The innovative drug sector has recently surged again, moving deeper into the "deep waters" of development. In the secondary market, the pharmaceutical sector, led by innovative drugs, has shown relatively strong performance, with several well-known stocks that performed well last year rebounding. We believe this is primarily due to the industry's sustained high prosperity. As of June 30, China has completed 81 out-licensing deals for innovative drugs, with a total transaction value of approximately $110 billion, reaching 80% of the total for the full year 2025, according to data from the National Medical Products Administration. Additionally, the earlier market correction created a gap between prices and values for many companies. After the artificial intelligence-driven capital pullback subsided, the sector staged a rebound.
We are also optimistic about CXO (Contract Research Organization) companies, as they serve as the "water sellers" for innovative drugs. Historically, when innovative drugs perform well, CXO stocks typically follow suit. Meanwhile, corporate buybacks and executive share increases are classic signs of a market bottom. Since company executives are insiders with a deeper understanding of corporate value, their frequent increases in holdings or buybacks indicate they believe the company's value is undervalued. As the first-half earnings season approaches, based on our current tracking, the interim reports for innovative drug companies are generally expected to be positive. Key financial metrics to watch include revenue growth, which reflects the ramp-up of flagship products, and whether net profit turns positive. Many innovative drug companies are turning profitable this year due to milestone payments from business development deals or increased product sales. This shift to profitability is a critical milestone for these companies.
From a policy perspective, domestic support for innovative drugs is strong. On July 9, the 26th edition of the National Essential Drugs List included innovative drugs for the first time, featuring blockbuster products like semaglutide, bevacizumab, and telitacicept. This breaks the long-standing trend of the essential drugs list excluding innovative drugs. Looking ahead, the list is clearly leaning toward domestic innovative drugs, and with the normalization of dynamic adjustments, more high-value innovative drugs are expected to be included. A new trend this year is the rise of platform-based business development deals, typically involving cooperation between a global multinational corporation and a large Chinese pharmaceutical company or bio-pharma at the technology platform or molecular level. In contrast, last year's deals were mainly based on individual star molecules. We believe this trend reflects the increasing integration of China's innovative drug industry into the global market.
Looking ahead to the second half of the year, we expect the momentum in innovative drugs to continue. This is driven by high fundamental prosperity and the strong performance of the U.S. biotech stock index, which has also benefited from capital flowing out of the AI sector. Note: The above content does not constitute stock recommendations or evaluations. The materials provided do not offer investment advice or decisions. They are not intended to guide specific investment operations. Investors should evaluate the information independently and make decisions at their own risk. We do not guarantee the accuracy, reliability, timeliness, or completeness of the materials. This content reflects information as of the publication date and may change thereafter. Unauthorized reproduction or commercial use by third parties is prohibited. MACD golden cross signals have formed, and these stocks are showing good momentum!