A research report from Shanxi Securities Company Limited indicates that China's innovative drug pipeline now accounts for approximately 30% of the global total. The multi-tiered payment model, combining basic medical insurance with commercial health insurance, has established a commercial pathway for internationally advanced therapeutic technologies and products, substantially promoting the development of China's innovative drugs and medical devices. The price-to-earnings (PE) valuation of the pharmaceutical sector is currently below its historical average. With the industry expected to achieve positive growth by 2026, the sector is projected to deliver positive returns in that year. Key areas to monitor include innovative drugs, CXO, AI healthcare, brain-computer interfaces, innovative medical devices, recovery in medical equipment tenders, and consumption recovery. The main views of Shanxi Securities are as follows.
Policy Support: Era of Major Development for China's Pharmaceutical Innovation Since the start of the "14th Five-Year Plan" period, the National Medical Products Administration has approved 204 innovative drugs and 265 innovative medical devices. From January to July 2025 alone, 50 innovative drugs and 49 innovative medical devices were approved. Currently, China's pipeline of innovative drugs under research represents about 30% of the global total. According to the "2025 Q1-Q3 Pharmaceutical Transaction Trends Analysis" released by PharmaCube, the total value of China's pharmaceutical license-out deals reached $92.03 billion in the first three quarters of 2025. The rapid growth in business development (BD) authorization value for Chinese innovative drugs reflects the swift development of the industry and the enhancement of its international competitiveness.
Commercial Health Insurance Experiences Major Growth, Multi-tier Payment System Supports Innovative Drugs & Devices In July 2024, the State Council executive meeting reviewed and passed the "Implementation Plan for Whole-Chain Support of Innovative Drug Development," proposing the development of commercial insurance to collectively boost innovative drug development. The National Healthcare Security Administration has also repeatedly expressed its intention to explore diversified payment mechanisms for innovative drugs, supporting and guiding inclusive commercial health insurance to promptly include innovative drugs in reimbursement coverage. On December 7, 2025, the 2025 edition of the National Reimbursement Drug List (NRDL) was released, adding 114 new drugs, including 50 Class I innovative drugs. Concurrently, the National Healthcare Security Administration also published China's first edition of the Commercial Insurance Innovative Drug Directory. Nineteen drugs were included in this directory, covering popular targeted therapies such as CAR-T, TCE therapies, and bispecific antibodies. The "basic medical insurance + commercial health insurance" multi-tier payment model has built a commercial pathway for internationally leading treatment technologies and products, substantially fostering the development of China's innovative drugs and devices.
CXO: Chinese Manufacturing Sails Overseas & Sentiment Improves Chinese CXO companies and life science upstream companies are continuously enhancing their global market competitiveness through strong technical capabilities, efficient service advantages, and exceptional cost-effectiveness. Domestically, as the investment and financing environment for the innovative drug industry gradually improves, CXO companies have seen a sustained recovery in orders since 2025. With the execution of lower-priced orders nearing completion, 2026 is expected to bring a scenario of both increasing order volume and price.
Devices & Services: Technology-Driven Industry Upgrades, Focus on Opportunities in Brain-Computer Interfaces and AI Healthcare The high-end, customized medical consumables OEM industry is breaking through the 0-1 stage. Leading OEM companies have gained global competitiveness in product quality, secure and stable supply chains, supply efficiency, and cost advantages, accelerating the trend of supply chain shifting from Europe and America to China. Brain-computer interface technology continues to advance. Furthermore, AI healthcare is also developing steadily, with various vertical models and AI applications growing rapidly.
Risk warnings include macroeconomic environment risks, market liquidity risks, pharmaceutical industry policy risks, and geopolitical and international trade risks.