China’s pharmaceutical industry has seen significant development over the past three years, with its leading companies increasingly seeking to go public to raise capital and Hong Kong emerging – particularly amid rising geopolitical risks – as their ideal listing destination on the back of the city’s regulatory support, valuation advantages, strong secondary market performance and access to a global base of institutional investors.

In total, 14 pharmaceutical and medical device companies, as of August this year, have listed on the Hong Kong Stock Exchange ( HKEX ), surpassing the full-year total of 12 listings in all of 2024. Additionally, 36 relevant companies, data from Choice show, are currently in the IPO pipeline.

China approved 43 innovative drugs in the first half of 2025, according to the China National Medical Products Administration, marking a 59% year-on-year increase and nearly matching the total of 48 approvals for all of 2024.

The HKEX continues to offer several advantages that make it attractive to Chinese biotech companies. Policy support from both Hong Kong and mainland regulators has effectively opened a window for companies to raise capital through public markets.

Since 2018, Chapter 18A of the HKEX listing rules has allowed pre-revenue biotechnology companies to go public, providing modified financial and disclosure requirements. Given the long research and development and clinical trial timelines typical of biotech firms, this rule offers a favourable path to listing for many Chinese companies. The listing process is relatively efficient, with most applications completed within six months, offering a degree of predictability that is highly valued by issuers.

“The China Securities Regulatory Commission has been encouraging Chinese biotech companies to pursue listings in Hong Kong,” says Richard Li, head of the healthcare and life sciences practice group in Greater China at Simmons & Simmons. “However, the approval process has been slower than expected due to a surge in listing applications.”

While the reopening of the Fifth Listing Standard in China’s A-share market in 2025 has created opportunities for unprofitable but innovative companies to list on the Star Market, a Shanghai-based science and technology board, the relatively higher valuations and global institutional investor base in Hong Kong continue to attract issuers that view it as the better choice. Moreover, US delisting risks are prompting many Chinese companies to seek a safer listing venue in Hong Kong.

“Hong Kong listings offer clear advantages, including access to international investors,” Li adds. “In addition, the HKEX has a streamlined and predictable listing process, which appeals to many issuers. This year in particular, valuations for biotech companies in the Hong Kong market have been more attractive compared to the A-share market. A good example is Hengrui Pharma, which completed a dual A+H listing this year.”

Jiangsu Hengrui Pharmaceuticals was listed on the Hong Kong Stock Exchange on May 23 2025, completing its dual listing on both the A- and H-share markets. The company issued 224.5 million H-shares in its Hong Kong offering, raising up to HK$9.89 billion. This marks the largest IPO by a pharmaceutical company on the Hong Kong market in the past five years. As of today, the valuation of H-shares is 8.75% higher than that of A-shares.

Moreover, strong secondary market performance has boosted confidence in primary listings for biotech companies. The Hang Seng SCHK Innovative Drug Select Index has risen 114% year to date.

In the private market, China’s biotech sector is seeing a clear shift in the investor landscape. Patient capital remains highly valued by biotech companies.

“From a private investment standpoint, US dollar-denominated funds used to dominate biotech investing in China,” Li notes. “Since 2022, many of these funds have pulled back due to geopolitical concerns and have yet to return. At present, government-backed funds are more active, but US dollar funds are still viewed as the most desirable investors by many biotech companies.”

Between 2022 and 2024, Chinese biotech firms signed a large number of out-licensing agreements with foreign pharmaceutical companies. These deals grant overseas partners the rights to develop or commercialize Chinese-developed drugs, reflecting a growing trend of China as a source of global innovation.

There were 110 cross-border licensing deals in 2024, according to BD China’s 2024 Annual Report on Licensing and Business Development Deals in China’s Pharmaceutical Industry, with US$50 billion in cumulative upfront payments – a 47% year-on-year increase. This underscores the rapid scaling of cooperation models and the emergence of hybrid licensing structures.

On the clinical development front, China now accounts for approximately 31% of all new trial initiations globally between 2019 and 2023, according to Norstella, a US-based pharmaceutical solutions provider. Key advantages include rapid patient recruitment, cost efficiencies ( Phase I trials cost about one-third of US prices ) and regulatory convergence with the guidelnes of the ICH ( International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use ). These factors have made China a go-to hub for early-stage clinical research by global pharmaceutical firms.

“We remain bullish on the long-term outlook for biotech as it’s a sector poised for sustained high growth,” Li states. “Over the next 12 to 18 months, we expect steady momentum in business development transactions, supported by China’s mature innovation infrastructure. That said, cross-border transactions continue to face challenges, particularly around geopolitical risks, regulatory compliance, complex legal frameworks and data transfer restrictions.”