Core Insights - The FDA's CDER approved 44 new drugs by 2025, with over half being "first-in-class" drugs, indicating a shift from "incremental" to "disruptive" treatment paradigms in drug development [1][3][24] - The rise of small molecules continues, but their development is evolving from broad inhibition to precision modulation, enhancing efficacy while reducing side effects [6][7][9][10] First-in-Class Drugs - The approval of "first-in-class" drugs is driven by unmet clinical needs, particularly in rare and complex chronic diseases, where existing treatments are inadequate [3][4] - Brinsupri (brensocatib) is a notable example, targeting Dipeptidyl Peptidase 1 (DPP1) to address non-cystic fibrosis bronchiectasis, providing a new mechanism of action that significantly improves patient outcomes [3][20] - Eight drugs received breakthrough therapy designation, reflecting their innovative mechanisms and potential for substantial clinical improvement [5] Small Molecule Innovations - Small molecules accounted for 66% of new drug approvals, maintaining their central role in drug development while shifting towards precision approaches [6][10] - Aficamten (Myqorzo) exemplifies this trend as a selective allosteric modulator for obstructive hypertrophic cardiomyopathy, demonstrating improved safety and efficacy [7] - Covalent drugs, such as Zegfrovy (sunvozertinib), show promise in overcoming resistance issues by forming stable bonds with targets, enhancing therapeutic effectiveness [8] Peptide and Nucleic Acid Therapies - Peptide and nucleic acid therapies are emerging as significant players, with multiple innovative drugs approved in 2025, marking a shift towards RNA-targeted treatments [10][11] - Qfitlia (fitusiran) offers a revolutionary preventive solution for hemophilia by significantly reducing annual bleeding rates [10][12] - Dawnzera (donidalorsen) provides a long-acting preventive treatment for hereditary angioedema, demonstrating substantial reductions in attack frequency [11] Antibody-Drug Conjugates (ADCs) - ADCs are evolving beyond cancer treatment, with Datroway (datopotamab deruxtecan) showcasing innovative mechanisms and expanding indications [14][15] - Datroway's "bystander effect" allows it to target heterogeneous tumor populations effectively, improving treatment outcomes in breast cancer and non-small cell lung cancer [15][16] Future Directions - The landscape of drug development is shifting towards a broader understanding of drug value, emphasizing patient outcomes and treatment paradigms over traditional sales metrics [19][23] - The integration of advanced technologies like AI and gene editing into drug development processes is expected to yield therapies that fundamentally alter disease progression [24]

Core Viewpoint - The pharmaceutical industry, particularly biotech companies, is expected to experience a significant market upturn from late 2024 to mid-2025, supported by global market growth and strong performance in the Chinese pharmaceutical market [1][3]. Market Trends - The rapid growth of BD (business development) activities, the reopening of the Sci-Tech Innovation Board, and the performance of Hong Kong's secondary market indicate that the industry is entering a valuation recovery phase [1]. - Despite some biotech companies experiencing substantial stock price increases, many investors have not yet recouped their costs due to the timing of investments [1][2]. Investment Landscape - High-quality companies that address clinical needs are more likely to survive market downturns, while many biotech firms have failed to navigate the recent market challenges [2]. - The current secondary market appears prosperous, but from the perspective of primary market entrepreneurs, it is still in a winter phase [2]. Challenges and Opportunities - The difficulty of listing biotech companies in both China and the U.S. has led to diversified financing channels, with investors focusing on asset quality and clinical research data [3]. - The demand for high-quality, cost-effective products is increasing due to global aging populations and limited healthcare funding [4]. Global Positioning - Chinese innovators have significantly narrowed the development gap with the U.S., with a reported 38% year-on-year increase in overseas licensing deals, totaling $60.8 billion in the first half of 2025 [5][6]. - The shift from generic to original drug development in China is expected to have a profound impact on the global pharmaceutical market [6]. R&D Efficiency - China leads globally in R&D efficiency from "1 to 10," while the U.S. remains dominant in "0 to 1" development [6]. - The ability to produce unique products, particularly in ADC (antibody-drug conjugates), is attributed to China's strong engineering capabilities [9]. Future Growth Areas - The most promising research areas for capital investment are in immunology and metabolic/cardiovascular fields [7]. - The market is witnessing a divide, with leading companies leveraging innovation and digital empowerment, while smaller firms face greater pressure due to homogenized competition [6][10]. Strategic Directions - Companies are encouraged to explore new financing models, such as RWA (Real World Asset) tokenization, to better access markets [11]. - The focus on license-out opportunities and the promotion of inclusive healthcare are critical strategies for pharmaceutical companies [12].

Group 1 - The focus of US funds on Chinese innovative drugs has not diminished, but the approach has shifted to overseas asset placement to reduce compliance risks and enhance capital efficiency [1][5] - The recent surge in Hong Kong's 18A projects is driven by high-frequency BD collaborations, NewCo models, and mergers and acquisitions, fundamentally changing the underlying logic of the innovative drug sector [1][3] - In 2024, the number of innovative drugs under development in China is projected to reach 3,575, surpassing the United States and establishing China as a global leader in this area [3] Group 2 - The NewCo model has gained traction, particularly in oncology and autoimmune disease treatment, allowing Chinese companies to collaborate with US funds to establish new entities for global development [2][4] - The BD and NewCo strategies are key drivers of the innovative drug market, with significant overseas licensing deals becoming commonplace, exceeding $1 billion [3][4] - The NewCo model allows Chinese pharmaceutical companies to retain equity while receiving upfront payments, milestones, and revenue sharing, thus mitigating direct investment risks for US funds [4][5] Group 3 - The investment landscape for US funds in China is evolving, with a focus on incubating NewCo and injecting assets into these entities to avoid direct investment risks associated with Chinese companies [5][6] - Despite a decrease in direct investments by US funds in Chinese biotech, the understanding of the market has deepened, leading to a strategic shift towards acquiring Chinese assets and forming US-based companies [6][7] - The trend of Chinese innovative drugs going global is accelerating, with an emphasis on having clear "going out" strategies to attract international partnerships and acquisitions [8][9] Group 4 - The current focus of capital is on large products and indications, particularly in oncology and autoimmune diseases, with a notable trend towards metabolic drugs driven by successful GLP-1 products from multinational companies [9][10] - The innovative drug market in China is increasingly recognized for its potential to be acquired by global pharmaceutical companies, moving away from a reliance on domestic sales and channels [8][9]