The first half of the year has seen Chinese pharmaceutical companies achieve a remarkable performance in out-licensing deals! According to data from the Insight Pharma Transaction module, by the end of the first half, Chinese companies had concluded 86 overseas licensing (license-out) agreements, with a disclosed total transaction value reaching a staggering $97.625 billion, representing year-on-year increases of 34% and 40% in number and value, respectively. Following this trend, the total annual out-licensing value for 2026 is poised to set a new record.

Explosive Growth in Deal Scale

In recent years, China's innovative drugs have been increasingly sought after by global pharmaceutical companies, a phenomenon that reached a new peak in 2026:

In 2024, innovative drugs licensed from Chinese biopharma companies accounted for 28% of those introduced by major global pharmaceutical firms. The total value of licensing deals rose from $16.6 billion in 2023 to $41.5 billion in 2024, a 66% increase. According to data from PharmaGO, in 2025, the total value of China's overall innovative drug business development deals exceeded $135.6 billion, representing 49% of the global share and surpassing the United States for the first time.

In Q1 2026, the total value of China's innovative drug out-licensing (License-out) transactions already surpassed $60 billion, exceeding the full-year 2024 total in just one quarter; in the first half of this year, the total value of out-licensing deals by Chinese innovative drug companies reached a high of $97.625 billion, a 40% increase year-on-year.

Some analysis suggests that the transaction amounts, upfront payments, and early-stage asset collaborations in License-out deals are frequently exceeding market expectations, indicating that China's innovative assets are becoming a crucial source for supplementing pipelines and enhancing efficiency for global pharmaceutical companies.

Value Proposition in a New Cycle of Rising Volume and Sentiment

Since the beginning of the year, trading volume in the innovative drug sector has begun to expand. The average daily turnover for the CSI Innovative Drug Index reached 28.429 billion yuan, a noticeable increase compared to the full-year 2025 average of 24.730 billion yuan.

Amidst this influx of capital, the medium- to long-term value of innovative drugs continues to be viewed favorably:

Fundamentals are entering a "verifiable" stage. In 2025, the revenue of the A-share innovative drug sector surpassed one trillion yuan, growing 26.32% year-on-year; the revenue of the Hong Kong-listed innovative drug sector reached 176.1 billion yuan, a 16.50% increase, marking a historic breakthrough in sector performance.

The competitiveness of domestically developed innovative drugs is becoming more prominent. Globalized output is transitioning from "isolated cases" to a "systematic" process. As the participation of domestic innovative drugs in the global industry continues to deepen, leveraging efficiency advantages, we may see more domestic drugs catching up with or even surpassing their European and American counterparts in the early R&D stages in the future.

The policy environment continues to improve. Optimizations to the national medical insurance catalog, breakthroughs in commercial health insurance catalogs, and reforms to drug pricing mechanisms are creating a favorable environment for innovative drugs.

How to Capitalize on Opportunities in Innovative Drugs

Thanks to advancements in gene editing and synthetic biology technologies, as well as innovations in R&D models driven by the application of artificial intelligence in drug discovery and development, the global biopharmaceutical industry is entering a new period of intensive innovation emergence.

Against this backdrop, how can investors focus on the innovative drug sector? Related ETF products may offer an efficient and ideal tool—

For the A-share market, one can consider the Yinhua CSI Innovative Drug Industry ETF (159992) and its feeder fund (Class A: 012781; Class C: 012782): These products track the CSI Innovative Drug Index (931152.CSI), focusing on leading companies in the A-share innovative drug industry chain, aggregating global CXO leaders and leading domestic generic-to-innovative drug companies to capture innovative drug investment opportunities.

For the Hong Kong market, one can consider the Yinhua SZSE-HK Connect Innovative Drug ETF (159567) and its feeder fund (Class A: 023929, Class C: 023930): These products track the SZSE-HK Connect Innovative Drug Index (987018.CNI), focusing on the Hong Kong-listed innovative drug industry chain, with a key coverage of downstream innovative pharmaceutical companies, aiming to capture opportunities in AI-empowered drug R&D and the overseas expansion of domestic innovative drugs.

Looking at the long-term trends in the innovative drug industry: On the policy front, the "15th Five-Year Plan" recommendations explicitly include biomanufacturing and brain-computer interfaces among the six future industries, providing directional guidance for the future commercial layout of biopharmaceutical companies. On the consumption front, the "silver economy" continues to generate rigid demand for innovative drugs, high-end medical devices, chronic disease management, and specialized medical services, pushing product pipelines to tilt towards these related areas. Investors, within their risk tolerance, may leverage related thematic ETFs to strive to capture the long-term opportunities in the innovative drug industry.

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