China's biotech stocks up 60% this year: What's fueling rally?
What's the story
China's biotechnology sector is witnessing a remarkable comeback, with stocks surging over 60% since January.
The Hang Seng Biotech Index's stellar performance has outshone even the tech sector's 17% gain, which was largely driven by the launch of DeepSeek's AI app in January.
The surge in biotech shares is primarily due to two major licensing deals between foreign firms and Chinese drug manufacturers.
Licensing agreements
Licensing agreements fuel biotech stock surge
On May 19, Pfizer announced a record $1.25 billion agreement to license an experimental cancer drug from China's 3SBio Inc.
The pharma giant also said it would invest $100 million in the company's shares.
Shortly after, Bristol-Myers Squibb Co. agreed to pay Germany's BioNTech SE up to $11.5 billion for licensing another cancer drug originally licensed from China's Biotheus Inc, contingent on certain conditions or milestones.
Market dominance
Stock rise underscores growing global influence
The rise of China-listed biotech firms highlights the country's growing influence in the global innovation landscape.
3SBio's shares have skyrocketed by an astonishing 283%, outperforming a Bloomberg index of global biotech stocks.
RemeGen Co, which specializes in antibody drugs, has also seen its stock price soar over 270% after being approached by multinational pharmaceutical companies for potential licensing deals.
M&A activity
China's dominance in global pharmaceutical space
China's dominance in the global pharmaceutical merger and acquisition space is drawing investor attention.
In Q1 2023, the value of such agreements involving local players doubled from the previous year to $36.9 billion, accounting for over half of the global total of $67.5 billion.
This trend has led some analysts to suggest that Chinese biotech companies are having their own "DeepSeek moment," similar to DeepSeek's breakthrough AI app launch earlier this year.
Interest
Surge in investor interest in biotech evident from IPOs
The surge in investor interest in biotech, which uses living organisms to produce medicines and other products, is evident from the strong performance of recent initial public offerings (IPOs).
Duality Biotherapeutics Inc, a cancer treatment developer, saw its shares more than double on their first trading day in Hong Kong.
Meanwhile, Jiangsu Hengrui Pharmaceuticals Co, China's biggest drugmaker by market value, also witnessed a 25% jump on debut despite being issued at the top end of the marketed range.