Editor's Note
No emerging industry thrives without sustained capital investment. While the US biotech ecosystem has been 45 years in the making — dating back to Genentech’s 1980 NASDAQ debut —China’s innovative drug sector only gained serious investor traction over the past decade. This journey has been equal parts gritty hustle and glittering breakthroughs. We won’t gloss over the growing pains of hypergrowth, but as we stand at the dawn of a new era, the next decade of China’s Biotech kicks off as we take a hard look at ROI — mapping the triumphs, stumbles, and hard-won lessons to chart a smarter path forward.
From Boom to Frost
Seven years of runaway growth, three years of hibernation. Today, China’s biotech investors are treading carefully on thin ice, searching for firmer footing.
Data from PharmCube’s InvestGO® database paints a stark picture: since 2022, early-stage funding has nosedived, with 2024 deal flow shrinking to 2018 levels—and lagging far behind global peers.
Public markets fared no better. Post-COVID-19, China’s healthcare index cratered to record lows, battered by anti-graft crackdowns and brutal reimbursement squeezes. A 2025 Hong Kong Stock Exchange (HKEX) rally offered fleeting relief, but the real question remains:
After a decade of wild bets and reality checks, is China’s biotech still worth backing—and how?
"China Remains the Last Market with a Biopharma Window"
A decade ago, China's innovative drug investment boom took off. What excited investors most was the vision of finding the next Genentech among traditional pharma companies, mirroring the US biotech evolution of the 1980s. The launch of the Shanghai Stock Exchange (SSE)’s technology-focused STAR Market and HKEX's Chapter 18A rules for Biotech companies cemented this path, making "Biotech-to-Biopharma leap" the dominant investment thesis of the past 10 years.
Yet as capital markets froze over the past two years, with IPOs stalling and domestic reimbursement ceilings becoming apparent, the "narrowing Biopharma window" has become the sector's collective anxiety.
As Apricot Capital's Qiang Jing bluntly puts it: "Biopharma growth demands an entire ecosystem's sustained support - break one link, and the chain fails. But China's capital markets demand commercial-stage products before listing, while early-stage funding can't bridge that gap. The result? Companies sell assets to survive, making Biopharma a pipe dream".
Commercialisation has always been Biotechs’ "make-or-break leap" toward becoming a Biopharma. But contrary to the doom-and-gloom, Hope Medicine Inc co-founder Sam Lou argues: "China might be the last market where Biotech-to-Biopharma transitions still happen - in the US, that window has practically closed".
Lou's reasoning cuts to China's underdeveloped specialty sales networks: "Whether for generics or innovative drugs, commercial efficiency is key. Generics rely on regional reps pushing multiple drugs, while innovators need nationwide launches with specialised teams. If sales channels become entrenched, Biotechs get locked out - especially for drugs with short patent cliffs".
In other words, without mature innovator-focused pharma players, DIY commercialisation isn't optimal - it's the "keep-it-in-the-family" only option. Yet this very gap creates opportunities for new Biopharmas to emerge.
"We've yet to see domestic pharma giants adopt the 'buy-and-scale' model for innovative drugs", Lou notes. "Hand a first-in-class drug to traditional pharma, and they'd likely fumble the launch - they only know their old playbooks. That's where emerging Biopharmas can carve their niche".
He warns that commercial success requires more than just Phase III data - it demands commercial-ready trial designs integrating pricing and market access strategies early. "China's still finding its way here", he admits.
This means neither established Pharmas nor today's "near-Biopharmas" are guaranteed long-term winners. The real victors will be those building category-leading commercial engines - even if they start late.
Per PharmCube InvestGO®, 53 Chinese Biotechs have raised Series C+ rounds since 2022 specifically for commercialisation. Among them is Evopoint Biosciences, chaired by Qiang Jing, which secured RMB 700 million in 2024 to advance pipelines and build commercial teams.
"We're committed to the Biopharma path", Qiang states. "Our first NDA is filed, and we'll retain China rights. The bar keeps rising, but survivors will become tomorrow's MNCs".
After three lean years, the sector's moved past "vanishing Biopharma window" panic toward clearer paths: "You're either a pure-play R&D Biotech or an execution-focused Biopharma - no middle ground", Lou summarises.
As an investor, Qiang now evaluates targets two ways: "Either 'for sale' assets (brilliant but niche), or potential 'great companies' needing visionary founders to go global".
While selling assets offers one exit, the trillion-dollar question remains: Can Chinese Biotechs become global Biopharmas?
To Lou, it's about efficiency: "China's R&D engine is world-class, but commercialisation must catch up. To recoup costs, you need global markets - and that requires global capital markets. BeiGene proved China's bourse can't drive this alone".
Where to Invest in the Next Decade?
