3 6 Ke·2025-08-17 07:35Core Insights - The Chinese innovative drug sector has gained global recognition, with the Hang Seng Medical ETF rising over 90% and the Hong Kong Stock Connect Innovative Drug Index increasing by 130% this year, indicating a shift to the first tier of global pharmaceutical capabilities [1] - There is a trend where investors are actively engaging in business development (BD) transactions rather than waiting for IPOs, with international capital looking to invest in domestic biopharmaceutical firms to explore promising drug development projects [1][2] - The investment model has evolved, focusing on direct investments in drug development projects and supply chain management, leading to opportunities for domestic general partners (GPs) to raise USD funds and enter international supply chains [1][2] Investment Trends - BD transactions have become mainstream in the industry, particularly large deals exceeding USD 1 billion related to overseas licensing of drug pipelines [2] - For instance, the collaboration between 3SBio and Pfizer involves a potential total transaction amount exceeding USD 6 billion, with an upfront payment of USD 1.25 billion [2] - The total value of BD transactions in the first half of the year surpassed USD 60 billion, highlighting the significance of this investment approach [2] Target Investment Institutions - International limited partners (LPs) are seeking three types of domestic GPs for investment in innovative drug projects: 1. GPs that invest in U.S. biopharmaceutical companies, primarily to introduce Chinese drug projects [3] 2. GPs that invest in foreign companies with Chinese drug authorizations [3] 3. GPs that lead investments in newly established domestic companies (NewCos) focused on overseas sales of Chinese drugs [3] NewCo as a Strategy - Establishing NewCos allows domestic GPs to enhance their bargaining power in international collaborations by determining their share of profits and selecting international teams for management [5][6] - NewCos can be established at a low valuation, enabling domestic GPs to leverage investments while providing accountability to domestic LPs [6] - However, the effectiveness of this model depends on the specific terms of agreements, particularly regarding profit-sharing and distribution [6] Challenges and Market Alignment - Despite the potential advantages of NewCos, challenges remain, particularly in aligning drug development with international market demands [7][8] - Domestic GPs need to better understand U.S. market needs and integrate into the drug project initiation phase to facilitate marketization and internationalization [8] - The use of AI technology is being explored to match Chinese drug projects with international buyer demands, enhancing the likelihood of successful collaborations [8][9] Investment Focus Areas - International LPs are also interested in investing in AI pharmaceutical companies, platforms that incubate multiple projects, and specific types of research and development projects [9] - The emphasis on supply chain management capabilities is crucial for the success of these investments, reflecting a shift in biopharmaceutical investment strategies [9]