CLSA: Recent Pullback in China's Healthcare Sector Is a Buying Opportunity; Overseas and Mainland Trends Improving

CLSA: Recent Pullback in China's Healthcare Sector Is a Buying Opportunity; Overseas and Mainland Trends Improving CLSA issued a research report stating that the recent pullback in China's healthcare sector was mainly driven by macroeconomic concerns, which have largely been reflected in share prices; with overseas progress and mainland operations continuing to improve and the macroeconomic environment having stabilized, the firm views the recent pullback as a buying opportunity. The firm noted that sample hospital data show drug sales improving month by month from July to September, with stronger sequential momentum in September, possibly reflecting that companies and doctors are gradually adapting to new compliance requirements. It expects third-quarter earnings to improve, and the upcoming results season could serve as a near-term catalyst. The out-of-hospital and self-pay markets are growing in importance; with more innovative drugs coming to market and demographic trends, the firm believes the mainland market will eventually become a growth engine again. At ESMO 2026, Chinese assets accounted for 29 of 96 LBA presentations and 5 of 12 Presidential Symposium sessions. Key developments include positive Phase III results for SKB BIO's (06990) TROP2 ADC sac-TMT in first-line non-squamous non-small cell lung cancer and endometrial cancer; AKESO's (09926) AK112 versus durvalumab succeeding in a Phase III trial in first-line biliary tract cancer; INNOVENT BIO's (01801) CLDN18.2 ADC IBI343 achieving a successful first Phase III readout in later-line gastric cancer; first Phase I data for GENFLEET-B's (02595) GFH276; and registrational clinical data for LEADS BIOLABS-B's (09887) LBL-024, among others. Further data readouts are expected at ESMO Asia on December 4-6, including CSPC PHARMA's (01093) SYS6010. Legislation related to U.S.-China innovative drug licensing has largely been settled, with limited impact on normal license-out transactions, removing a major uncertainty for overseas expansion. The firm maintained its China healthcare stock basket unchanged, noting that healthcare accounts for less than 2% of total fund holdings and that the valuation discount offers a more attractive long-term buying opportunity; further overseas clinical progress and new Phase III asset BD transactions should also support the sector.