Industrial Securities has released a research report stating that the large-scale share buybacks in the pharmaceutical sector, coupled with the upcoming interim results in July, are expected to serve as significant catalysts. The innovative drug supply chain is anticipated to maintain its Q1 growth momentum, supported by strong industry fundamentals and order expectations. Innovative drugs and medical devices are also poised to benefit from new product launches and high growth in overseas operations. The global competitiveness of China's innovative drug sector continues to strengthen, with Business Development (BD) and out-licensing remaining the preferred method for global market expansion for companies not yet equipped with overseas sales capabilities. The increasing prevalence of Co-Co models reflects enhanced corporate bargaining power. The robust trend of global expansion is expected to continue, with the sector's driving force shifting from "valuation-driven" to "performance and globalization realization-driven." Progress in overseas Phase III trials, increased certainty of approvals, and commercialization royalties will serve as subsequent catalysts for already out-licensed products. The main points from Industrial Securities are as follows:
Large-Scale Buybacks and Innovative Drug BD Deals Converge, Interim Results Poised as Key Catalyst
According to Wind data, as of June 26, 2026, a total of 166 A/H-share listed biopharmaceutical companies have implemented share buybacks, with a cumulative amount of RMB 13.345 billion. Among them, WuXi AppTec H-shares, WuXi Biologics, Tigermed, Hui Tai Medical, and Topbio ranked high in terms of buyback value. Companies like Gu Sheng Tang, Yidu Tech, Aikang Medical, Outai Bio, and Jinxin Fertility ranked high in terms of shares repurchased as a percentage of total share capital. These buybacks are primarily used for employee incentive plans or share cancellation, demonstrating corporate confidence in their own operational development and helping to enhance shareholder value. As July approaches, interim results are expected to be a major catalyst. The innovative drug supply chain is likely to sustain its Q1 growth trend, supported by favorable industry conditions and order expectations. Innovative drugs and medical devices should also benefit from new product ramp-ups and rapid growth in overseas business. In Q1 2026, the CRO index showed year-on-year growth of 18.62% in revenue, 21.52% in net profit attributable to shareholders, and 59.85% in adjusted net profit. The innovative drug index grew by 8.48%, 20.99%, and 26.84% respectively, making the upcoming interim performance figures noteworthy. Regarding BD deals, Haisco and Nuvectis reached an agreement for HSK42360 and HSK39297, securing a $40 million upfront payment and up to $1.421 billion in milestones. A previous collaboration with Eli Lilly involved potential payments of up to approximately $3.054 billion, and the FDA approval of ciprofol further validates the international competitiveness of China's innovative drugs.
Innovative Drug Supply Chain Momentum Remains Upward; CDMO Project Ramp-up and CRO Demand Recovery Support Earnings Rebound
CDMO orders in 2026 continue the growth trend of 2025, with strong demand for new modalities like peptides, ADCs, bispecific antibodies, and oligonucleotides. WuXi AppTec's backlog as of Q1 2026 grew by 23.6%. Pharmaron's new orders for laboratory services and CMC business in Q1 2026 increased by over 20% and over 50% year-on-year, respectively. WuXi XDC and WuXi Biologics saw their backlogs grow by 50.3% and 28.3% in 2025, respectively. Orders for companies like Haoyuan Pharma and PharmaBlock have also improved significantly. As projects are delivered, CDMO earnings are expected to accelerate. In the CRO sector, the enhanced global pricing power of China's innovative drug assets means that upfront payments from license-out deals now exceed total primary market financing, becoming a crucial funding source. Active out-licensing activity alleviates client cash flow pressure. Coupled with the recovery in primary market investment, domestic demand revival, and supply optimization, new CRO orders have shown "volume and price increases" since the second half of 2025. Although still affected by legacy contract pricing in the short term, revenue and profits are expected to rebound quarter by quarter starting in 2026. The complex manufacturing processes for new modality therapies drive demand for process optimization and capacity support. Chinese CDMOs, with their capacity expansion, project experience, and global footprint, have become core global suppliers for new modalities.
Sector Strategy: "Innovation and Internationalization" Remain Core Themes for 2026
For innovative drugs, China's global competitiveness continues to strengthen. BD and out-licensing remain the preferred path for global expansion for companies lacking overseas sales capabilities. The rise of Co-Co models reflects increased corporate bargaining power. Supported by patent cliff pressures on major global pharma, domestic policies encouraging innovation, and the realization of commercialization profits, the high growth trend of global expansion is expected to continue. The sector's driver is shifting from "valuation-driven" to "performance and globalization realization-driven." Progress in overseas Phase III trials, increased approval certainty, and commercialization royalties will be subsequent catalysts for out-licensed products. Regarding the supply chain, geopolitical risks have been partially cleared. CDMO new orders maintained high growth in 2025, with rapid ramp-up of new modalities like peptides, ADCs, bispecific/multispecific antibodies, and oligonucleotides. The recovery in early-stage R&D demand is flowing downstream, with preclinical and clinical CRO orders accelerating quarter by quarter. Prices for safety evaluation, clinical CRO services, and experimental monkeys have risen significantly. CRO companies are expected to see an earnings rebound in 2026, while AI+CRO and upstream import substitution warrant attention. In consumer healthcare, medical services have broad demand and improving supply dynamics. OTC products and retail pharmacy chains benefit from demand recovery and industry consolidation, with sector valuations expected to recover as fundamentals improve. For medical devices, core businesses are stabilizing, equipment procurement is recovering, and the marginal impact of volume-based procurement, DRG/DIP, and industry rectification is weakening. Innovation, internationalization, and import substitution are expected to contribute incremental growth.
Recommended Stocks
Jiangsu Hengrui Pharmaceuticals Co., Ltd.: A leading innovative drug company, with domestic sales entering an accelerated growth cycle and continuously improving quality of international BD deals, promising significant overseas potential.
BeiGene, Ltd.: A global leader in innovative drugs, with accelerating profit growth this year, sustained ramp-up of zanubrutinib, and Proof-of-Concept data from solid tumor pipelines highlighting long-term potential.
Innovent Biologics, Inc.: IBI363 has vast global potential, with frontline clinical trials expected to continue validating its efficacy. Progress is smooth in areas like ADCs and metabolism, solidifying its position as a leading domestic pharma company.
Akeso, Inc.: A leading IO-plus company, with multiple key readouts for AK112 expected in 2026, indicating broad global market potential.
Sichuan Kelun Pharmaceutical Co., Ltd. / Kelun-Biotech Biopharmaceutical Co., Ltd.: Holds a significant advantage in the infusion field, with synthetic biology offering new growth drivers. The core product sac-TMT is progressing smoothly in global clinical trials, consistently demonstrating best-in-class potential, with promising future sales growth.
WuXi AppTec Co., Ltd.: A global leader in integrated, end-to-end CXO services, empowering drug development projects through its CRDMO and CTDMO models.
WuXi XDC Cayman Inc.: A leading one-stop ADCCRDMO service provider.
WuXi Biologics (Cayman) Inc.: Possesses a globally leading open-access, integrated biologics technology and capability platform, with its CRDMO model driving sustained business growth.
Asymchem Laboratories (Tianjin) Co., Ltd.: Driven by both its small molecule CDMO business and emerging businesses, with its order backlog accelerating growth. The company plans to expedite its overseas capacity layout.
Risk Warnings: Unexpected changes in industry policies; weakening comparative advantage of the sector.