According to the Zhitong Finance APP, China Merchants Securities has released a research report stating that it is optimistic about the investment value of the pharmaceutical sector in the second half of 2025. It believes that the trend of Chinese innovative drugs going overseas has emerged, with overall competitiveness significantly enhanced. Business Development (BD) overseas is continuously reaching new highs, with ongoing catalysts leading the pharmaceutical market, while searching for sectors and stocks with large potential and strong realization capabilities. It also suggests paying attention to opportunities in the upstream pharmaceutical industry chain, advanced manufacturing, and pharmaceutical consumption, such as medical devices, services, pharmacies, and traditional Chinese medicine.
<h2>The main viewpoints of China Merchants Securities are as follows:</h2>
Pharmaceuticals and Technology Sector
Chinese innovative drugs have taken the global competitive stage, with technological innovation and market expansion leading the trend of the innovative drug industry. The firm remains optimistic about subsequent catalysts and realizations. The overseas expansion of innovative drugs is an industrial logic where supply and demand mutually achieve success. As of now, more than 80 BD projects have been completed for domestic innovative drug projects by 2025, with a wide variety of molecular forms. From the perspective of the number and amount of transactions introduced from multinational corporations (MNCs), China has become the fastest-growing country. From 2020 to 2024, the upfront payment amount for domestic innovative pharmaceutical companies has increased from $500 million to $4.1 billion, which indirectly confirms the global competitiveness of domestic pharmaceutical companies. The firm believes that the development and investment cycle of the innovative drug industry can be interpreted according to &#34;product logic + clinical data + product sales,&#34; with continuous market activity.
In terms of investment ideas, it suggests looking for potential overseas targets along the direction of industrial trends. The main lines of industrial trends and innovative drugs include: 1) New generation immunotherapy: CanSino Biologics, 3SBio, Innovent Biologics, huahaipharm, Junshi Biosciences, and Yiming Oncology; 2) ADC: Kelun-Biotech, BaiLi Tianheng, Fuhong Hanlin, Yingen Biologics, Maiwei Biologics, and HengRui Medicine; 3) TCE bispecific antibodies: Zai Lab; 4) Major breakthroughs in chronic diseases: GLP-1 industry chain (Innovent Biologics, BrightGene, HUADONG MEDICINE, Laika Pharmaceuticals, and Zhongsheng Pharmaceutical), Xinlitai, Yipinhong, Yunding Xinyao, Yifang Biologics, and Shutaishen.
Innovation and Pharmaceutical Industry Chain
The CXO sector has become more competitive after experiencing a financing freeze and bio-secure events. Focus on: 1) WuXi Biologics, WuXi AppTec, WuXi HeLian, and Kanglong Chemical, where leading companies have seen steady growth in hand orders; 2) Opportunities brought by the layout of second and third growth curves in peptides, ADCs, and small nucleic acids; 3) Improvement in fundamentals for companies like Zhaoyan New Drug, with subsequent catalysts. The supply side of raw materials is still clearing, and in the second half of the year, it is recommended to pay attention to companies like TIANYU PHARM, Sitai Li, Tonghe Pharmaceutical, and Guobang Pharmaceutical, which are expected to see marginal profit margin improvements driven by new products and new business releases, as well as companies like huahaipharm and BrightGene with innovative drug catalysts. In the upstream industry chain, the trend of going overseas is still promising, with reduced price competition pressure in the domestic market, a continuous trend of domestic substitution, and performance expected to gradually improve. Focus on companies like Baipusais and Bid Pharmaceutical.
Medical Devices
The bidding data for equipment continues to improve, which is expected to promote inventory improvement in channels. The centralized procurement of high-value consumables continues to expand, and the high market share of imported products is expected to benefit from centralized procurement to achieve domestic volume growth, with significant overseas brand potential. For consumables CDMO/low market share, it is important to grasp the progress of domestic substitution and continue to pay attention to the downstream destocking process, which is expected to stabilize and improve. The acceleration of IVD centralized procurement is helping leading domestic companies increase their market share. Focus on: Mindray Medical, Kaili Medical, Huatai Medical, Microelectrophysiology-U, Xinmai Medical, and Sainuo Medical
In-Hospital and Out-of-Hospital Consumption
Medical services focus on the stabilization of year-on-year factors in cataract centralized procurement in the second half of the year, as well as opportunities for the recovery of demand for consumer-oriented medical services. In the serious medical field, traditional Chinese medicine diagnosis and treatment services, oncology medical services, and comprehensive medical services show strong resilience. Several indicators of traditional Chinese medicine are marginally improving. Attention should be paid to recovery and high-dividend targets. The standardization and rectification of the pharmacy industry accelerate the increase in concentration + the long-term logic of prescription outflow, with performance expected to accelerate in the second half of the year. The growth of blood product plasma volume is gradually being realized, with short-term fluctuations in supply and demand, while core products are expected to maintain supply-demand balance in the medium to long term.
Risk Warning: R&amp;D failures, international relations, foreign exchange fluctuations, intensified competition, environmental protection, and other risks

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China Merchants Securities released a research report, pointing out that the trend of Chinese innovative drugs going overseas has emerged, and it continues to be optimistic about the investment value of the pharmaceutical sector in the second half of 2025. It suggests paying attention to individual stock opportunities in the upstream pharmaceutical industry chain, advanced manufacturing, and pharmaceutical consumption fields, including medical devices, services, pharmacies, and traditional Chinese medicine. The report emphasizes the enhancement of global competitiveness of innovative drugs, a significant increase in the number of BD projects, and investors should look for potential overseas targets along the industry trend

Zhitong

huahaipharm

BrightGene

HUADONG MEDICINE

TIANYU PHARM

WUXI APPTEC

ApicHope

EVEREST MED

CMSC

SONOSCAPE

Hengrui Pharma

HENGRUI PHARMA

Environment Protection

Staidson BioPharm

WUXI XDC

ZHONGSHENGYAOYE

Starry

Guobang Pharma

AKESO

INNOVENT BIO

JUNSHI BIO

Mindray

3SBIO

PHARMARON

Endovastec

HENLIUS

Salubris

InventisBio

WUXI BIO

ACROBIOSYSTEMS

SYNERGY

SKB BIO

Yinhua CSI Chinese Medicine ETF

JOINN

SINOMED

China Merchants Securities: The trend of innovation going overseas has emerged, and we remain optimistic about opportunities in innovative drugs and pharmaceutical consumption