In-Depth Analysis of Innovation Capabilities and Investment Potential in China's Biopharmaceutical Industry

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Morgan Stanley’s Chief China Economist Xing Ziqiang’s prediction that “over one-third of new drugs approved by the FDA will come from China by 2040”[1] is quite achievable based on the current industry development trajectory and structural advantages. China’s innovative drugs are in a critical window of transition from “followers” to “runners-up” and even “leaders”, with phased breakthroughs expected around 2030.

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According to data from the National Medical Products Administration (NMPA), China approved

for marketing in 2025, a significant increase from 48 in 2024, hitting a record high. Among them, domestic innovative drugs accounted for 80.85% of approved chemical drugs and 91.30% of approved biological products[2]. This data marks that China has surpassed the United States (the FDA approved 46 new drugs in 2025)[2].

Indicator	FDA 2025	NMPA 2025	Change in China’s Share
Number of Approved New Drugs	46	76	91% domestic
FDA-Approved Chinese Innovative Drugs	2	-	~5%[1]
Total BD Transaction Value	-	USD 135.655 Billion[3]	Record High

Morgan Stanley’s forecast[1] shows:

• 2025
  : Chinese innovative drugs account for approximately 5% of FDA approvals
• 2030
  : Target share of approximately 12%
• 2035
  : Target share of approximately 22%
• 2040
  : Target share of
  over one-third (35%)

1. Industrial Cluster Advantages
   : China has the world’s most complete pharmaceutical manufacturing industry chain, with full-chain capabilities from APIs to biological products
2. STEM Talent Dividend
   : China trains the largest number of STEM talents globally each year, supporting sustained innovation capabilities
3. Oversized Market Scale
   : Clinical trial scale and cost advantages brought by a 1.4 billion population
4. Full-Chain Policy Support
   : Policies such as the “Implementation Plan for Full-Chain Support for Innovative Drug Development” are continuously being implemented[1]

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According to research data from GF Securities, Chinese companies lead the world in the number of investigational new drugs in multiple emerging technology fields[4]:

Sub-Segment	Global Share	Technology Maturity	Investment Rating	Core Logic
ADC Drugs	54%[4]	Early Commercialization	⭐⭐⭐⭐⭐	Dense breakthroughs in targets such as HER2 and Trop2, led by Kelun Biotech and DualityBio
CAR-T Cell Therapy	48%[4]	Early Commercialization	⭐⭐⭐⭐	Legend Biotech’s Cilta-cel recorded USD 1.3 billion in sales in the first three quarters[5]
Bispecific Antibodies	46%[4]	Early Commercialization	⭐⭐⭐⭐⭐	Summit licensed Akeso’s AK112 with a USD 500 million upfront payment[6]
PROTAC	45%[4]	Clinical Phase	⭐⭐⭐⭐	Leading protein degradation technology platform
Polypeptide Drugs	High Potential	Explosive Growth Phase	⭐⭐⭐⭐⭐	Tirzepatide recorded USD 24.8 billion in sales in the first three quarters of 2025[4]

• Market Space
  : The global ADC market is expected to exceed USD 30 billion by 2028
• Breakthrough Milestone
  : The HER2 ADC (BNT323) co-developed by DualityBio and BioNTech is expected to submit a BLA in 2026, and is poised to become the
  first domestically-developed ADC approved by the FDA
  [6]
• Transaction Activity
  : ADC-related BD transactions accounted for over 60% of total transactions in 2025[4]
• Core Targets
  : Kelun Biotech, DualityBio, Hengrui Medicine, Lepu Biologics

• Technology Advantage
  : PD-1/VEGF bispecific antibody (Akeso’s AK112) leads globally in development progress
• Commercialization Breakthrough
  : Akeso reached a collaboration with Summit Therapeutics with a USD 500 million upfront payment[6]
• Catalytic Event
  : Global Phase III data of AK112 will be released in 2026; if approved, it will capture an over USD 10 billion market
• Core Targets
  : Akeso, Rongchang Biologics, Betta Pharmaceuticals

• Sales Performance
  : Cilta-cel, co-developed by Legend Biotech and Johnson & Johnson, recorded
  USD 1.332 billion
  in sales in the first three quarters of 2025[7]
• Technology Breakthrough
  : Aimaituosai from Bosheng Zhuoyue became China’s first approved mesenchymal stem cell therapy[8]
• Core Targets
  : Legend Biotech (subsidiary of Genscript), Fosun Pharma

• End-Market Performance
  : Tirzepatide (Mounjaro/Zepbound) recorded global sales of
  USD 24.837 billion
  in the first three quarters of 2025, representing a 125% year-over-year increase[4]
• Industry Chain Dividend
  : WuXi AppTec’s TIDES business recorded RMB 7.84 billion in revenue in the first three quarters, with a 121.1% year-over-year growth[4]
• Core Targets
  : WuXi AppTec (global leader in polypeptide CDMO), United Laboratories, Borui Pharmaceuticals

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Enterprise	Innovative Drug Revenue (2024)	Core Products	Globalization Progress	Investment Rating
Hengrui Medicine	RMB 13.892 Billion[6]	Camrelizumab, Apatinib	Reached a USD 12 billion collaboration with GSK[5]	⭐⭐⭐⭐⭐
BeiGene	~RMB 25 Billion (Zanubrutinib)[9]	Zanubrutinib, Tislelizumab	No. 1 market share for BTK inhibitors in the US	⭐⭐⭐⭐⭐
Innovent Biologics	~RMB 8 Billion	Mazdutide, PD-1	Reached a USD 11.4 billion strategic collaboration with Takeda[3]	⭐⭐⭐⭐
Akeso	Rapid Volume Growth Phase	AK112, AK104	USD 500 million upfront payment collaboration with Summit	⭐⭐⭐⭐⭐

