Compared with traditional industries, biopharmaceuticals have long relied on relatively concentrated financing channels, heavily dependent on VC, PE, and IPOs. Capital returns mainly come from IPOs, successful mergers and acquisitions, or business development (BD) deals.

However, amid growing volatility in capital markets, the fragility of this single pathway has become apparent. Some companies have fallen into the trap of “expensive and difficult financing”, struggling to sustain lengthy R&D cycles. Especially as IPO channels tightened in recent years, capital exits became harder, and primary market investors grew more cautious.

Meanwhile, changes were unfolding on the supply side. As earnings growth peaked in traditional manufacturing, real estate, and other sectors, banks were also searching for new growth engines. As a representative of new-quality productive forces, biopharmaceuticals naturally came into view.

In short, cash-strapped innovative drug companies and cash-ready banks found a perfect match. Particularly when equity financing cooled, bank credit gradually became a critical source to fill Biotechs’ funding gaps.

Zhang Feng pointed out:

“When the market is strong, companies prefer equity financing. But during a ‘funding winter’, listing channels narrow and equity financing becomes harder, so companies turn more to banks for support.Naturally, early-stage companies favor equity financing, but equity and debt are not mutually exclusive — they are complementary, and most companies value both highly.”

In 2024, an unprofitable innovative drug R&D company faced financing difficulties amid a severe downturn in biopharma investment. Beijing Bank provided 50 million yuan in comprehensive credit support through a “equity-debt integration, investment-loan linkage” model, while partnering with investment institutions to secure 100 million yuan in warrant options.

This “debt + equity” approach balanced the high-risk nature of tech companies with banks’ risk control requirements, while unlocking more capital for early-stage R&D.

For Biotechs, the most direct benefit of bank financing is less equity dilution for founding teams.

Chen Jie ran the numbers:A company that just completed an angel round can obtain several million to 10–20 million yuan in credit for daily operations, reducing equity dilution by 1–2 percentage points or more — a tangible benefit for early-stage valuations. Companies secure urgently needed R&D cash flow while preserving founders’ ownership.

He advised companies to plan for 10%–20% of their annual funding needs via bank loans, effectively using financial leverage while maintaining a safe debt margin.

Bank credit also signals implicit endorsement of a company’s fundamentals.

Zhang Feng recalled that Beijing Bank was among the first to provide tens of millions in credit to an innovative drug firm during a critical R&D stage, later increasing it to over 100 million yuan. Other banks followed, broadening financing channels and strengthening liquidity. During pivotal R&D phases, such bank backing can mobilize more financial resources, creating a positive cycle and securing more time and capital.

Bank capital is beneficial but not a “cure-all”; its value hinges on alignment with a company’s development stage. For Biotechs, the optimal strategy is to dynamically adjust the equity-debt ratio as their pipeline advances.

From a bank’s perspective, how is a pipeline’s credit value evaluated across stages? Chen Jie shared a clear framework.

During preclinical and Phase I trials, banks prefer a “follow-on strategy”.At this stage, results focus on pharmacology, toxicology, safety profiles, and dosing windows in healthy volunteers.

“These are only foundational data with high uncertainty. Therefore, bank involvement should be modest: around 5 million yuan in preclinical, and 10–20 million yuan in Phase I, mainly for rent, salaries, or small CRO fees.”

Credit here does not bear primary R&D risk but provides modest liquidity alongside reputable investors.

Beyond Phase II, the approach shifts decisively. Strong interim or full Phase II data triggers a more aggressive stance, with credit rising to 20–50 million yuan or higher, and tenors extended from 1-year working capital loans to 2–3 years.

When a drug enters late Phase III or gains approval, certainty rises sharply, and credit limits expand further.

To accommodate long R&D cycles, some banks have launched tailored products:

• Industrial Bank’s “Tech Enterprise R&D Loan” offers up to 5-year working capital loans and 10-year fixed-asset loans.
• Bank of Communications Suzhou Branch’s “OPC Entrepreneurial Talent Loan” is unsecured, with terms up to 3 years.

Beijing Bank is piloting medium-to-long-term working capital loans customized for individual pipelines.

“We assess total funding from molecule discovery to clinical completion. If a pipeline requires 1 billion yuan, with 100 million from the company, we provide matching loans, and VCs cover the rest. Loan tenors align with R&D cycles, and future commercial sales serve as repayment,” Zhang Feng explained.

When Biotechs consider bank loans, they first need to understand banks’ unique, data-driven evaluation system — distinct from VCs’ “bet on sector, bet on team” logic.

Chen Jie broke down core dimensions:

1. Internal data comparison: Clinical advantages versus approved or peer-stage drugs.
2. Global benchmarking: Competitiveness against same-target, same-indication programs worldwide.

Head-to-head trial data is decisive.

“If a company runs head-to-head trials in Phase II or III, our data assessment rises significantly. Head-to-head studies eliminate patient-selection bias and directly prove a drug’s clinical value.”

Team background is also foundational.Zhang Feng noted that core teams from Big Pharma with successful track records naturally gain greater trust — banks may even provide small seed funding before the angel round.

VC endorsement is another key reference.

“VCs often have deeper sector expertise; their approval is a valuable signal,” Zhang Feng said, adding that he also reviews an institution’s overall biotech investment success rate.

Ultimately, judgment returns to the company: whether its R&D is best-in-class or merely me-too.

Banks also have clear “red lines”.

Chen Jie warned against using bank loans for large, long-term fixed-asset investments such as factory construction — a fundamental mismatch with bank capital’s nature.

“Using working capital to build factories creates a severe risk-return misalignment. Banks prioritize safety and liquidity, which conflict with decade-long infrastructure projects.”

Only mature companies with strong Phase III data, approved products, and promising pipelines may qualify for medium-to-long-term project loans.

As banks’ enthusiasm for innovative drugs grows, sustainable investment requires clarifying one core bottleneck: defining boundaries for “exemption from liability due to due diligence”, so regulations match innovation’s high risk.

Chen Jie described Bank of Communications’ practice:No medium-to-long-term project loans for pre-commercial Biotechs; amounts stay reasonable to limit banks’ primary risk.

“We have real precedents, which empower frontline staff to engage early-stage projects — supported by professional teams.”

Zhang Feng emphasized that genuine “patient capital” needs institutional support.Innovative drugs take 8–10 years, making 3–5-year equity exit horizons unrealistic.

“Regulatory policies must align with capital cycles. Equity investment carries far higher failure risk than credit, and disruption by new technologies is common — exemption rules are also needed here.”

Banks are shifting from onlookers to deep participants in innovative drugs.This “mutual convergence” reflects an inevitable restructuring of China’s innovative drug financing landscape.

Bank capital not only fills liquidity gaps left by equity but also validates industrial logic: clinical data, team expertise, and pipeline value are becoming quantifiable credit assets.

For Biotechs, this means an additional financing tool.For the broader ecosystem, capital structures are evolving from single-layer “risk preference” to diversified “risk stratification”.Amid cycles of winter and recovery, this shift embodies industrial resilience.