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①The capital ecosystem in the pharmaceutical industry is undergoing a profound shift, with BD financing surpassing the primary market to become a core source of cash flow for many innovative drug companies;
②While China’s innovative drugs are strong in outbound BD and global partnering, the domestic market still lags significantly—per capita spending on innovative drugs is only 1/124 of that in the United States;
③To break the deadlock, experts recommend using commercial health insurance as a breakthrough to build a diversified payment system, while strengthening policy support and improving market inclusiveness.

Cailian Press, Dec 2 (Reporter Wu Chao) As Eli Lilly’s market capitalization recently surpassed the USD 1 trillion milestone—becoming the first company in the global biopharmaceutical industry to enter the “trillion-dollar club”—many leading figures in China’s pharmaceutical sector have been asking a question: When will China produce its own “Eli Lilly”?

At the 2025 China Pharmaceutical City Big Health Industry Forum—hosted by the Taizhou Municipal People’s Government and organized by Tongxieyi—as well as the 16th Taizhou Pharmaceutical Expo, experts presented a set of thought-provoking figures: China’s innovative drug market is roughly 3% the size of the United States, and per capita spending on innovative drugs is only one one-hundred-and-twenty-fourth of that in the U.S.

Meanwhile, another picture is emerging: China’s outbound transactions for innovative drugs now account for nearly half of global deals, and the number of clinical trials for innovative drugs has even surpassed that of the United States.

Together, these trends underscore the reality that China’s pharmaceutical industry stands at a crossroads. China’s innovation capacity has begun to reshape the global landscape and has attracted increasing attention and favor from global capital and industry; however, industrial development and domestic market potential remain mismatched, and ample market headroom is the foundation for capital-market valuation.

Breaking Through the Market: Dual Momentum from Payment Innovation and Global Expansion

At present, the combined market capitalization of China’s top 10 pharmaceutical companies is RMB 1.87 trillion—only 27% of Eli Lilly’s market cap. Compared with leading firms in other domestic industries, Hengrui Medicine, founded in 1970, reported revenue last year that was only about 3% of Huawei and BYD, which were founded roughly 20 years later.

“Innovative drugs account for 81.8% of the market in the United States, 57% in Japan, but only 8.6% in China. In terms of per capita spending on innovative drugs, the U.S. is 124.9 times China, and Japan is 24.4 times China,” said Song Ruilin, Senior President and Chief Expert of the China Association for the Promotion of Medical Innovation. He noted that this enormous market gap directly results in innovative drug prices in China being only about 10% of those in the U.S., making it difficult for companies to generate sufficient profits to sustain growth—one of the key reasons China has struggled to produce a trillion-market-cap pharmaceutical company.

Addressing domestic payment constraints and building a multi-tiered payment system has become a broad industry consensus. Song Ruilin proposed a concrete solution: “Reasonable returns on innovation are the prerequisite for market development. We are not asking for excessive burdens on the basic medical insurance system; rather, we should use commercial health insurance as a breakthrough to build a diversified payment system.”

He suggested that innovative drugs could first be included under medical insurance by referencing the payment standards of comparable indications already covered in the reimbursement catalog, enabling a direct linkage between NMPA approval and the reimbursement list; after two years, they would be re-evaluated based on real-world clinical evidence—if superior, the payment standard would be raised; if equivalent, it would remain unchanged; and if inferior, the drug would be removed from the reimbursement list. “Once cash flow improves for innovative drug companies, it will spur employment, tax revenues, and capital return, forming a virtuous economic cycle of ‘innovation—returns—re-innovation.’ This is the key to high-quality development of China’s pharmaceutical innovation,” he said.

Against the backdrop of tighter medical-insurance spending controls and the normalization of volume-based procurement, commercialization capability has become a core competency for the survival and development of innovative drug companies. Wang Ruwei, Special Assistant to the Chairman of Yangzijiang Pharmaceutical Group, candidly stated during a roundtable discussion: “The current market environment is not optimistic. Homogeneous competition is intense, and in some tracks we even see an ‘involution’ situation where there are no mature products globally, yet more than 100 companies in China are already running clinical trials.”

