Key Points
- The National Medical Products Administration (国家药品监督管理局) is optimizing clinical trials, aiming for review and approval within 30 working days for innovative drugs focused on clinical value.
- Recent positive catalysts include CSPC Pharmaceutical Group (石药集团)‘s potential $5.22 billion USD collaboration with AstraZeneca and measures from the State Council Executive Meeting to optimize centralized procurement and support pharmaceutical innovation.
- Chinese pharmaceutical companies are increasingly pursuing a “go global” strategy through out-licensing (BD deals), tapping into international markets and leveraging technology like AI in drug discovery.
- The ADA Conference (June 20-23) is expected to highlight advancements in GLP-1RAs and other metabolic disease treatments, potentially providing further catalysts for relevant stocks.
- Analysts like China Post Securities (中邮证券) remain strongly bullish on the innovative drug market for the next 2-3 years, citing the “Going Global” trend and increasing funding allocation as key drivers.
The innovative drug development landscape in China is buzzing, and it just got another significant shot in the arm.
This is big news for anyone watching the pharmaceutical industry.
Just after the market closed, the National Medical Products Administration (Guójiā Yàopǐn Jiāndū Guǎnlǐjú 国家药品监督管理局) dropped some exciting news.
They released the “Announcement on Optimizing Matters Related to the Review and Approval of Innovative Drug Clinical Trials (Draft for Comment).”
What’s the core takeaway?
To supercharge the development of innovative drugs focused on clinical value and boost the efficiency and quality of clinical research.
Here’s the kicker: applications for innovative drug clinical trials that meet the requirements will now aim for review and approval completion within 30 working days.
This new 30-day review and approval channel is designed to:
- Support nationally focused research and development projects.
- Encourage global early synchronous development.
- Facilitate international multi-center clinical trials.
- Address urgent clinical needs.
- Boost the development of the national pharmaceutical industry.
This is a clear signal of support for faster innovation in Chinese pharma.
Positive Catalysts Pile Up for Pharma Stocks
Lately, it feels like a continuous stream of good news for pharmaceutical stocks.
For instance, CSPC Pharmaceutical Group (Shíyào Jítuán 石药集团) recently announced a landmark strategic R&D collaboration with AstraZeneca.
This deal includes a hefty $110 million USD ($110,000,000 USD) upfront payment for CSPC.
And, get this, it could potentially reach up to $5.22 billion USD ($5,220,000,000 USD) in milestone payments, covering both R&D and sales.
That’s a massive vote of confidence!
Just last Friday, the State Council Executive Meeting also piled on the good vibes.
They discussed measures to optimize centralized drug and medical supply procurement.
According to CCTV News, the meeting highlighted several key points:
- Strengthening the evaluation of centralized procurement policies.
- Learning from experience and addressing shortcomings.
- Promoting standardized, systematic, and regular procurement work.
- Emphasizing better coordinated development and governance of the “three medicals” (healthcare, medical insurance, pharmaceuticals).
- Improving public hospital compensation mechanisms.
- Supporting pharmaceutical companies in enhancing their innovation capabilities.
- Better meeting diverse medical treatment and medication needs.
- Strengthening quality supervision across the entire chain: production, distribution, and use of drugs and medical supplies.
- Solidly advancing the quality and efficacy consistency evaluation of generic drugs.
- Ensuring the public can use medicines safely and confidently.
- Strengthening evaluation of centralized procurement policies.
- Learning from experience and addressing shortcomings.
- Promoting standardized, systematic, and regular procurement work.
- Emphasizing better coordinated development and governance of the “three medicals” (healthcare, medical insurance, pharmaceuticals).
- Improving public hospital compensation mechanisms.
- Supporting pharmaceutical companies in enhancing innovation capabilities.
- Better meeting diverse medical treatment and medication needs.
- Strengthening quality supervision across the entire chain.
- Solidly advancing generic drug quality and efficacy consistency evaluation.
- Ensuring safe and confident use of medicines by the public.
Southwest Securities (Xīnán Zhèngquàn 西南证券) chimed in on this too.
They noted that recent trends in centralized drug and medical supply procurement point towards:
- Gradually more reasonable and moderate price reductions.
- Continuous expansion of coverage.
- Stricter quality supervision.
They suggest keeping an eye on the launch of the 11th batch of national drug procurement.
Also, watch for the release pace of the official document for the “Plan to Further Optimize Centralized Drug Procurement Policies.”
