Overseas Policy Rumors Disrupt Innovative Drug Sector; Industry Awaiting Clarity

Shares of China’s innovative drug companies listed on the A-share market opened sharply lower today, with Hengrui Pharmaceutical (600276.SH), 3SBio (688336.SH) and Betta Pharmaceuticals (300558.SZ) all slipping more than 5% during morning trading.

Hong Kong-listed peers experienced similar pressure as the sector declined broadly. China Biopharma (01177.HK), Henlius Biotech (02696.HK) and Hua Medicine (02552.HK) led the downturn, although losses narrowed significantly by the closing bell.

Despite this intraday volatility, both A-share and Hong Kong drug developers remain buoyed by strong outbound licensing momentum. In the first half of the year, Chinese innovators completed over 70 overseas licensing transactions with a combined value approaching USD 66 billion. This flurry of deals reflects a sustained appetite among multinational corporations for Chinese drug assets.

A June report by Artery Network underscored that global firms prize China’s innovative pipelines for their scale, deal sizes and competitive edge. These partnerships have reinforced market confidence, helping the Hang Seng Innovative Drug Index and the Wind Innovative Drug Index surge 60.27% and 23.93%, respectively, in the first six months.

At present, the veracity and potential scope of the rumored U.S. policy change remain uncertain. Industry experts emphasize that any real impact hinges on official implementation and subsequent legal challenges from American pharmaceutical companies.

Liu Lihe, Managing Director of CIC Consulting, warns that a new regulatory barrier would raise transaction costs, extend approval timelines and heighten uncertainty for license-out collaborations, potentially dampening acquisition interest and reducing valuations offered by multinationals. Zhao Heng, founder of LatitudeHealth, adds that restricting Chinese experimental drugs could sever parts of the low-cost supply chain, driving up R&D, manufacturing and procurement expenses worldwide—costs that would ultimately flow through to patient prices and conflict with stated goals of lowering drug costs.

Moreover, Liu notes that such a shift could undermine the rapid growth model of domestic firms built on cost-efficient development coupled with overseas licensing. Looking ahead, industry participants will be watching for enhanced policy support in areas such as medical insurance negotiations and innovative payment schemes to sustain the momentum of China’s home-grown drug innovation.