CITIC SEC has released a research report indicating that pharmaceutical innovation companies and global pharmaceutical supply chain enterprises are expected to see steady earnings growth over the next 3-5 years. Concurrently, starting from Q3 this year, key pipelines of domestic innovative drugs are approaching significant data readout catalysts, and the international value of assets with global potential is expected to be realized more rapidly. Furthermore, major policy reforms are gradually realigning the market pricing system towards clinical value and demand orientation, fostering a stable and sustainable domestic pharmaceutical market environment and establishing a long-term, high-potential development trajectory. This is expected to deliver relatively high alpha and beta for the industry's growth. The report recommends a focused attention on investment opportunities within the healthcare industry.
Key Analyst Perspectives
Overall, the earnings performance for the healthcare industry in 26Q2/H1 is anticipated to be relatively stable. Based on forecasts for 63 key covered pharmaceutical companies in 26Q2/H1, 55 are projected to achieve year-on-year profit growth or remain flat, while 8 may experience a decline in profits, incur losses, or continue to be unprofitable (the primary performance metric is net profit, with some companies assessed by revenue growth, and semi-annual indicators used for those without quarterly reports). Notably, many pharmaceutical and medical device companies achieved rapid earnings growth or turned profitable in 26Q2/H1. Against the backdrop of a generally weak domestic demand environment, the pharmaceutical sector continues to demonstrate the high certainty of its essential demand characteristics. Coupled with the sustained high growth in domestic biopharmaceutical financing data, the firm believes that pharmaceutical innovators and global pharmaceutical supply chain companies are poised for continued steady earnings growth over the next 3-5 years.
Detailed Sector Analysis
Innovative Drugs: The fundamentals of China's innovative drug industry are expected to improve steadily in 2026H2, driven primarily by enhanced R&D quality, global value validation, and improved profitability. China's innovative drugs are gradually entering a phase of "global registration + commercialization realization." In R&D, based on the ASCO conference, 94 original Chinese studies were selected for oral presentations at the 2026 ASCO, with HARMONi-6 selected for the Plenary Session and SKB264 demonstrating superiority over Keytruda in a head-to-head trial, signaling continuous improvement in pipeline quality. In global collaboration, according to PharmaGO, the total value of China's innovative drug license-out deals reached $94.3 billion year-to-date in 2026, up 80.8% year-on-year, with upfront payments hitting $5.50 billion, up 124.2% year-on-year, indicating growing recognition from multinational corporations for Chinese innovative assets. Financially, companies like BeiGene and Innovent Biologics have already achieved profitability in 2025. Looking ahead to the second half of the year and beyond, upcoming conferences like WCLC, ESMO, ACR, and ASH, the readout window for multiple registration studies, the ongoing progress of global Phase III/registration trials, and the gradual realization of overseas commercialization are expected to collectively drive performance in the innovative drug sector.
Pharmaceutical Supply Chain: With the rapid recovery of global biopharmaceutical financing, global pharmaceutical R&D demand is gradually rebounding. Combined with China's excellent and efficient CRO service capabilities, the overall earnings growth for the sector is expected to accelerate. On one hand, as the high demand from early-stage research in 2025 gradually translates downstream, there is continued optimism for volume and price increases in preclinical CRO and a stabilization and recovery in clinical CRO in 2026. On the other hand, against the backdrop of rapidly growing downstream drug R&D demand and commercial scale-up, CDMO companies involved in peptide and ADC-related businesses are expected to show outstanding performance.
Medical Industry Chain:
1) Medical Devices: Expansion of innovative payment models + gains from international expansion. Looking forward, innovative products and device exports are expected to remain the two main themes for sector development. Specifically: ① IVD & ICL: The effects of volume-based procurement are expected to materialize, with performance potentially bottoming out and recovering in 2026. Post-procurement, leading companies are expected to continue increasing market share. ② High-value Consumables: Steady revenue growth, continued international volume expansion, and gradual improvement in profitability. ③ Low-value Consumables: Post-pandemic inventory digestion has been effective, with the sector gradually entering an upward cycle. Performance is stable, with a high proportion of exports, warranting close attention to foreign exchange gains/losses. ④ Medical Equipment & Upstream: Equipment renewal policies support steady industry development, but high inventory levels require time to absorb, and net profit margins are impacted by procurement policies.
2) Consumer Healthcare: This sector offers a long runway for growth with favorable multi-dimensional policies, highlighting its allocation value. Leading companies demonstrate earnings resilience, and marginal improvements in the consumer healthcare sector merit attention. Specifically: ① Medical Services: Concurrent improvement in revenue and profit, with a bottom established, suggesting a potential recovery trend for the full year. ② Home-use Medical Devices: Ongoing domestic channel adjustments, with rapid expansion in overseas markets. ③ Pharmaceutical Retail: Revenue under pressure but profit improving, with an industry reversal trend emerging. ④ Internet Healthcare: Benefiting from multiple favorable factors and entering a harvest period. ⑤ Traditional Chinese Medicine Consumer Products: Sector facing temporary pressure, approaching an inflection point. ⑥ Medical Aesthetics: Sector under temporary pressure, with a recovery trend expected for the full year.
3) AI in Healthcare: Enhanced commercialization capabilities are accelerating the restructuring of the trillion-dollar pharmaceutical market.
4) TCM and Health: Innovation and transformation for long-term development, with the "15th Five-Year Plan" opening a grand new chapter.
Individual Company Earnings Preview
(Performance metric is primarily net profit, with some using revenue growth. If marked as 26H1, it refers to the 26H1 forecast; otherwise, it is for 26Q2): 7 companies are expected to see year-on-year earnings growth exceeding 50% or achieve profitability turnaround in 26Q2/H1; 8 companies are expected to have growth between 30-50%; 26 companies are expected to have growth between 10-30%; 14 companies are expected to have growth between 0-10%; 8 companies are expected to experience negative growth, incur losses, or continue losses.
Risk Factors
Risks include intensifying geopolitical friction; macroeconomic recovery falling short of expectations; volume-based procurement price cuts and intensity exceeding expectations; declining financing enthusiasm in the primary market for biopharmaceutical companies; high-value consumables price cuts and procurement progress exceeding expectations; clinical trial failures for innovative drugs; healthcare insurance policy risks for medical services; medical malpractice risks; industrial policy changes not meeting expectations; slower-than-expected development of medical AI; and slower-than-expected progress in commercial insurance policies and product development.
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