Broker: UOB Kay Hian
Date of Report: 31 July 2025

China Healthcare Sector Surges: Top Stocks, Strong 1H25 Results, and Key Industry Catalysts

Overview: China Healthcare Stocks Rally on Robust 1H25 Outlook

The China healthcare sector has demonstrated remarkable performance in the second half of July 2025, with all covered stocks posting gains. Investor sentiment was buoyed by expectations of strong first-half results, especially among CRDMO (Contract Research, Development, and Manufacturing Organization) companies, whose share prices surged by 22-34%. Standout performers included MicroPort, Sino Biopharm, and Hengui Medicines, which climbed 65.3%, 16.8%, and 13.0% respectively, largely due to significant business development (BD) and M&A activity.

Key Recommendations and Target Price Updates

• WuXi AppTec: Upgraded from HOLD to BUY. Target price raised to HK\$146.00, on the back of increasing investment in biopharmaceuticals expected to drive CRDMO demand over the coming years.
• Mindray (300760 CH): Target price increased from Rmb260.00 to Rmb325.00. Successful tender wins and strong overseas expansion are set to accelerate revenue growth from 3Q25. Mindray is positioned to become a top 10 global medtech company within 5-10 years.
• Aier Eye Hospital Group (300015 CH): Target price lowered from Rmb17.80 to Rmb16.70, reflecting ongoing economic headwinds impacting optometry and refractory segments in 2Q25. The long-term earnings outlook, however, remains positive.

Major Industry News and Developments

• Mindray Potential Hong Kong Secondary Listing:
  • Market rumors suggest Mindray may pursue a secondary listing in Hong Kong to raise at least US\$1 billion (HK\$7.8 billion).
  • If executed, the proceeds would fuel Mindray’s overseas expansion and R&D, fast-tracking its ascent as a global medtech leader.
• Hengrui and GSK Strategic Partnership:
  • Hengrui signed a deal granting GSK ex-China rights to HRS-9821 (a PDE3/4 inhibitor for COPD) and global options for up to 11 additional drug projects.
  • Hengrui will receive a US\$500 million upfront payment, up to US\$12 billion in milestones, and tiered sales royalties.

Top Stock Picks and Target Prices

Peer Comparison: Financial Metrics at a Glance

1H25 Preliminary Results: Biotech and CRDMO Outperform, Some Laggards

Most CRDMO and biotech companies delivered strong 1H25 preliminary results, supported by dynamic BD activity, innovative product approvals, and favorable policy support. However, MicroPort and China TCM are expected to report weaker-than-anticipated earnings due to volume-based procurement (VBP) pressures and company-specific challenges.

Business Development and M&A Activity: Key Catalysts Driving Growth

• Sino Biopharm completed the full acquisition of LaNova, and Hengrui inked out-licensing deals with GSK, further boosting sector sentiment.
• Shanghai SIIC Capital Management’s acquisition of a major MicroPort stake from Otsuka lifted MicroPort’s share price.
• CSPC announced an out-licensing deal for its SYH2086 drug with Madrigal, securing a US\$120 million upfront payment.

Innovative Drug Approvals and Policy Support

• Six domestic innovative drugs were approved by China’s NMPA in July 2025, including Ascentage’s Lisaftoclax, the first BCL2 inhibitor for CLL/SLL in China. The global reference, Venclexta (AbbVie), achieved US\$2.6 billion in global sales in 2024.
• The NMPA introduced new measures to optimize the lifecycle regulation and support the development of high-end medical devices. This policy will benefit leading firms such as Mindray, particularly in fields like medical robotics, imaging, AI medical devices, and new biomaterials.

Impact of Chikungunya Virus Outbreak on Diagnostics and Vaccine Firms

A surge in Chikungunya virus cases (over 4,000 in Foshan, Guangdong) led to a rally in shares of vaccine and diagnostic companies like Zhifei Bio, CanSino, CSPC, Daan Gene, and Wondfu Bio. Chikungunya typically causes fever and severe joint pain, with additional symptoms such as joint swelling, muscle pain, headache, and nausea.

Risks Facing the Sector

• Geopolitical tensions
• Changes in domestic and overseas regulations
• Economic downturn risks
• Poor financial results
• Setbacks in R&D, market launches, and investments in new technologies
• Risks associated with overseas expansion and new business collaborations

Analyst Action: OVERWEIGHT Rating Maintained

The outlook for China’s healthcare sector remains bullish. Chinese biopharmaceutical companies are achieving rapid growth, stronger profitability, and expanding global reach. The increase in out-licensing and acquisition deals is enriching pipelines and adding new revenue streams. The medical device segment is also poised for growth, supported by favorable government policies.
Top BUY Recommendations: Innovent, Hansoh Pharma, Sino Biopharma, BeOne Medicines, HUTCHMED, and Mindray.

Highlights: Recent BD/M&A Activity and IPOs (July 2025)

Healthcare Sector IPOs – July 2025

• Dazhong Dental (2651 HK): Market cap HK\$987m, dental services, raised HK\$186m.
• Leads Biolabs (9887 HK): Market cap HK\$6,600m, biotech, key pipelines include LBL-024 (PD-L1/4-1BB bsAb), LBL-034 (GPRC5D/CD3 BsAb), LBL-033 (MUC16/CD3 BsAb), and LBL-007 (LAG3 mAb), raised HK\$1,179m.

Recent FDA Novel Drug Approvals (2025 YTD)

Recent Company and Sector Updates

• Healthcare Sector: Robust earnings outlook and pipeline growth continue to drive momentum.
• Innovent (1801 HK): Becoming a major player in China’s weight management market.
• WuXi AppTec (2359 HK): 1H25 results exceeded expectations, benefiting from growing CRDMO service demand.
• Mindray (300760 CH): Regaining growth from 3Q25, with a strong trajectory toward global medtech top 10 status.
• Aier Eye Hospital Group (300015 CH): Weak economic conditions clouded optometry and refractory business in 2Q25.