Broker: UOB Kay Hian
Date of Report: 16 July 2025
China Healthcare Sector Surges: Robust Earnings, Pipeline Growth, and M&A Momentum Drive Biotech Rally
Sector Overview: Accelerated Growth Underpinned by Innovation and Strategic Deals
China’s healthcare sector is gaining significant traction, powered by strong earnings outlooks, a robust biopharmaceutical pipeline, and an uptick in business development (BD) and M&A activities. Expectations are high for biopharmas and CRDMO companies to deliver impressive growth in the first half of 2025, with commercial insurance policy developments further supporting sector momentum. UOB Kay Hian maintains its OVERWEIGHT rating, citing a sustained rally driven by innovation, strategic partnerships, and growing demand for advanced therapies.
Sino Biopharm: Strategic Acquisition of LaNova Medicines Enriches Innovative Pipeline
Sino Biopharm (1177 HK, BUY, Target Price: HK\$7.70) announced a landmark acquisition of LaNova Medicines for up to US\$950.92 million. LaNova, a clinical-stage biotech firm, is committed to developing global First-in-Class (FIC) or Best-in-Class (BIC) products. The acquisition brings:
- Two assets in registration trials
- Six assets in Phase I/II trials
- Over 10 preclinical-stage assets
Key products include:
- LM-299: Potential BIC PD-1/VEGF bispecific in Phase I trial (China), licensed to Merck & Co.
- LM-305: Potential FIC GPRC5D-targeting ADC in global Phase I, licensed to AstraZeneca
- LM-108: Potential FIC CCR8-targeting mAb in Phase II (China), with Breakthrough Therapy Designation by NMPA for two indications
- LM-302: Potential FIC Claudin 18.2 ADC in Phase III (China), IND approval from US FDA
LaNova’s strong out-licensing income propelled it to profitability, reporting RMB 4.2 billion in revenue and RMB 1.69 million in net earnings in 1H25. The acquisition is expected to enrich Sino Biopharm’s innovative portfolio, boosting its R&D capabilities and positioning the company for at least 10 innovative launches between 2025 and 2027.
Additionally, Sino Biopharm’s R&D is progressing smoothly with NMPA accepting its new indication application for Culmerciclib Capsule (TQB3616, a self-developed CDK2/4/6 inhibitor) in combination with Fulvestrant for 1L treatment of HR+/HER2- advanced or metastatic breast cancer. These developments underpin a sustainable double-digit revenue growth outlook from 2025 onward.
Top Stock Picks in China Healthcare
| Company |
Recommendation |
Share Price (LCY) |
Target Price (LCY) |
| Innovent (1801 HK) |
BUY |
85.90 |
110.00 |
| Hansoh Pharma (3692 HK) |
BUY |
28.15 |
40.00 |
| Sino Biopharma (1177 HK) |
BUY |
6.37 |
7.70 |
| BeOne Medicines (6160 HK) |
BUY |
141.00 |
220.00 |
| HUTCHMED (13 HK) |
BUY |
26.05 |
36.00 |
| Ping An Good Doctor (1833 HK) |
BUY |
9.61 |
11.00 |
WuXi AppTec: Outstanding Profit Alert and Sector Leadership
WuXi AppTec (2359 HK, HOLD, Target Price: HK\$70.00) posted a positive profit alert for 1H25:
- Revenue: RMB 20.80 billion, +20.6% YoY
- Revenue from continuing operations: +24.2% YoY
- Net profit: RMB 8.56 billion (+101.9% YoY), driven by a RMB 3.21 billion gain from partial sale of WuXi XDC shares
- Adjusted net profit: RMB 6.31 billion (+44.4% YoY)
This performance outpaced both internal and consensus estimates for full-year 2025, reinforcing WuXi AppTec’s sector leadership and signaling strong financial performance across the broader CXO sector.
WuXi Biologics: Accelerating Global Expansion and Margin Improvement
WuXi Biologics (2269 HK, BUY, Target Price: HK\$33.00) is experiencing rapid business expansion, with confidence in achieving:
- 12-15% YoY total revenue growth in 2025
- 17-20% YoY business revenue expansion in 2025
Key drivers include optimization of production facilities in Germany and Ireland, as well as expanded capacity in the US and Singapore, driven by resilient service demand. The 2025 earnings estimate has been revised upward from RMB 5.5 billion to RMB 5.7 billion to reflect margin improvements.
TUL: Innovation in Anti-Obesity Treatments and Upgraded Earnings Outlook
TUL (3933 HK, BUY, Target Price: HK\$19.00) focuses on new product innovation, with recent US FDA IND approval for UBT37034 Injection for overweight or obesity. UBT37034 is a novel peptide receptor agonist targeting the Neuropeptide Y2 receptor (NPY2R), showing in preclinical studies that its combination with GLP-1 analogs can significantly enhance weight loss.
TUL also received a substantial upfront payment of US\$180 million from Novo Nordisk for the out-licensing of UBT251 (a GLP-1/GIP/GCG triple agonist), providing a significant boost to 1H25 earnings. Revenue and earnings estimates for 2025 have been revised upward (revenue from RMB 2,704 million to RMB 3,604 million), supporting an upgrade to BUY.
