*FX168 Financial News (Asia-Pacific) –* After four years of sluggish performance, China’s biotech stocks have emerged as one of Asia’s hottest investment themes this year, with funds betting on further upside.
The Hang Seng Biotech Index has surged more than 60% since January, fueled by investor enthusiasm over two multi-billion-dollar drug licensing deals involving foreign firms and Chinese-developed therapies. The highly anticipated listings of two domestic biotech firms have further boosted the sector’s appeal.
“China’s biotech industry is no longer just an emerging story—unlike a decade ago, it has now become a disruptive force reshaping global drug innovation,” said Yiqi Liu, senior investment analyst at Exome Asset Management in New York. “The science is solid, the economics are compelling, and the drug pipelines are starting to deliver.”
The surge in publicly listed Chinese biotech firms underscores the country’s growing role as a hub for global innovation. This year’s rally has even outpaced the 17% gain in Chinese tech stocks, which was partly driven by breakthroughs in DeepSeek’s AI applications.
Key Drivers of the Rally
A major catalyst for the biotech boom was two blockbuster licensing deals. On May 19, Pfizer announced it would pay a record $1.25 billion to license an experimental cancer drug from China’s 3SBio, along with a $100 million equity investment in the company. Just two weeks later, Bristol Myers Squibb agreed to pay up to $11.5 billion for rights to a cancer therapy developed by Germany’s BioNTech—which had previously licensed the drug to China’s Biotheus in 2023.
Some biotech stocks have seen even more explosive gains. 3SBio’s shares skyrocketed 283%, far outpacing global biotech benchmarks. RemeGen, an antibody drug developer, surged over 270% after revealing it had been approached by multinational pharma firms for potential licensing deals.
The “DeepSeek Moment” for Biotech
China’s increasing influence in global pharma M&A and licensing has also drawn investor attention. In Q1 alone, the value of such deals involving Chinese firms doubled to $36.9 billion, accounting for more than half of the global total of $67.5 billion.
“Chinese biotech companies are now experiencing their ‘DeepSeek moment,’” said Dong Chen, chief Asia strategist at Julius Baer Wealth Management. “There’s still room for further upside.”
Investor appetite is also reflected in recent IPOs. Duality Biotherapeutics, a cancer-focused biotech, saw its shares double on its Hong Kong debut on April 15. Jiangsu Hengrui Pharmaceuticals, China’s largest drugmaker, jumped 25% in its May 23 IPO despite pricing at the top of its range. Since listing, Duality has surged 189%, while Hengrui is up 31%.
Caution Amid the Optimism
However, some analysts warn the rally may have gone too far.
“Short sellers, particularly healthcare specialists, are looking to take profits at this stage, while some investors prefer lagging healthcare stocks with stable dividends and steady earnings growth,” wrote Bank of America analysts, including Ethan Cui, in a recent note.
Some investors also argue that the recent licensing deals may be one-off events, making it premature to assign higher valuation multiples to these firms.
Talent Influx Boosts R&D
Despite U.S.-China trade tensions creating headwinds for many mainland companies, Nicholas Chui, China equity portfolio manager at Franklin Templeton, notes that this has also led to a “reverse brain drain,” with more talent returning to China and strengthening its R&D capabilities.
Jefferies remains optimistic, arguing that U.S. tariff hikes won’t hinder Chinese biotech firms.
“Many Chinese biotech companies already have established partnerships with U.S. firms, making them service providers rather than product exporters,” said Cui Cui, head of Asia healthcare research at Jefferies in New York.
The sector’s momentum suggests China’s biotech revolution is just beginning—and investors are taking notice.