He added that Yangzijiang Pharmaceutical is seeking breakthroughs through a strategy of “optimizing the existing base and expanding incremental growth”: “We are shifting our marketing model from traditional channel recruitment toward compliant, academically driven promotion, focusing on unmet clinical needs. At the same time, we are accelerating our innovation transformation, with more than 30 innovative drug pipelines in place. In the first half of this year, one Class 1 new drug was approved, and more new products will continue to land in the coming years.”

The localization practices of multinational companies also provide useful references for Chinese firms. Wang Lili, Assistant Vice President of AstraZeneca China, shared: “AstraZeneca entered China in 1993 and built a plant in Taizhou in 2014. Today, Taizhou has become our global supply base for metabolic products. Our products not only serve the China market but are also exported to Europe, Australia, and other regions.” She disclosed that AstraZeneca currently has nine products in the “three highs and three slows” fields, but plans to have at least 18 related products launched by 2034. “We are working with the government and medical institutions to build a one-stop chronic disease management platform, integrating diagnosis and treatment, data, and payment resources, and creating a full-cycle service system from prevention to treatment. This both fits China’s healthcare needs and opens new paths for product commercialization.”

Global expansion has become an inevitable choice for Chinese biopharmaceutical companies to break through domestic market constraints and lift valuations. Wang Junfeng, Co-Chief Investment Officer and Managing Director of Legend Capital, stated: “China’s wave of global partnering and expansion in pharma innovation is showing vigorous development across multiple layers and pathways. In the first half of this year, outbound BD for China’s innovative drugs contributed nearly half of global deal volume.” He emphasized, however, that going global is not simply about product transactions: “Major pharma companies must systematically build global capabilities in the process. Rapidly filling gaps through partnerships, participating in global development, and accumulating experience are the more critical tasks at this stage.”

Xie Xin, Executive Director and Senior Vice President of Sino Biopharmaceutical, clarified the company’s global ambitions: “Our goal is to build a multinational pharma company rooted in China. Over the next five years, we hope to have products approved in the United States and achieve USD 1 billion in annual sales.” He highlighted China’s distinctive advantages: “Our R&D costs are only half of those in the United States, while our R&D speed is double. Coupled with the sense of responsibility and diligence shaped by Confucian culture, Chinese teams are capable of standing out in global competition.”

Beyond mature markets in Europe and the United States, emerging markets such as Southeast Asia have become important breakthrough points for Chinese companies going global. Wang Junfeng noted: “We began strategically deploying in Southeast Asia in 2018, believing it resembles China 15 years ago, with tremendous demographic dividends and market potential.” He explained with an example: “In Indonesia, companies we invested in have already helped products from BeiGene, Junshi Biosciences and other Chinese firms to land locally—whether through bulk drug exports or local commercialization, we have seen positive progress. With 280 million people and strong healthcare demand, Indonesia may become a major overseas market for China’s innovative drugs in the future.”

Capital Restructuring: Ecosystem Evolution from Equity Reliance to BD-Driven Growth

Breakthroughs in technological innovation and the expansion of market布局 depend on efficient capital coordination. China’s biopharmaceutical capital ecosystem is evolving from a single model that relied primarily on equity financing to a diversified ecosystem driven by BD and coordinated across multiple channels, providing sustained momentum for industrial development.

The rise of BD transactions has become a key marker of this shift. “In 2024, the total value of China’s outbound biopharma licensing is expected to exceed USD 100 billion, with upfront payments already surpassing USD 6 billion. More importantly, BD financing has overtaken the primary market and has become the core source of cash flow for many innovative companies,” Wang Junfeng explained further. This shift is reshaping companies’ growth logic: “In the past, companies relied mainly on equity financing. Now, the hard cash generated through BD deals is largely reinvested into R&D, forming a virtuous cycle of ‘R&D—translation—licensing—re-R&D.’ This model not only reduces reliance on equity financing, but also improves the sustainability of R&D.”