Hengrui Pharmaceuticals: Leading with Innovation and Multiple Approvals
Hengrui Pharmaceuticals (1276 HK, Not Rated) emerged as an innovation leader in 1H25, securing six innovative drug approvals and clinical trial approvals for:
- SHR-4506: Novel Class I biologics for advanced malignant tumors
- HRS-9821: Small molecule PDE3/PDE4 inhibitor for COPD maintenance
- SHR-2173: Novel biologic for primary membranous nephropathy
R&D costs were RMB 19.9 million, RMB 38.43 million, and RMB 64.07 million respectively for these assets. Hengrui’s progress highlights its dominance in biopharmaceutical innovation in China.
Peer Comparison: Key Metrics and Valuations
| Company |
Ticker |
Rec |
Price |
Target Price |
Market Cap (LCYm) |
2025F PE |
2026F PE |
2025F P/B |
2026F P/B |
2025F EV/EBITDA |
2026F EV/EBITDA |
2025F ROE (%) |
2025F Net Gearing (%) |
2025F EPS |
2026F EPS |
2027F EPS |
2025-27 EPS CAGR (%) |
2025F PEG |
| Aier Eye Hospital |
300015 CH |
BUY |
12.21 |
17.80 |
113,863.1 |
30.5 |
25.5 |
4.9 |
4.4 |
17.2 |
15.4 |
18.6 |
-24.1 |
0.40 |
0.48 |
0.56 |
18.5 |
1.6 |
| Dian Diagnostics |
300244 CH |
SELL |
15.21 |
10.50 |
9,505.9 |
49.3 |
33.7 |
1.4 |
1.4 |
10.4 |
8.1 |
2.9 |
0.2 |
0.31 |
0.45 |
0.59 |
38.1 |
1.3 |
| Shenzhen Mindray |
300760 CH |
BUY |
215.06 |
260.00 |
260,747.6 |
21.1 |
19.2 |
6.5 |
5.8 |
18.3 |
16.4 |
32.5 |
-44.4 |
10.18 |
11.21 |
12.74 |
11.9 |
1.8 |
| Hansoh Pharma |
3692 HK |
BUY |
28.15 |
40.00 |
174,251.5 |
30.1 |
25.1 |
5.0 |
4.4 |
22.7 |
19.0 |
17.4 |
-34.8 |
0.89 |
1.07 |
1.29 |
20.3 |
1.5 |
| Innovent Biologics |
1801 HK |
BUY |
85.90 |
110.00 |
146,840.1 |
154.5 |
113.2 |
9.5 |
9.2 |
280.9 |
145.0 |
2.0 |
10.5 |
0.51 |
0.69 |
0.91 |
34.1 |
4.5 |
| BeOne Medicines |
6160 HK |
BUY |
141.00 |
220.00 |
264,619.1 |
51.6 |
28.8 |
8.5 |
7.5 |
114.7 |
44.8 |
1.7 |
-37.2 |
0.41 |
0.73 |
1.27 |
76.9 |
0.7 |
| Ping An Good Doctor |
1833 HK |
BUY |
9.61 |
11.00 |
20,771.5 |
78.8 |
53.2 |
5.0 |
4.7 |
499.8 |
93.8 |
5.0 |
-63.4 |
0.11 |
0.17 |
0.21 |
36.2 |
2.2 |
| WuXi Biologics |
2269 HK |
BUY |
27.30 |
33.00 |
111,087.3 |
18.4 |
16.2 |
2.2 |
1.9 |
12.8 |
10.8 |
10.0 |
-12.1 |
1.35 |
1.54 |
1.79 |
14.9 |
1.2 |
Recent Business Development and M&A Activity
The sector has seen a notable increase in BD and M&A activity, with recent deals including:
- Recbio (2179 HK) licensing REC603 (HPV 9-valent vaccine) to Biological E
- Henlius (2696 HK) licensing HCB101 (Anti-SIRPα-CD47 Fusion Protein) to FBD Biologics (US\$10m upfront, US\$202m total deal value)
- Brii Bio (2137 HK) licensing BRII-693 (novel synthetic lipopeptide) to Joincare Pharma
- Cstone (2616 HK) licensing Sugemalimab (Anti-PD-L1 mAb) to Istituto Gentili (US\$192.5m total deal value)
- Sironax licensing Brain Delivery Module platform to Novartis (US\$175m total deal value)
This heightened level of activity underscores the sector’s attractiveness and the strategic imperative to expand innovative pipelines and access global markets.
Risks to Outlook
Investors should be aware of several risks, including:
- Rising geopolitical tensions
- Regulatory shifts domestically and overseas
- Potential economic downturns
- Weaker-than-expected financial results
- R&D, market launch, and new technology investment risks
- Risks in overseas expansion and business collaborations
- Other policy-related risks
Conclusion: China Healthcare Poised for Continued Outperformance
China’s healthcare sector is on a rapid growth trajectory, bolstered by a combination of innovative drug pipelines, robust earnings, and aggressive business development. The sector’s leading companies—Innovent Biologics, Hansoh Pharma, Sino Biopharm, BeOne Medicines, and HUTCHMED—are well-positioned to capitalize on expanding domestic and global markets. Increasing out-licensing deals and M&A activity will continue to enhance pipelines and generate significant revenue streams. UOB Kay Hian’s OVERWEIGHT stance reflects confidence in the sector’s ability to deliver sustainable growth and innovation in the years ahead.
