China Securities Co., Ltd. has released a research report stating that the A-share Shenwan Medical Device Index experienced a continuous decline from 2020 to 2024, influenced by factors such as centralized procurement of consumables and heightened medical compliance requirements. In 2025, the index initially rose before falling again. Looking ahead, as policy impacts gradually subside and corporate performance recovers following strategic adjustments, the medical device sector is expected to witness a dual recovery in both valuation and performance. It is recommended to increase allocation to the medical device sector in 2026, with primary opportunities stemming from performance recovery, international expansion, surgical robotics, brain-computer interfaces, and companies undergoing proactive transformation. Additionally, it is advised to monitor developments at the ASCO conference. At the 2026 ASCO Annual Meeting, 94 Chinese studies were selected for oral presentations, with the drug ivonescimab featured in the plenary session, marking a new level of global academic influence for China's innovative pharmaceuticals. The main viewpoints of China Securities Co., Ltd. are as follows:

The industry is witnessing an improving trend, with innovation-related segments showing more pronounced performance. In 2025, the overall operating revenue of the pharmaceutical industry decreased by 0.56% year-on-year, showing a narrowing decline compared to the first three quarters. In Q1 2026, the overall operating revenue of the pharmaceutical industry increased by 2.16% year-on-year, indicating an improving trend in industry revenue for the quarter. In 2025, the non-GAAP net profit attributable to shareholders for the entire pharmaceutical sector decreased by 18.91% year-on-year. In Q1 2026, this metric increased by 2.69% year-on-year, reflecting an improving trend. During Q1 2026, segments including biopharmaceutical upstream, CRO/CMO, medical services, chemical preparations, home-use devices, and high-value consumables demonstrated dual growth in both revenue and non-GAAP net profit attributable to shareholders, with the CRO/CMO segment showing the most significant growth.

Global Perspective: Innovation Value Highlights, Chinese Influence Accelerates Penetration. China's pharmaceutical sector possesses advantages in "innovation upgrading + supply chain resilience." In 2025, the upfront payments for overseas licensing of innovative drugs significantly exceeded the total for the previous year, and medical devices are also actively exploring international expansion pathways. The United States dominates early-stage R&D and premium pricing, but with strong demand due to patent cliffs faced by multinational pharmaceutical companies, Chinese assets offer prominent global cost-effectiveness, presenting broad opportunities for internal and external collaboration.

Domestic Value Reshaping: Focus on High-Quality Development, Strengthen Innovation and Compliance Foundations. ① Policy: Emphasis on high-quality development, optimization of centralized procurement, diversified payment systems, and advancement of medical service pricing reforms. ② Pharmaceutical Chain: Innovative drugs are entering a period of commercial scale-up; attention to supply chain security is crucial. ③ Medical Devices: Domestic substitution is extending into mid-to-high-end segments; optimism lies in international expansion, new technologies (AI, brain-computer interfaces), and the implementation of technologies through mergers and acquisitions. ④ Monitor opportunities for bottoming out and transformation/upgrading in sectors like traditional Chinese medicine, pharmacies, and medical services.

International Expansion Value Reshaping: Multi-dimensional Breakthroughs, Building a New Global Landscape. ① Innovative Drugs: Business Development (BD) is becoming routine, entering the internationalization 2.0 era. ② Industry Chain: Recovery in both domestic and overseas demand. ③ Active Pharmaceutical Ingredients (APIs): Addressing short-term disruptions, transitioning towards specialty APIs/CDMO. ④ Medical Devices: Expanding into overseas markets, with parallel strategies of independent sales and BD for innovative devices. ⑤ Blood Products / Vaccines: Overseas registration of intravenous immunoglobulin, diversified models for vaccine internationalization.