The past decade saw China's innovative drugs industry grow from virtually nothing, representing the "China growth fundamentals" that dollar fund-dominated VCs sought. However, in recent years, as capital shifted from hot to cold, overseas industry players became the biggest buyers. Coupled with companies experiencing firsthand the domestic reimbursement environment for innovative drugs, globalisation has become the sector's dominant logic.
Amid the fervent asset trading boom, investable Chinese innovative drugs now exhibit more concrete characteristics aligned with industry logic: either globally validated innovative drugs like Akeso Biopharma's PD-1/VEGF bi-specific antibody that can challenge established blockbusters, or Best-in-Class (BIC) candidates leveraging China's engineering innovation advantages.
For the future, investor consensus increasingly focuses on the latter.
Wang Xun, Chief Investment Officer of HUAGAICAPITAL Healthcare Fund, states bluntly: "Developing completely novel targets or mechanisms is quite difficult for China, but we excel at building on existing technologies, iterating on current mechanisms to create BICs. Currently, most successful products fall into this category".
This aligns with Made-in-China's position in today's global industrial chain: benefiting from mature infrastructure and engineer dividends, China specialises in engineering innovation. This approach doesn't invent new paradigms or discover new technologies but makes significant optimisations based on existing ones, often establishing advantages through pricing revolutions.
In AI, this approach birthed DeepSeek, triggering a revaluation of Chinese assets. In China's innovative drugs sector, companies' decade-long engagement in hot therapeutic areas and drug targets through fast-follow innovation, combined with clinical efficiency advantages from China's population base, makes the emergence of an equally impactful "global BIC" highly probable. This may well be the most sought-after investment target in the coming decade.
According to statistics from an industry research report released this month by PharmCube, global innovative drugs involve 1,840 targets, with Chinese-originated innovative drugs covering 754. Among the 20 most popular drug targets, China's overlap with global targets reaches 80%, and China contributes the highest proportion globally, accounting for over 50% of drugs targeting 18 of the top-20 targets.
Echoing this trend, at the 2025 J.P. Morgan Healthcare Conference, former US Food and Drug Administration (FDA) commissioner Scott Gottlieb noted that over 50% of IND-approved molecules in the US during 2024 originated from China, signalling the Chinese Biotech sector's "DeepSeek moment".
Moving forward, after the bubble of homogeneous competition and the commercial disadvantages of first-in-class (FIC) drugs, prioritising global BICs—identified through manufacturing innovation and efficiency advantages in hot therapeutic areas and targets—has become a high-conviction strategy.
Qiming Venture Partners' managing partner William Hu explicitly positions global BIC as his core investment thesis. "A rush into FIC drugs is unrealistic—success there remains low-probability", he states. "Conversely, never underestimate BIC's potential or China's engineering innovation capabilities".
Complementing engineering innovation are cost and efficiency advantages. Under this strategy, Hu highlights a critical question: "How will Chinese innovative drugmakers' true innovation capacity, costs and speed evolve? How will they stack up against global peers?".
For serial entrepreneurs like Sam Lou with economic acumen, this efficiency creates unique opportunities: "Developing the same drug to the same milestones costs just 1/2 to 1/3 of US expenses. Thus, many drugs deemed uneconomical in the US make sense in China".
Case in point: In late 2018, Lou co-founded Hope Medicine as president. In 2019, Bayer | Pharmaceuticals granted Hope global rights to develop and commercialise HMI-115 (a prolactin receptor mAb)—marking Bayer’s first-ever global licensing of an originator drug to a Chinese firm. Now, after successful global Phase II trials and a CDE Breakthrough Therapy Designation (BTD), Hope is advancing HMI-115 into Phase III.
"During fundraising, investors asked why foreign Biotechs or Bayer didn’t pursue this drug" Lou explains. "For Biotechs abroad, costs would triple. MNCs avoid CDMO models—their full-chain R&D-to-commercialisation costs dwarf our capital-light VIC approach. But this math only works for Biotechs targeting globally valuable markets".
By early 2025, this efficiency edge gained global recognition — particularly among US peers. Endpoints News and Biopharma Dive reported that nearly every therapeutic area or target explored by US Biotechs now faces Chinese competitors, with 50% to 100% faster clinical development and 100% to 200% faster preclinical progress.
To Lou, this cost-speed advantage defines Chinese Biotech’s unique value. The optimal path? "Channel development efficiency into capital markets—exactly what listed firms should do".
However, while globalisation is the dominant logic for China's innovative drugs sector today, it is not the only one.
