reliable earnings for upstream companies.

Producers of medical devices and supplies also fared well, supported by relatively stable cash flows. Weigao Group (1066.HK) rose 38% in 2025 while shares in MicroPort Scientific (0853.HK) achieved an annual gain of 76%.

Among the losers were some dental and medical aesthetics stocks, hit by stiff competition and lower consumer spending on non-essential medical services in an uncertain economy. Shares in oral healthcare firm Arrail Group (6639.HK) and beauty products company Giant Biogene (2367.HK) fell nearly 40% in 2025.

China’s supportive policy attitude towards Hong Kong listings added to the market momentum, as several big names with an existing presence on mainland share markets added H-shares in 2025, boosting inflows and overall investor confidence.

Biopharmaceutical companies were particularly eager to list, with more than 90 such firms applying to join the Hong Kong exchange during the year and more than 20 achieving their goal – double the number in 2024. Pharmaceutical sector leaders continued to win strong investor backing. Hengrui Pharma (1276.HK; 600276.SH) raised HK$11.3 billion, ranking among the top five Hong Kong IPOs in 2025, and its shares have since risen more than 30%.

International partnerships for innovative drugs were another driver of the 2025 rally.  According to industry data on PharmCube, the total value of outbound licensing and BD deals for Chinese innovative drugs rose 161% to US$135.66 billion by the end of 2025 compared with the previous year.

Aggregate upfront payments totaled $7 billion, while the number of transactions hit a record high of 157. Notably, a single agreement between Hengrui and pharma giant GSK covered 12 innovative drug programs, giving the Chinese partner $500 million upfront and up to $12 billion in potential milestone payments and option fees. It was the largest single licensing deal to date for a Chinese drug company.

Tangible return on investment

All these factors have injected cash into the industry and boosted market confidence.

Looking ahead to 2026, easier U.S. credit conditions and moves to include more novel drugs in China’s medical system are likely to help sector leaders such as BeiGene (688235.SH; 6160.HK) achieve profitability. The Hong Kong-listed pharmaceutical firms could therefore be entering a new phase in which investment potential turns into measurable value.

Meanwhile, Chinese regulators are clearing the way for a rising number of novel drugs to proceed towards commercial viability. China’s National Medical Products Administration approved a record 76 innovative drugs for market launch last year, compared with 48 a year earlier, and has pledged to take further steps in 2026 to accelerate the flow of pharmaceutical innovations.

Meanwhile, the Chinese authorities released the country’s first commercial insurance catalogue for innovative drugs in December, formally shifting to a dual-coverage model that combines basic medical insurance and commercial provision.

The inclusion of high-value immunotherapies to combat cancer, such as CAR-T and PD-1 drugs, could lift clinical treatment standards and improve overall returns on R&D investment. Leading innovative drugmakers with extensive pipelines, such as BeiGene, Innovent Biologics and Akeso, stand to benefit from commercial insurance income that would provide extra funds to expand their capacity.

That said, big challenges remain. After an exceptionally active IPO market in 2025, the mass expiry of post-listing lockups this year could unleash a wave of selling, dampening the mood.

Tighter scrutiny from stock market regulators could also be in the cards. Last month Hong Kong securities regulators issued warning letters to IPO sponsors, voicing concerns over a decline in application quality and citing worries about compliance issues, which may herald stricter IPO vetting going forward. For companies that listed under easier rules for biotechs, profits remain elusive. Only medical device maker Zylox-Tonbridge and drug developer Everest Medicines have successfully shed their pre-revenue designation, while the majority continue to struggle to convert their R&D investment into commercial output.

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