CXO leads on “certainty,” while biotech awaits a main theme to attract incremental capital

Overview

The report summarizes four days of investor meetings conducted in mainland China from August 3 to 6, 2026. Around 20 one-on-one buy-side meetings show that investors generally recognize the fundamental resilience of China healthcare, especially innovative drug-related areas, in the second half of 2026, but believe the core variables for market returns have shifted from demand, pipeline quality, and marginal changes in BD transactions to cross-sector capital rotation and risk appetite. CXO has become a “certainty” allocation due to higher earnings visibility, while innovative drugs and biotech need a clearer common theme or global validation catalysts to attract incremental capital.

Core views

First, China healthcare fundamentals are expected to remain stable, but good operating data alone may not be enough to generate excess returns; the market needs clearer catalysts, better-than-expected earnings upgrades, or investment narratives with global reach. Second, CXO remains an allocation direction with high consensus, with investors focused on its earnings trajectory and the gradual removal of known risks. Third, China’s innovative drug capabilities and BD transaction performance in the first half of 2026 are recognized, but the second half of 2026 lacks a unified theme similar to GLP-1, so allocation will be more stock-specific. Fourth, the global translatability of clinical data is an important constraint on overseas capital inflows. Fifth, AIDD has long-term appeal but is still at the stage of establishing investment and valuation frameworks. Sixth, offline pharmacy retail has defensive attributes, while recovery in demand for discretionary medical services such as refractive surgery and adult orthodontics may be delayed until the second half of 2027.

Analysis framework

The research is based on around 20 one-on-one buy-side meetings during a four-day roadshow in mainland China. It summarizes investor feedback on fundamentals, fund flows, positioning structure, risk pricing, and thematic preferences, and conducts a qualitative comparison based on subsector earnings visibility, the global validation capability of innovative assets, catalyst strength, and the communicability of market narratives.

Methodology notes

• Investor surveyBuy-side one-on-one interview synthesis

  Identify market consensus, disagreements, and positioning preferences through around 20 buy-side meetings.

  The sample comes from the mainland China roadshow from August 3 to 6, 2026. The conclusions mainly reflect the views of the interviewed institutions at that time and do not represent a full-market statistical survey.

• Market driver analysisFundamentals–fund flows two-factor framework

  Distinguish between industry operating resilience and drivers of stock returns.

  The report argues that stable fundamentals do not necessarily lead to excess returns; ETF and institutional fund flows, cross-sector rotation, generalist investor risk appetite, and overseas capital trends must also be considered.

• Catalyst analysisThematic appeal and global validation framework

  Assess whether an investment theme can attract incremental capital and whether Chinese clinical data can support global registration and commercial partnerships.

  Companies with clear data readouts, regulatory progress, earnings upgrades, or globalization narratives are more likely to receive valuation premiums; when there is no unified theme, the importance of stock differentiation rises.

• Emerging technology assessmentAIDD investment framework

  Assess AI-driven drug discovery from dimensions including platform, pipeline, data barriers, model capabilities, and value attribution.

  Investors have not yet formed a consensus on competitive moats, commercial value attribution, and traditional valuation metrics, so related trading opportunities are more likely to emerge around verifiable milestone stages.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• CXO sector

  Preferred subsector and “certainty” allocation

  Strengths

  Relatively high earnings visibility, repeatable global business, and an operating path that investors can assess more easily.

  Weaknesses

  Valuation performance still depends on the earnings trajectory and whether known policy and geopolitical risks can be gradually removed.

  Comparison

  Compared with other China healthcare subsectors, CXO receives greater investor attention and stronger consensus.

  Risks

  Geopolitics, overseas regulatory restrictions, and orders or earnings falling short of expectations.

• Innovative drugs and biotech sector

  Preferred subsector, but with an emphasis on stock selection

  Strengths

  Innovation capabilities are recognized, BD transaction flow in the first half of 2026 was better than expected, and pipelines have structural growth potential.

  Weaknesses

  The second half of 2026 lacks a unified “magnet theme,” and overseas investors still question the global translatability of clinical data.

  Comparison

  Structural growth is stronger than in traditional healthcare areas, but near-term certainty and market consensus are weaker than for CXO.

  Risks

  Clinical failures, obstacles to global registration, persistent valuation discounts, and insufficient incremental capital.

• Innovent Biologics (1801.HK)

  Key favored biotech name, OW

  Strengths

  One of the biotech top picks explicitly listed in the report.

  Weaknesses

  Performance still depends on company-level catalysts and pipeline differentiation.

  Comparison

  When the industry lacks a unified theme, companies with clearer stock-specific logic receive more attention.

  Risks

  R&D data, commercialization execution, and fluctuations in industry fund flows.

• Kelun Biotech (6990.HK)

  Key favored biotech name, OW

  Strengths

  One of the biotech top picks explicitly listed in the report, with sac-TMT potentially providing a global validation catalyst.

  Weaknesses

  Value realization is highly dependent on key clinical and regulatory milestones.

  Comparison

  Compared with innovative drug companies lacking clear catalysts, its global Phase III data and potential BLA acceptance are more observable.

  Risks

  sac-TMT data falling short of expectations, BLA not being accepted, or timeline delays.

• WuXi AppTec (603259.SS / 2359.HK)

  Key favored CXO name, with both A-shares and H-shares rated OW

  Strengths

  High liquidity and benchmark relevance, a clear operating path, and alignment with investors’ preference for global repeatability and earnings visibility.

  Weaknesses

  Needs to continue proving its earnings trajectory and remove known risk premiums.

  Comparison

  A core representative of the CXO “certainty” trade.

  Risks

  Geopolitics, overseas policy restrictions, and changes in earnings expectations.