Haitong Securities' analysis of China's pharmaceutical sales reveals that 5 of the top 8 revenue-generating drugmakers in China are MNCs. Drugs like AstraZeneca's osimertinib and dapagliflozin, Novartis's secukinumab and Novo Nordisk's semaglutide have all achieved annual sales over RMB 5 billion, spanning oncology, autoimmunity and metabolic diseases — proving the domestic market can also produce blockbuster drugs worth RMB 5 to 8 billion.
Meanwhile, China-focused firms like Shanghai Allist Pharmaceuticals Co., Ltd, Amoytop Biotech, Sinocell Technology, Chengdu Kanghong Pharmaceutical Group Co.,Ltd. and Betta Pharmaceuticals Co., Ltd. have also secured RMB 2 billion-plus annual sellers, demonstrating that niche markets can yield significant returns if products and strategies align.
"First, China's market is vast enough. Second, US-China market disparities remain stark", adds Qiang Jing. "This means locally tailored products can still achieve scale".
Ultimately, as China's innovative drugs industry matures, it must undergo the same cognitive shift as other tech-driven sectors: technology sets the ceiling, but market and efficiency define the floor.
Reshuffle and Renewal
The turbulence of the past three years has brought some clarity to "what and how to invest" in Chinese innovative drugs — while changes in "who invests" are now more profoundly and subtly shaping the next decade's venture landscape.
In 2023, the upfront payments from business development (BD) deals secured by Chinese innovative drugmakers first surpassed total IPO proceeds, nearly doubling them — a shock to the industry. By 2024, this BD "frenzy" became the norm: PharmCube data shows China's license-out upfronts hit USD 4.1 billion, eclipsing IPO fundraising and nearing total Series A-C financing volumes.
"Every crisis presents the best opportunity for structural adjustment. In recent years, funding shortages in China's primary markets have pushed Biotech financing structures closer to US models", said Qiang Jing. "From 2015 until two to three years ago, China's Biopharma funding was unbalanced - 80% came from funds and 20% from local government investments. In the US, about 40% comes from funds, 50% from MNC BD deals and acquisitions, and 10% from policy funds".
This transformation is irreversible - investors have proactively "retreated to secondary positions", creating healthier pressure for sustainable development. Qiang admitted: "We now advise all portfolio companies to secure BD deals after three funding rounds. VC money supports concept validation - after validation, you need to find bigger buyers".
However, this rapidly restructured funding system carries a latent risk: government funds now dominate.
Qiang stated bluntly: "On one hand, dollar funds have retreated completely. On the other, market-driven funds face fundraising difficulties, with 80% to 90% of limited partners being local governments. Market-oriented government funds are being forced into investment promotion roles - this structure is quite risky. We shouldn't use government capital for such high-risk ventures. We need to reactivate market-driven funds' investment capabilities".
His concern lies in the efficiency losses caused by misalignment between government and market-driven funds' investment philosophies and systems. He revealed: "Previously, co-investors would accept the lead investor's due diligence report. Now, state-backed investors basically redo everything themselves. If a round has three state-backed investors, regardless of who leads, the due diligence gets done three times".
Under these structural funding changes, the future of China's innovative drugs sector ultimately depends on its people - the entrepreneurs and investors driving it. Both Wang Xun and Qiang Jing highlight a critical issue: the operational inexperience of China's "professor-led teams" and investors' weak post-investment management.
Wang Xun observes China's key gap versus US venture ecosystems: "We lack mature management systems - particularly in portfolio stewardship, value creation and founder empowerment".
He contrasts US-China Biotech models: "In the US, professors typically transfer their technology to a fund-incubated company. The fund then appoints an experienced CEO who holds 5-6% equity, while the professor retains 10% through technology contribution, with the fund controlling the remaining 70-80%. However, in China, it's common for professors to hold 70% equity in startups, their students 10%, leaving just 20% for investors. Moreover, most professor-founders lack business operation skills and CEO capabilities, frequently resulting in chaotic situations”.
Qiang Jing notes the US actually has two models - the fund-driven approach Wang described, plus founder-led ventures. However, China's "professor-led" Biotechs represent neither - they're "invest-and-abandon" hybrids, as most Chinese funds lack operational expertise.
"The past three years' winter reshuffled both copycat competitors and participants", Qiang asserts. "Only versatile entrepreneurs - those securing top talent in promising therapeutic areas - will thrive. Future investors must master incubation, portfolio management and exits (IPOs, M&A, cross-border deals)".
From personnel flows to capital shifts, from domestic growth to global integration - a decade of achievements, lessons, triumphs and setbacks now converges at this 2025 milestone. China's innovative drugs investment sector is defining its new path forward.
Acknowledgements
QIANG Jing (Managing Partner, Apricot Capital)
Sam LOU (Co-founder, Hope Medicine)
WANG Xun (Chief Investment Officer, Huagai Capital Healthcare Fund)
William HU (Managing Partner, Qiming Venture Partners)