Morgan Stanley: Catalysts for China's biotech sector concentrated in the second half, reinitiating coverage on INNOVENT BIO with an "Overweight" rating

Morgan Stanley released a report indicating that the Chinese biotechnology sector has entered a turning point this year, with fundamentals stabilizing, resilient innovation foundations, ongoing licensing transactions, and a continuous recovery in financing activities. However, in the first half of the year, under the backdrop of a scarcity of catalysts, there are limited highly confident investment themes, and risk appetite Beta remains unstable. Amid increasing geopolitical uncertainties, Morgan Stanley expects a broader rotation to de-risked sectors, with greater allocation pressure on high Beta and long-duration sectors such as biotechnology. Morgan Stanley anticipates that the Chinese biotechnology sector will experience range-bound fluctuations in the first half of the year; catalysts, capital reallocation, and more ideal valuations will lay the foundation for clearer stock price directions in the second half of this year.

The firm expects the next round of growth may begin when meaningful data releases, business development (BD) activities, and visibility of licensing transactions start to concentrate. As most events are concentrated in the second half of 2026, the firm believes that further industry re-evaluation should be delayed rather than interrupted.

Morgan Stanley expects the Chinese biotechnology sector to be range-bound in the first half of this year, with a clearer direction in the second half. The first half may continue to be volatile and event-driven; as catalysts accumulate and overseas capital flows expand, the firm anticipates a more sustained upward trend in the second half of the year.

The firm has resumed coverage of INNOVENT BIO (01801.HK) with an "Overweight" rating and a target price of 130 yuan. The firm has also adjusted target prices for several stocks, as detailed in another table