China Biotech & Pharma 2025

Profitability Inflection and Innovation Transformation Driving Sector Leadership

Good Afternoon,

When we set out to analyse China’s healthcare transformation, the plan was simple: two comprehensive articles to cover it all. That turned out to be wildly optimistic. The sector’s evolution is simply too rich, too fragmented, and too strategically important for broad brushstrokes.

This is Part 4 of what has now become an expanded series. Previously in this series, published last week:

1. Policy-Driven Transformation: A macro and regulatory overview of key reforms, demographics, and system design, outlining sector winners and losers without delving into valuations.

2. Innovation & Global Competition: Biotech pipelines, cross-border licensing, AI integration, and China’s push into global medtech and health exports.

3. Medical Devices Deep Dive: Mindray, United Imaging, SNIBE, and the rise of China’s equipment manufacturers from import substitution to global technology contenders.

Today, we continue with Biotech & Traditional Pharma, analysing companies at the forefront of China’s innovation pivot – from biotech champions like Innovent, BeiGene, and Akeso approaching profitability inflection points, to traditional pharma giants such as Hansoh, CSPC, and Hengrui, which are successfully transforming their business models for an innovation-driven future.

In upcoming articles, we will cover:

• Digital Platforms & Services: JD Health, Alibaba Health, Ping An Good Doctor, Hygeia Healthcare, Jinxin Fertility

• CRO/CDMO & Vaccines: WuXi AppTec, WuXi Biologics, Asymchem, Pharmaron, Tigermed, Kangtai, CanSino, Walvax

This piece unpacks how Chinese biotech is moving from R&D-heavy pipelines to commercial profitability, and how traditional pharmaceutical leaders are reinventing themselves to remain relevant in an era of pricing reform, innovation competition, and globalisation.

As usual, the bulk of this analysis is paywalled. If you find value in these deep dives and want to follow the full healthcare series, please do consider joining up.

Portfolio Review will be published this week, most likely at the very end of it. Another feature for the premium subscribes.

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Nothing in this Substack is Investment Advice. This information is provided for informational purposes only and does not constitute financial, investment, or other advice. Any examples used are for illustrative purposes only and do not reflect actual recommendations. Please consult a licensed financial advisor or conduct your own research before making any investment decisions. The authors, publishers, and affiliates of this content do not guarantee the accuracy, completeness, or suitability of the information and are not responsible for any losses, damages, or actions taken based on this information. Past performance is not indicative of future results.

The Chinese biotech and pharmaceutical sector stands at a transformational inflection point, with innovative companies approaching profitability while traditional players successfully navigate innovation transformation. This transformation is accelerated by regulatory reforms supporting innovation through expedited approval pathways and global expansion validation as Chinese companies achieve international partnership success, creating a unique convergence of domestic policy support and international market validation. Market performance in 2025 validates this thesis, with biotech leaders delivering exceptional returns—RemeGen surging 283.68% year-to-date, Innovent Biologics gaining 116.67%, and Akeso advancing 149.80% over one year. Traditional pharmaceutical companies are simultaneously demonstrating their transformation success, with Hansoh Pharma rising 75.84% year-to-date and achieving ~66% innovative drug exposure.

This performance divergence reflects fundamental business model differences that create distinct investment opportunities. Biotech companies offer innovation-driven growth with approaching EBITDA profitability from 2025 onwards, while traditional pharma provides stability with transformation upside through successful R&D programs and VBP adaptation. The sector's 22.86% average EBITDA margin demonstrates the profitability potential as companies transition from pure R&D investment to commercial success.

Investment Thesis: The Profitability Inflection Creates Premium Opportunities

Leading biotech companies are transitioning from pure R&D investment phase to revenue generation and profitability, creating a unique investment opportunity where premium valuations can be sustained through superior growth, operating leverage, and pipeline optionality. Traditional pharmaceutical companies offer complementary exposure through innovation transformation success and operational efficiency gains from VBP adaptation.

Key Investment Themes:

• Biotech Leaders

• Transformation Winners

• Value Opportunities

Do scroll all the way to the bottom for the Panda Take, with a short summary of the entire piece.

Innovative Biotech: Leading the Global Innovation Wave

The innovative biotech segment represents China's most dynamic healthcare investment opportunity, with companies achieving genuine breakthrough innovations that compete globally while addressing significant unmet medical needs. This segment has demonstrated exceptional market performance, with leading companies delivering triple-digit returns as investors recognize the approaching profitability inflection point.