ADC Track: Kelun Biotech (Trop2 ADC granted FDA Priority Review)[6]
            DualityBio (expected to be the first to file an ADC with the FDA)

Cell Therapy Track: Legend Biotech (Cilta-cel sales of USD 1.3 billion)
                    Xinnian Medicine (hemophilia gene therapy approved)

Bispecific Antibody Track: Akeso (leader in PD-1/VEGF bispecific antibodies)
                           Betta Pharmaceuticals (EGFR/HER3 bispecific antibody ADC)

Polypeptide Track: WuXi AppTec (global No. 1 in polypeptide CDMO)
                   Shengyin Biotech (nucleic acid platform secured collaboration with Eli Lilly)

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• Hengrui Medicine: Innovative drug revenue accounts for over 50% of total revenue; ranked first in NDA approvals in China for 3 consecutive years[10]
• BeiGene: Zanubrutinib’s annual sales are expected to exceed USD 3.6 billion; free cash flow turned positive[6]

• Kelun Biotech: Plans to submit a BLA for its Trop2 ADC in 2026; data from first-line lung/gastric cancer trials to be released[6]
• Akeso: Phase III data of AK112 to be released in 2026; potential first-in-class blockbuster

• WuXi AppTec: TIDES business grew 121%; sustained strong demand for polypeptide/CDMO services[4]
• WuXi XDC: Global leader in ADC CDMO; benefits from the ADC boom

Risk Type	Specific Performance	Response Strategy
R&D Risk	Clinical failure rate of approximately 90%; multiple companies plummeted in 2024 due to underwhelming data[6]	Focus on late-stage clinical pipelines; diversify holdings
Geopolitical Risk	Biosafety legislation, supply chain disruptions for CXOs	Focus on companies with core technologies and platforms
Valuation Risk	PS ratios of some unprofitable companies deviate from reasonable ranges	Prioritize companies with cash flow validation
Policy Risk	Price cuts in medical insurance negotiations, slower-than-expected commercial insurance rollout	Focus on companies with globalization capabilities

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1. Feasibility of 2040 Target
   : Based on the current development trajectory and structural advantages, Morgan Stanley’s target of 35% share
   has a foundation for realization
   , but the following key milestones need to be monitored:
   • 2026-2027: First domestically-developed ADC approved by the FDA
   • 2030: Phased target of 12% market share
   • 2035: Full maturity of technology platforms

2. Implications of the “DeepSeek Moment”
   : The “DeepSeek Moment in the Pharmaceutical Industry” mentioned by Xing Ziqiang[1] refers to the qualitative transformation of Chinese innovative drugs from technology following to value leadership, similar to DeepSeek’s breakthrough impact in the AI field.

Risk Preference	Allocation Recommendation
Conservative	Hengrui Medicine, BeiGene + WuXi AppTec (diversify risks with innovative drug ETFs such as 515120)
Aggressive	Kelun Biotech, Akeso, Legend Biotech (high-elasticity sub-segment leaders)
Long-Term	Shengyin Biotech, Bowang Pharma (nucleic acid platforms, validated by Novartis/Eli Lilly)

Chinese innovative drugs are in a critical period of transformation from “quantitative accumulation” to “qualitative leap”. For investors with a long-term perspective, the current period is a strategic window for deploying high-quality innovative drug assets.

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[1] China Pharmaceutical News - “From "Capital Return" to "Capacity Feedback": Chinese Innovative Drug Globalization Activates a Positive Cycle of Industrial Upgrading” (https://m.cnpharm.com/c/2026-01-04/1087804.shtml)
[2] Eastmoney - “A Strong Start! Can Chinese Innovative Drugs Capture a Share of the USD 300 Billion Patent Cliff Pie?” (https://caifuhao.eastmoney.com/news/20260106180649913854290)
[3] Pharmcube - 2025 Statistical Data on Chinese Innovative Drug BD Transactions
[4] GF Securities - “2026 Annual Strategy for the Innovative Drug Industry Chain” (https://finance.sina.com.cn/roll/2025-12-30/doc-inhewuuv4726413.shtml)
[5] DrugTimes - “USD 5.6 Billion! Rongchang Biosciences’ PD-1/VEGF Bispecific antibody Goes Global” (https://www.drugtimes.cn/2026/01/13/56yimeiyuanrongchangshengwupd1vegfshuangkangchuhai/)
[6] Caifuhao - “Focus on the Pharmaceutical Market: Which Innovative Drugs are Quietly Raking in Profits?” (https://caifuhao.eastmoney.com/news/20260111120636536479600)
[7] China Pharmaceutical News - “Cilta-cel’s Global Sales Reach USD 1.332 Billion in the First Three Quarters”
[8] Financial New Media - “2025 Biopharmaceuticals: Let True Innovation Receive Deserved Rewards” (https://finance.sina.com.cn/stock/relnews/hk/2026-01-05/doc-inhffwpp2202348.shtml)
[9] WuXi STA - “2025 Review” Report (https://view.inews.qq.com/a/20251216A01KMB00)
[10] Soochow Securities - “Pharmaceutical and Biotech Industry Tracking Weekly Report” (http://m.hibor.net/wap_detail.aspx?id=b22a631bfcea825cc7d9725b41e9d077)