Dongfang Wealth Securities: Focus on the restoration and breakthrough of the pharmaceutical sector under the wave of innovation

The Zhitong Finance App learned that as the total amount of Chinese innovative drug license-out projects set a new record, the proportion of pre-clinical projects continues to be high. Emerging treatments such as ADC, dual/multiple antibodies, and small nucleic acids, as well as obesity indications in the metabolic field, may be the key direction for future license-out projects. China's innovative drug companies have transitioned from a research and development exploration period with high investment and low output to a period of intensive pipeline harvesting. At the same time, the development of commercial insurance is expected to transform the original “single” payment for innovative drugs to multiple payments. Furthermore, the medical device procurement side continued to recover in 2025, focusing on equipment renewal policies and funding implementation to continue to drive demand release.

The main views of Orient Wealth Securities are as follows:

Since this year, driven by innovative drugs and AI medicine, the chemical pharmaceutical sector has led the way

The valuation level of the pharmaceutical sector is close to the historical average of the last 10 years. The market value of pharmaceutical biotechnology stock holdings in public funds has been relatively low in the past ten years, and the share of pharmaceutical-biotech public fund holdings in 2025Q1-3 showed a trend of increasing quarterly.

The booming development of innovative drugs has gradually become a benchmark for improving China's ability to innovate

As the total amount of Chinese innovative drug license-out projects set a new record, the proportion of pre-clinical projects continues to remain high, indicating that China's innovative drugs are gradually gaining global recognition, and the “gold content” of China's innovative drug assets continues to rise. While consolidating their position in traditional dominant sectors, international pharmaceutical giants are actively expanding high-potential fields such as metabolism and neurology. Emerging therapies such as ADC, dual/multiple antibodies, and micronucleic acids, as well as obesity indications in the field of metabolism, may be the focus of future license-out projects.

China's innovative pharmaceutical companies have experienced nearly ten years of accumulation, transitioning from a period of R&D exploration with high investment and low output to a period of intensive pipeline harvesting

According to Pharmacology data, China's innovative drug market will exceed 400 billion yuan in 2024, becoming a new bright spot for economic development. It is worth mentioning that 113 domestically produced innovative drugs have been approved for marketing during the “14th Five-Year Plan” period (up to the end of 2024), which is 2.8 times that of the “13th Five-Year Plan” period. China's ten-year transformation of innovative drugs has mainly benefited from comprehensive regulatory reforms, increased investment in R&D, and a strategic global layout. Compared with international pharmaceutical giants and large domestic pharmaceutical companies, there is a big gap in terms of operating income, total market value, and size of major products. China's commercial health insurance still has plenty of room for development. It is expected that the original “single” payment for innovative drugs will be transformed into multiple payments, and China's innovative payment plan will be created.

The procurement side continues to recover in 2025, and the implementation of equipment renewal policies and capital will continue to drive demand release

According to statistics from Zhongcheng Mathematics, the overall market size of medical device bidding in 2025Q3 increased by 29.8% year-on-year, and the inflection point in the revenue side of 2025Q3 medical equipment companies gradually became apparent. Under the normalization trend of domestic procurement and medical anti-corruption, overseas markets also have friendlier payment systems and mature GPO systems. Companies seek to go overseas faster and seek markets with high gross profit or high payment capacity. In 2025, national and local governments successively introduced policies to support the development of the brain-computer interface field. Global brain-computer interface companies, led by Neuralink, are booming, accelerating technology iteration and clinical application.

Aspect of the target

The innovative medicine sector suggests focusing on Baiji Shenzhou (06160), Hengrui Pharmaceuticals (01276), China Biopharmaceuticals (01177), Sansheng Pharmaceuticals (01530) /Sansheng Guojian (688336.SH), and Shiyao Group (01093). Medical device sector: 1) Domestic demand repair: It is recommended to focus on Mindray Healthcare (300760.SZ), Lianying Healthcare (688271.SH), Kaili Medical (300633.SZ), Australian and Chinese endoscopy (688212.SH), etc.; 2) Overseas implementation: it is recommended to focus on Haitai Xinguang (688677.SH), new industry (300832.SZ), etc.; 3) Brain-computer interface: it is recommended to focus on Chengyitong (300430.SZ), Weiss Healthcare (), etc. 688580.SH

Risk Alerts

Risk of changes in industry policies; sales growth of major products falls short of expectations; R&D progress falls short of expectations.