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Going Global: China’s Pharma Innovators Expand Their Reach
The “go global” strategy, particularly through Business Development (BD), continues to pick up steam.
We’ve seen Sino Biopharmaceutical (Zhōngguó Shēngwùzhìyào 中国生物制药) and RemeGen (Róngchāng Shēngwù 荣昌生物) issuing “BD announcements.”
Out-licensing is a crucial strategy for innovative drug companies looking to tap into international markets.
Remember that CSPC Pharmaceutical Group (Shíyào Jítuán 石药集团) and AstraZeneca deal?
Announced on June 13th, it also involves using AI technology platforms to discover and develop novel oral small molecule innovative drugs.
This highlights a trend of leveraging cutting-edge tech in drug discovery.
And there’s more on the horizon!
The upcoming ADA Conference (American Diabetes Association Annual Meeting) is a big one to watch.
It’s scheduled from June 20th to 23rd.
This conference is a benchmark for metabolic diseases.
Expect reports on several cutting-edge research directions for GLP-1RAs (Glucagon-like peptide-1 receptor agonists – key for weight-loss drugs) and related key drug clinical progress.
This could be another catalyst moment for specific pharma players.
- Sino Biopharmaceutical (Zhōngguó Shēngwùzhìyào): Announced BD deals.
- RemeGen (Róngchāng Shēngwù): Announced BD deals.
- CSPC Pharmaceutical Group (Shíyào Jítuán) + AstraZeneca: Strategic R&D collaboration including potential $5.22B USD milestones and use of AI platforms for drug discovery.
The Big Question: Will Innovative Drug Stocks Keep Soaring?
There’s been undeniable enthusiasm for innovative drugs recently.
In the first half of last week, the focus was on themes like:
- “PD1 plus” therapies.
- Weight-loss drugs (like GLP-1RAs).
- Potential BD deals.
- Breakouts in small and mid-cap stocks.
This excitement then spread comprehensively to second and third-tier innovative drug stocks.
Even Traditional Chinese Medicine (Zhōngyào 中药) companies with innovative drug pipelines and CRO (Contract Research Organization) companies saw decent gains.
However, last Friday brought a significant correction.
Core stocks showed relative resilience, but second and third-tier stocks corrected more sharply.
Despite that, towards the end of trading today, innovative drug stocks still showed structural large gains.
So, how long can this innovative drug rally truly last?
Why the Surge in Innovative Drug Stocks?
Year-to-date, the innovative drug sector has seen impressive collective gains.
There are a couple of key reasons for this:
- Industry Maturity: Nearly a decade of industry accumulation is starting to bear fruit this year.
This is evident in high-quality clinical data presented at international conferences and frequent overseas BD deals, which were core catalysts in the first half of the year. - Funding Rebound: After a four-year deep correction in the sector, funding has bottomed out and is warming up.
In a stock market with limited new capital inflow, innovative drugs have regained favor.
Public funds, especially those focused on pharmaceuticals, are continuously increasing their allocation to this sector.
Analyst Outlook: Long-Term Bullishness Persists
China Post Securities (Zhōngyóu Zhèngquàn 中邮证券) offers a compelling perspective.
They believe that while short-term volatility in innovative drug stocks is normal, they remain strongly bullish on the innovative drug market over a 2-3 year horizon.
Their reasoning includes:
- Going Global (Outbound BD): Even with existing expectations for many high-quality project BD deals, there’s still potential for actual deals to exceed expectations.
Overseas valuations aren’t overheated, and the outbound trend has formed a positive cycle.
There’s room for the proportion of domestic innovative drugs viewed globally to increase. - Funding Dynamics: Broad-based funds’ allocation to the innovative drug sector is far from peaking.
There’s also room for foreign capital to increase its allocation to Hong Kong-listed innovative drug stocks.
Guosheng Securities (Guóshèng Zhèngquàn 国盛证券) also weighs in with areas of focus:
- The “PD1 plus” logic (potential upgrades expanding from PD1 VEGF to PD1 IL2, etc.).
- Investment opportunities related to the ADA conference starting in late June.
- Breakout products from small and mid-cap pipelines.
Looking ahead to 2025, Guosheng Securities maintains an optimistic outlook for pharmaceuticals, especially those centered around innovative drugs.
The momentum in China’s innovative drug market seems set to continue, driven by policy support, R&D breakthroughs, and growing global interest.
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