China's novel drug approvals entered the three-digit era in H1, benefiting CDMO leader WuXi AppTec

Overview

This report is Morgan Stanley China Healthcare’s "Chart of the Week," focusing on the trend of Chinese novel drug approvals in 2025 and the first half of 2026. It notes that approvals in China exceeded three digits for the first time in 2025, indicating regulatory support, improved R&D capability, and support from the CDMO supply chain for technical breakthroughs.

Core views

Core views include: first, the number of Chinese NMPA novel drug approvals continues to rise, reaching 120 in 2025 and 58 in H1 2026; second, similar to U.S. trends, small molecules remain the dominant approval type in China; third, domestic developers surpassed multinationals in the number of approvals in 2025, reflecting sustained gains in China’s biopharma R&D capability; fourth, faster approvals and increased outsourcing propensity are positive for China’s leading CDMOs, especially WuXi AppTec.

Analysis framework

The report analyzes NMPA novel drug approvals from 2019 through H1 2026, breaks them down by small molecules and biologics, and evaluates China’s novel drug development ecosystem and implications for CDMO commercial opportunities by combining indication, asset source, and representative drug cases. Its call on WuXi AppTec also integrates DCF valuation, outsourcing trends, AI-driven target discovery, and improving capacity utilization.

Methodology notes

• Valuation methodsdiscounted cash flow

  DCF valuation

  The report applies a discounted cash flow approach to WuXi AppTec under a base-case scenario, with key assumptions including 10% WACC and a 4% terminal growth rate.

• industry_analysisdrug approval trend analysis

  innovative drug approval trend analysis

  By comparing NMPA small-molecule, biologics, and total approvals from 2019 to H1 2026, it evaluates changes in China’s innovative drug R&D and regulatory environment.

• equity_researchMorgan Stanley relative rating system

  relative rating framework

  Morgan Stanley uses relative ratings such as Overweight, Equal-weight, Not-Rated, and Underweight, typically to assess risk-adjusted total return relative to the industry coverage universe over the next 12-18 months.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• WuXi AppTec Co Ltd (603259.SS)

  The report discusses it as a beneficiary and top-pick candidate as a China CDMO leader

  Strengths

  Accelerating small-molecule approvals in China, increased outsourcing appetite from multinational pharma and biotech firms, more commercialization contract opportunities, and higher utilization rates that could expand margins.

  Weaknesses

  Commercial contract performance still depends on end-product sales and customer pipeline success, and VC/PE funding volatility may affect biotech client demand.

  Comparison

  Compared with broad healthcare peers, WuXi AppTec stands to benefit more directly from small-molecule R&D, preclinical services, and commercialization outsourcing demand.

  Risks

  Major commercialization contracts underperforming at final sales, loss of exclusivity, volatility in VC/PE funding, and changes in U.S.-China relations.

• China Healthcare industry

  Industry view is Attractive

  Strengths

  Rising innovative-drug approval counts, domestic developers outnumbering multinational approvals, and a regulatory environment supportive of drug development and trial initiation.

  Weaknesses

  The sector remains exposed to funding cycles, regulatory timing, clinical success rates, and commercialization execution.

  Comparison

  The report argues that China is continuing to rise as a biopharma R&D powerhouse and is showing, similar to the United States, a trend where small molecules remain the majority of approvals.

  Risks

  Policy changes, weakening funding conditions, geopolitical risk, and cross-border collaboration frictions.

Key data

• Total 2025 NMPA novel drug approvals120First time crossing three digits, including 80 small molecules and 40 biologics.
• Total 1H26 NMPA novel drug approvals58Of which 31 were small molecules and 27 biologics.
• Small-molecule share, 2019-2025Over 60%The report says small molecules still make up the majority of approved drugs in China by count.
• 2025 approvals from Chinese domestic developers63Higher than 57 approvals from multinational developers.
• Newly launched breast cancer products in 20259Including PI3Kα and AKT inhibitors, TROP2/HER2-targeted ADCs, and others.
• WuXi AppTec target priceRmb153Price history shows a target price of 153 on 2026-06-29.
• WuXi AppTec reference priceRmb124.12The coverage table shows 603259.SS at Rmb124.12 on 2026-07-03.

Impact & implications

Rising approval numbers for Chinese innovative drugs and stronger domestic R&D capability may increase outsourcing demand across preclinical services, process development, manufacturing, and commercialization stages. For CDMO companies, especially platform operators with capabilities in small molecules and global clients, faster approvals could translate into more commercialization contracts and higher capacity utilization.

Risks

• Major commercialization contracts may not deliver expected end sales, such as when loss of exclusivity reduces sales.
• Volatility in VC/PE funding could weaken biotech clients’ R&D and outsourcing spending.
• Changes in U.S.-China relations could affect cross-border pharmaceutical R&D, client outsourcing, and supply-chain cooperation.
• An increase in approval counts does not automatically imply commercialization success; approved assets still require sales ramp and clinical value realization.

What to watch

• Whether NMPA novel drug approvals in H2 2026 will sustain the momentum from H1.
• Whether the number of small-molecule approvals and their share of total approvals remain elevated.
• Whether the number of approvals from domestic Chinese developers versus multinationals changes.
• Changes in WuXi AppTec’s new commercialization contracts, client outsourcing intent, and capacity utilization.
• The innovation-drug funding environment, cross-border collaboration environment, and shifts in U.S.-China relations.