• WuXi Biologics (2269.HK)

  Key favored CXO name, OW

  Strengths

  High industry attention and a relatively clear operating assessment framework.

  Weaknesses

  Market performance may be affected by fund rotation and risk appetite.

  Comparison

  Together with WuXi AppTec and GenScript, it forms the group of CXO names most discussed by investors.

  Risks

  Fluctuations in orders and capacity utilization, geopolitics, and overseas regulatory risks.

• MicroPort MedBot (2252.HK)

  Key favored surgical robotics name, OW

  Strengths

  Exposure to medical device innovation and the surgical robotics theme.

  Weaknesses

  The report does not provide detailed earnings forecasts or valuation arguments.

  Comparison

  A supplementary stock-specific opportunity outside CXO and biotech.

  Risks

  Commercialization progress, hospital procurement environment, and earnings delivery falling short of expectations.

• AIDD

  Emerging investment theme with high attention

  Strengths

  May improve drug discovery efficiency and create differentiated value at the platform, data, or model level.

  Weaknesses

  There is not yet market consensus on competitive moats, value attribution, or valuation methods.

  Comparison

  The long-term narrative is attractive, but current investability and earnings visibility are weaker than for mature CXO.

  Risks

  Insufficient technology validation, difficulty mapping milestones to traditional valuations, and a rapid fading of attention.

• Offline pharmacy retail

  Defensive healthcare allocation

  Strengths

  Same-store sales growth is improving, hospital anti-corruption efforts may drive some prescription volume to retail pharmacies, and leading chains are relatively more resilient to routine inspections.

  Weaknesses

  The strength of the industry recovery still requires continued data validation.

  Comparison

  Compared with discretionary medical services, demand visibility and defensive attributes are stronger.

  Risks

  Regulatory inspections, prescription outflow falling short of expectations, and weak consumption recovery.

• Discretionary medical services

  Cautious observation

  Strengths

  May have operating leverage after demand recovers, while overseas expansion can reduce dependence on mainland China consumption.

  Weaknesses

  Demand for refractive surgery, adult orthodontics, and similar services shows no signs of a rapid near-term recovery.

  Comparison

  Recovery certainty is lower than for offline pharmacy retail, and some investors have pushed expectations for an inflection point to the second half of 2027.

  Risks

  Weak discretionary consumption by residents, further delays in recovery timing, and excessive dependence on the domestic market.

Key data

• Roadshow periodAugust 3 to 6, 2026Four days of investor meetings conducted in mainland China.
• Number of buy-side meetingsAround 20Mainly one-on-one meetings.
• Key investment periodSecond half of 2026Fundamentals are expected to be solid, while fund flows and risk appetite are the main variables driving volatility.
• Innovent Biologics closing priceHK$94.851801.HK, OW; as of the close on August 7, 2026.
• Kelun Biotech closing priceHK$539.506990.HK, OW; as of the close on August 7, 2026.
• MicroPort MedBot closing priceHK$23.222252.HK, OW; as of the close on August 7, 2026.
• WuXi AppTec A-share closing priceRmb154.82603259.SS, OW; as of the close on August 7, 2026.
• WuXi AppTec H-share closing priceHK$192.302359.HK, OW; as of the close on August 7, 2026.
• WuXi Biologics closing priceHK$45.862269.HK, OW; as of the close on August 7, 2026.

Impact & implications

At the allocation level, priority should be given to CXO companies with high earnings visibility and clear operating paths, as well as biotech companies with clear global validation catalysts and differentiated pipelines. Because the innovative drug sector lacks a unified theme, broad sector allocation may be less effective than selected stock picking. Whether overseas capital can increase exposure largely depends on repeated validation of Chinese clinical data by global regulators and partners. Offline pharmacy retail can serve as a defensive direction, while medical services dependent on domestic discretionary consumption should adopt more cautious recovery assumptions.

Risks

• Healthcare anti-corruption efforts may continue to affect hospital access, channel behavior, promotion intensity, and sales execution, and whether conditions normalize in the second half of 2026 remains uncertain.
• Geopolitical risks may heat up rapidly from late 2026 to early 2027 and may affect valuations independently of company fundamentals.
• Investors currently pay limited attention to anti-corruption and geopolitics, creating the possibility of insufficient risk pricing or excessive optimism.
• Cross-sector capital rotation, ETF and institutional fund flows, and generalist investor risk appetite may overwhelm the healthcare industry’s own fundamentals.
• If Chinese clinical data cannot continue to prove its applicability for global registration, overseas capital inflows and valuation recovery may be constrained.
• Biotech lacks a unified investment theme, so the sector may see high dispersion and the risk of stock-specific catalysts falling through.
• AIDD’s business model, competitive moats, and valuation framework are not yet mature.
• Recovery in demand for discretionary medical services may be further delayed.

What to watch

• Incremental fund flows from ETFs, institutions, generalist investors, and overseas investors.
• CXO companies’ earnings trajectories, order trends, and progress in removing known policy risks.
• Release of sac-TMT global Phase III data and whether its BLA is accepted by the FDA.
• Repeated evidence that Chinese clinical data are recognized by global regulators and partners.
• Whether the innovative drug sector can form a unified theme similar to GLP-1, a dominant drug technology route, or BD expectations.
• Quantifiable milestones corresponding to AIDD platforms, pipelines, data barriers, and model capabilities.
• Follow-on impact of healthcare anti-corruption on hospital access, channel caution, and promotion activities.
• Offline pharmacy same-store sales growth and prescription outflow trends.
• Timing of demand inflection for discretionary medical services such as refractive surgery and adult orthodontics.
• Geopolitical changes from late 2026 to early 2027.