CMB International: Continuous policy support, optimistic about China Meheco Group's valuation rebound.

Zhaojin International released a research report stating that benefiting from overseas interest rate cuts and improvements in the domestic macro environment, the pharmaceutical industry, as a high-elasticity sector, is expected to outperform the market in 2025. The State Council issued another document to support innovative drugs and medical devices, with the potential introduction of the "Class C medical insurance catalog". The upcoming JPM conference will be a good opportunity for Chinese innovative drugs to cooperate with various overseas pharmaceutical companies for BD partnerships, and the outbound transactions of innovative drugs are expected to reach a small peak again. With the significant recovery of medical equipment tenders, it is optimistic about the sustainability of the tender recovery and the valuation repair of the industry. The main viewpoints of Zhaojin International are as follows: The MSCI China Healthcare Index has cumulatively fallen by 4.7% since the beginning of 2025, underperforming the MSCI China Index by 0.9%. Benefiting from overseas interest rate cuts and improvements in the domestic macro environment, the pharmaceutical industry, as a high-elasticity sector, is expected to outperform the market in 2025. The State Council issued a document to promote the high-quality development of the pharmaceutical industry, and innovative drugs and medical devices will continue to enjoy a positive policy environment. With the macro policy focus shifting towards stimulating the economy, the balance of the medical insurance fund is expected to be significantly improved. With stricter supervision of the medical insurance fund, products that meet the characteristics of in-hospital, essential, and medical insurance coverage are expected to continue to grow. The acceleration of medical equipment tenders will drive the profit recovery of domestic medical equipment companies. The State Council issued another document to support innovative drugs and medical devices On January 3, the General Office of the State Council issued the "Opinions on Comprehensive Deepening of Drug and Medical Device Supervision Reform to Promote the High-Quality Development of the Pharmaceutical Industry". The policy mentions deepening the full-process reform of drug and medical device supervision, accelerating the construction of a national unified large market in the field of drugs and medical devices, creating an innovative ecosystem with global competitiveness, and promoting China's transformation from a pharmaceutical power to a pharmaceutical powerhouse. By 2027, the quality and efficiency of the evaluation and approval of innovative drugs and medical devices will be significantly improved, and a regulatory system adapted to pharmaceutical innovation and industry development will be established. By 2035, the pharmaceutical industry will have stronger innovation and global competitiveness. The policy mentions improving the multi-level medical security system and enhancing the payment ability for innovative drugs. The introduction of the "Class C medical insurance catalog" is expected to give priority to drugs that have passed formal review and expert evaluation in domestic negotiations but were not eventually included in medical insurance, such as CAR-T therapy. The JPM conference is about to be held, and there is hope for another small peak in outbound transactions of innovative drugs The JP Morgan Healthcare Conference will be held in mid-January. This conference will be a good opportunity for Chinese innovative drugs to cooperate with various overseas pharmaceutical companies for BD partnerships, and outbound transactions of innovative drugs are expected to reach another small peak. Recently, outbound transactions of innovative drugs in China have continued to grow rapidly, such as INNOVENT BIO and Jiangsu Hengrui Pharmaceuticals reaching overseas licensing agreements with Roche and IDEAYA Biosciences for DLL3ADC, with transaction amounts exceeding $1 billion each. China has become a global engine for innovative drug research and development, and the early-stage research and development efficiency of Chinese pharmaceutical companies is competitive globally. Significant recovery in medical equipment tenders, optimistic about the sustainability of tender recovery According to statistics from Zhongcheng Shuke, the market size of publicly tendered and contracted medical devices in December increased by 37% year-on-year. According to statistics on medical equipment tender amounts disclosed on the China Government Procurement Network, companies such as Shanghai United Imaging Healthcare, Shenzhen Mindray Bio-Medical Electronics, and Sonoscape Medical Corp. all achieved high double-digit growth in equipment tender amounts in December 24 compared to November. Meanwhile, a large number of equipment renewal projects have been implemented, including commissioned hospitals such as Peking University Third Hospital, China-Japan Friendship Hospital, as well as provincial and municipal-level tertiary/secondary hospitals such as Haikou City People's Hospital and Liaocheng Chiping District People's Hospital. According to statistics from Zhongcheng Shuke, as of December 22, 24, the scale of equipment renewal tender procurement in the medical field nationwide has exceeded 6.7 billion yuan. In addition, the accelerated issuance of local government special bonds and the introduction of debt conversion policies are expected to ease the pressure on local finances. With the improvement of local finances and the implementation of equipment renewal policies, medical equipment tenders are expected to continue to recover in 2025. Optimistic about the industry's valuation repair Recommended buy: WuXi AppTec, BEIGENE, INNOVENT BIO, Shanghai United Imaging Healthcare, GIANT BIOGENE, 3SBIO, SKB BIO-B.