The innovative drug industry has seen another significant catalyst, with leading pharmaceutical companies reaching licensing agreements. The booming BD (Business Development) phase is a key reason for the surge in China's innovative drug market. Since 2025, the number of license-out deals for China's innovative drugs has more than doubled year-over-year. Last week, the innovative drug sector welcomed another major catalyst. According to an announcement by Hengrui Pharmaceuticals, Hengrui has granted GlaxoSmithKline (GSK) the global exclusive license rights (excluding mainland China, Hong Kong, Macau, and Taiwan) for the PDE3/4 inhibitor HRS-9821. In addition to HRS-9821, the agreement includes the collaborative development of up to 11 projects. GSK will pay Hengrui an upfront payment of $500 million. Hengrui will also be eligible for potential milestone payments totaling approximately $12 billion based on successful development, registration, and sales.

Furthermore, CSPC Pharmaceutical Group has reached a licensing agreement, and Sino Biopharmaceutical is set to receive milestone payments soon. CSPC granted Madrigal the exclusive global rights to develop, manufacture, and commercialize SYH2086, with a total potential consideration of up to $2.075 billion, including a $120 million upfront payment. On July 30, Sino Biopharmaceutical announced that its wholly-owned subsidiary, Linxen Pharmaceuticals, has made smooth progress in its out-licensing collaboration with Merck for the "PD-1/VEGF bispecific antibody" LM-299/MK-2010 and will soon receive a $300 million technology transfer milestone payment.

From a valuation perspective, AI applications have ignited market sentiment, and AI is expected to enhance the overall valuation of innovative drugs. AI's high fault tolerance in the pharmaceutical field may accelerate its application in innovative drug development, reducing the workload of experimental screening and improving R&D efficiency, thereby achieving cost reduction and efficiency gains.

With market style rotation and positive catalysts in the innovative drug industry, innovative drugs are poised for a dual boost in valuation and profitability. Interested investors may consider the Innovative Drug ETF (517110) and the Biopharmaceutical ETF (512290).

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