Special Topic: 2026 Investment Strategy | Top Fund Companies and Managers Look Ahead to Investment Opportunities in the Year of the Horse Breakthrough and Renewal: An Outlook on 2026 Investment Opportunities in the Healthcare Sector Author: Zhu Minglei, Fund Manager at Nord Fund
Wind data reveals that as of December 31, 2025, the CITIC Pharmaceutical Index had accumulated a gain of 12.9% year-to-date, lagging behind the CSI 300 Index by 4.8 percentage points. Performance within the sector was significantly divergent: innovative drugs and export-related industries achieved substantial excess returns, while consumer-related assets significantly underperformed. Among the sub-sectors, traditional Chinese medicine, vaccines, and blood products were among the worst performers.
Reviewing the quarterly performance in 2025, the innovative drug sector showed strong momentum in the first half, catalyzed by the finalization of overseas licensing and collaboration (BD) projects from several large companies, before entering a correction phase in the second half. The AI healthcare sector performed exceptionally well in the first quarter, driven by progress related to DeepSeek, but subsequently experienced a noticeable stock price adjustment as the performance realization cycle on the application side remained lengthy and business models still required further validation. Meanwhile, the CXO sector demonstrated relatively good stock performance as new order growth rates in its sub-sectors gradually improved alongside the recovery of the overseas investment and financing environment.
Looking ahead to 2026 from the current standpoint, we anticipate that the operating performance of the healthcare industry is expected to gradually emerge from its bottom. As the phased impacts from volume-based procurement and medical anti-corruption measures are gradually digested, their suppressive effect on industry growth may marginally weaken, with overall revenue growth expected to stabilize and rebound. Breaking it down by sector, we may focus on the innovative drug industry chain, the CXO sector, and the innovative medical consumables field, which are projected to offer favorable structural opportunities in the coming year.
Currently, the innovative drug sector is at a critical juncture of transitioning from rapid imitation to differentiated innovation. Since 2020, the number of overseas licensing deals by domestic pharmaceutical companies has risen significantly, with transactions involving innovative drugs and related technology platforms becoming increasingly active. Concurrently, the proportion of out-licensing deal values from Chinese pharmaceutical companies in the global total licensing deal value has also increased rapidly, reflecting the growing recognition of Chinese innovative drug assets by the international market. Beyond overseas progress, as the Federal Reserve enters an interest rate cutting cycle, the gradual recovery of the overseas investment and financing environment is expected to drive a sustained improvement in the prosperity of the global innovative drug industry chain. Domestically, medical anti-corruption efforts are helping to accelerate the volume expansion of innovative drugs with high clinical value. Coupled with successive supportive policies from regulators, the commercial environment for domestic innovative drugs is gradually becoming more standardized and mature. Overall, we believe the innovative drug industry currently possesses certain investment value.
Furthermore, as the overseas investment and financing environment gradually recovers, funding pressures on small and medium-sized innovative drug companies have somewhat eased, leading to a continued rebound in the growth rate of new orders for the CXO industry. Structurally, revenue growth for companies primarily focused on CRO still faces certain pressures, while CDMO companies are benefiting from increased demand at the commercial stage, maintaining a relatively fast overall growth trend. Regarding tariff impacts, we believe the R&D and production services provided by CXO companies are relatively less affected by tariff shocks, warranting no excessive concern.
In the field of innovative medical consumables, taking the orthopedics industry as an example, the performance of several leading orthopedics companies came under significant pressure in recent years due to the impact of centralized volume-based procurement. Currently, a new round of orthopedics procurement has been completed with relatively moderate renewal results, indicating that the domestic orthopedics market is expected to gradually stabilize and return to a growth trajectory. With the deepening trend of population aging, the domestic orthopedics market is projected to maintain a compound annual growth rate of around 10% over the next five years. On another front, due to the substantial impact of earlier procurement policies on the performance of domestic companies, some leading enterprises have actively expanded into overseas markets and achieved phased progress. We are optimistic about the expansion potential of these companies in the international orthopedics market; their overseas business is expected to gradually increase in volume, potentially following the growth path of other leading domestic device companies going global to achieve sustainable international development.
Additionally, from an absolute return perspective, we maintain our focus on the traditional Chinese medicine (TCM) sector. The sector's performance overall was under pressure in 2025, primarily related to the incidence cycle of respiratory diseases, which were at a relatively low incidence stage over the past year until influenza activity increased in the fourth quarter of this year. It is expected that inventory for respiratory-related medications of relevant TCM companies is about to enter a restocking cycle. Valuation-wise, the current price-to-earnings ratio and PEG of the TCM sector are at medium to low levels within the healthcare industry. Compared to dividend-yielding assets across the entire market, some TCM stocks demonstrate certain allocation value in terms of their P/E ratios, dividend yields, and the stability and certainty of their business models.
Based on the above analysis, from the current standpoint, we believe it is appropriate to view the healthcare sector positively and explore the structural opportunities within it. Overall, we maintain a relatively optimistic attitude towards the healthcare industry.
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