China's Outlook on Biopharmaceuticals in 2026: Innovation as the Theme, Breaking Through Overseas Markets and Commercial Insurance.

Abstract The trend of innovative overseas expansion is clear, and the prospects for pharmaceuticals leading the way, as well as medical devices, are equally promising. The continued release of dividends from drug approval reform, coupled with domestic engineering dividends, abundant clinical resources, and supportive multilateral policies, has gradually led domestic innovative drugs from following the times to innovation in FIC/BIC. Chinese innovative drugs have gradually entered the international stage. At the same time, the Chinese innovative drug industry has shifted from "imitation introduction" to "innovation output." Currently, overseas licensing, license out, and new co forms are important means of internationalizing innovative drugs, entering the 2.0 era of Chinese innovative drugs. We believe that the overseas expansion of medical devices and other categories is worth looking forward to. The weak domestic demand is gradually improving, and breakthroughs in commercial insurance are easing payment contradictions. The concentrated rectification of medical anti-corruption that began in 2023 will be normalized in 2024, with the industry impact expected to gradually ease by 2025; policies related to countering internal competition have also been introduced in the pharmaceutical industry, with the first batch of generic drug procurement adopting more flexible pricing points. The trial of a diversified payment system and the continuous advocacy for commercial insurance mark the policies shifting towards easing regional tensions and improving weak domestic demand in the short term. The dumbbell strategy is also applicable in 2026, with a focus on technological advancement and traditional defense. On the one hand, the attributes of medical technology innovation are promising. In addition to the breakthroughs of innovative drugs and their internationalization, the development of AI+ healthcare is also noteworthy. As large models become more prevalent and algorithm optimization accelerates AI development across industries, the rapid development of artificial intelligence has great potential in healthcare. On the other hand, the defensive attributes of traditional sectors should also be noted. With further reforms in state-owned enterprises and advancements in technological innovation, state-owned pharmaceutical companies are expected to enter a new cycle of high-quality development. Risk warning: research and development failures, commercialization falling short of expectations, and procurement price reductions exceeding expectations.