Xie Xin, Executive Director of Sino Biopharmaceutical, shared a similar experience: “We have obtained considerable upfront payments through out-licensing. Recently, the acquired company Laixin Pharma just received USD 300 million, and most of these funds were used for R&D. BD income has become an important supplement to our R&D funding, supporting the continuous advancement of our innovative pipeline.”

Hong Kong’s capital market plays an indispensable role in this ecosystem. Yu Changhai, Chairman of the Hong Kong Biotechnology Association, said: “Hong Kong’s Chapter 18A listing regime is an innovation. It has already become Asia’s No. 1 and the world’s No. 2 listing destination for pre-revenue biotech companies. In 2024, Hong Kong’s biopharmaceutical sector rebounded first and became one of the best-performing biopharmaceutical capital markets globally.”

He emphasized that Hong Kong’s value goes beyond financing: “Hong Kong is becoming a cross-border collaborative platform for ‘R&D–financing–translation.’ More and more companies are choosing Hong Kong as a pivot to conduct global fundraising and BD transactions, forming a cross-border innovation ecosystem of ‘Hong Kong financing, mainland R&D, and global translation.’”

Capital’s investment logic is also shifting from “track chasing” to “deep value cultivation.” Cao Yibo, Managing Director of Sequoia China, said: “After the market adjustments of the past few years, capital markets have become more rational in biopharma investing. Differentiation, platformization, and internationalization have become core investment criteria. We adhere to an investment principle of ‘either the first, or the only,’ focusing on scarce innovative assets.”

He further analyzed the core competitiveness of Chinese companies: “China’s R&D costs are only half of those in the United States, while R&D speed is double. Together with indirect cost advantages such as management and facilities, the total cost of Chinese innovative pipelines may be 1/4 to 1/6 of that in the U.S. As overseas companies gradually shed their biases against China’s R&D and clinical data, the global attractiveness of China’s innovative assets will continue to rise.”

Notably, new financing models are injecting fresh vitality into the industry. In a thematic exchange on the digital revolution of RWA and healthcare financing, experts pointed out that RWA tokenization provides a breakthrough pathway for funding pharmaceutical R&D: “By using blockchain technology to convert real-world assets such as future revenue rights of R&D pipelines and medical data into tradable digital tokens, the logic shifts from ‘selling equity’ to ‘selling expectations.’” This model can effectively unlock idle assets, enabling global capital to participate directly in early-stage innovation and share returns. Experts also stressed that, to ensure implementation, compliant infrastructure such as a “regulatory sandbox–stablecoin–exchange” framework must be established, while addressing critical challenges including on-chain data authenticity, cross-border regulatory coordination, and system security.

Policy support is further improving the capital ecosystem. Song Ruilin called for: “We call for a Huawei or BYD in pharmaceuticals, but that requires policy support and market inclusiveness. We need to improve the patent term extension/compensation system to prevent the patent cliff from arriving prematurely. China has already established a patent term compensation mechanism through reforms of the drug review and approval system, which, in theory, can provide up to 14 years of post-launch patent protection. However, due to the pressure of a single payment system, prices of many innovative drugs fall rapidly after launch, bringing the patent cliff forward by at least 10 years. This severely undermines companies’ incentives to innovate and weakens investors’ confidence.”

He also suggested: “A dedicated registration classification for natural products should be established. China has unique advantages in natural products, but the current classification system makes it difficult for such innovation to obtain reasonable pricing and market recognition, constraining industry development.”

As China advances from a “major pharmaceutical country” to a “pharmaceutical powerhouse,” Wang Junfeng expressed confidence in the future: “After ten years of development, China’s innovative drugs have moved from quantitative change to qualitative change. Driven by efficiency, talent, infrastructure, and market potential, China will play a more important role globally over the next decade. We look forward to accompanying more Chinese innovative drug companies to secure a place in the global arena of innovative medicines and to write a value story that belongs to China’s biopharmaceutical industry.”