The Zhitong Finance App learned that Wanlian Securities released a research report saying that the overall valuation of the pharmaceutical sector has been revised quite a bit compared to the previous high, and is currently at a historical median level. Overall, the pharmaceutical manufacturing side is still in a painful period of transformation. The number and amount of domestic pharmaceutical companies' BD incidents in the first half of 2026 continued to set new records, and the total amount of overseas transactions for the whole year is expected to reach a new high. The bank is optimistic about revaluation of domestically produced innovative drugs. In terms of medical devices, it is recommended to focus on emerging technology directions, such as brain-computer interfaces.
The main views of Wanlian Securities are as follows:
The pharmaceutical sector underperformed in the first half of 2026
In the first half of 2026, the Shenwan Pharmaceutical Index fell 10.26%, outperforming the Shanghai and Shenzhen 300 Index by 17.81 percentage points, and ranked 16th among the 31 Shenwan Tier 1 industry sectors. Judging from the rise and fall rate of the sub-sector, only the medical services sector recorded positive gains after experiencing a rebound in June. The overall valuation of the sector has been revised quite a bit compared to the previous high, and is currently at the historical median level.
Production-side data fluctuates at a low level, payment side is stable, and the industry is running steadily
From January to May 2026, the cumulative revenue of the pharmaceutical manufacturing industry decreased by 1.50% year on year, and total profit decreased by 1.30% year on year. Overall, the pharmaceutical manufacturing side is still in a painful period of transformation. Judging from health insurance income and expenditure data, from January to May 2026, the health insurance fund's revenue was 1346.268 billion yuan, expenditure was 974.182 billion yuan, and the current balance was 372,086 billion yuan. The overall operation of the fund was steady, and the health insurance fund balance was abundant.
Innovative drugs: the amount of BD reached a new high, and China's innovative drugs went to the world stage
Domestic innovative drugs continue to gain strength in terms of policy support, research and development results, and commercialization processes. The overall tone of the policy changed from focusing on fee control in the past to fully encouraging high-quality original innovation, and the number of new drug reviews and approvals reached a new high in the first half of 2026. Meanwhile, the number and amount of BD incidents involving domestic pharmaceutical companies continued to set new records in the first half of 2026. The total amount of Chinese pharmaceutical overseas transactions was 99.7 billion US dollars, close to 73% of the full year of 2025, and is expected to reach a new high for the whole year. In terms of the quality of innovative research and development, the results of Chinese enterprises at the World Academic Conference also verified that the bank's innovative drug research and development quality has reached international standards, moving from followers to frontrunners. The bank is optimistic about the revaluation of domestically produced innovative drugs.
CXO: AI Improves Drug Development Efficiency
Since 2025Q1, the CXO sector has achieved a positive year-on-year growth rate of operating income and net profit for 5 consecutive quarters, and the growth rate has remained above 20%. At the same time, the market size is expected to grow steadily, and the industry CAGR is expected to be 18.3% in 2023-2030. The use of artificial intelligence technology in the drug development process can significantly reduce the time and cost required for drug development and improve the success rate. Artificial intelligence is rapidly reshaping the entire pharmaceutical value chain, covering all stages from early research to commercial production and post-marketing monitoring.
Medical Devices: Focus on Emerging Technology Brain-Computer Interfaces
Affected by industry factors such as DRG/DIP fee control and high-value consumables collection, the overall performance of the medical device sector is still bottoming out, and the industry is showing a situation where revenue growth is not increasing. It is recommended to focus on emerging technology trends, such as brain-computer interfaces. Currently, the brain-computer interface industry is still in its infancy, and the market size is expected to grow significantly faster than the medical device sector as a whole. Various technical directions have yet to be defined, so both domestic and foreign companies have an opportunity to seize the opportunity.
Risk factors: risk of failure in R&D of innovative drugs and innovative devices, risk of innovative drug BD falling short of expectations, risk of innovative drug pricing falling short of expectations.