China Securities Co., Ltd.: Pharmaceutical industry welcomes improvement trend, innovation-related performance more prominent.

China Securities Co., Ltd. released a research report stating that pharmaceutical listed companies have completed the disclosure of their performance for the year 2025 and the first quarter of 2026. Overall, the pharmaceutical industry's revenue in 2025 showed a slight decline, with a 18.91% decrease in non-net profit attributable to the mother; in 26Q1, the overall revenue and non-net profit attributable to the mother of the pharmaceutical industry returned to year-on-year growth. The performance of various specific sectors continued to diverge. In the first quarter of 2026, the upstream biopharmaceuticals, CRO/CMO, healthcare services, chemical formulations, household appliances, and high-value consumables sectors showed double-digit growth in revenue and non-net profit attributable to the mother, with CRO/CMO showing the most significant growth. Key points from China Securities Co., Ltd.: The industry is witnessing an improvement trend, with more prominent performance in the innovation-related sectors. In 2025, the overall operating income of the pharmaceutical industry decreased by 0.56% year-on-year, compared to a slight narrowing of the decline from Q1 to Q3 of 2025; in 26Q1, the overall operating income of the pharmaceutical industry increased by 2.16% year-on-year, indicating an improvement trend in the industry's revenue in the first quarter of 2026. In 2025, the overall non-net profit attributable to the mother of the pharmaceutical industry decreased by 18.91% year-on-year. In 26Q1 of 2026, the overall non-net profit attributable to the mother of the pharmaceutical industry increased by 2.69% year-on-year, showing an improvement trend. In 26Q1, the upstream biopharmaceuticals, CRO/CMO, healthcare services, chemical formulations, household appliances, and high-value consumables sectors showed double-digit growth in revenue and non-net profit attributable to the mother, with CRO/CMO showing the most significant growth. Key sector situations: Innovative Drugs: Continuous advancement in commercialization and internationalization, significant increase in revenue, scale effects evident, multiple companies turn losses into profits, and leading companies perform exceptionally well; in 26Q1, the total amount of product authorizations for international expansion exceeded US$60 billion, nearly half of the total for the full year of 25. CRO: Benefiting from the continued hot market for business development, domestic investment and financing continue to improve; at the same time, the track of new drug forms is further expanding, and new orders and performance in the domestic CRO industry in 26 will accelerate growth. Overseas demand will face greater fluctuations due to geopolitical factors, overseas investment and financing, and early-stage research demand abroad. Chemical Formulations: The growth rate of sector revenue from 25Q1-3 to 26Q1 has gradually stabilized and turned positive, the impact of group purchases has gradually cleared, and the increase in revenue from new innovative drugs has boosted operational performance. Pharmaceutical Equipment and Consumables: Revenue in 26Q1 continued the growth trend of the past few quarters, with a significant year-on-year increase in net profit attributable to the mother, a continued growth trend in contract liabilities, stabilization of the industry at the bottom, and significant profit recovery on the earnings side. Scientific Reagents: Achieved close to a 10% growth in both 25Q4 and 26Q1, with the overall industry gradually stabilizing, the industry's bottom confirmed, focusing on domestic alternatives and merger integration trends. Medical Devices: Achieved positive revenue growth for three consecutive quarters, with the industry's recovery continuing; the impact of group purchases on the high-value consumables sector gradually weakening, overall solid revenue growth in 25, expected to be maintained in 26; significant improvement in revenue growth for medical device sector in 25, with some companies with new products and high overseas growth expected to maintain rapid growth in 26; the IVD sector in 25 was under pressure due to multiple policy factors, with the policy impact weakening in 26, but most companies still under performance pressure. Traditional Chinese Medicine: Industry under temporary pressure due to multiple factors, stabilized and recovered in 25Q4; gradual clearance of channel inventory in 26Q1, industry performance stable. Vaccines: Significant decline in performance in 25, slight narrowing in 26Q1, with the launch of some new products offsetting the decline in traditional products; in 26, the potential of new product launches or research and development progress from some companies warrants attention, focusing on the development of innovative vaccines and merger integration. Risk reminders: Industry policy risk; research and development falling short of expectations risk; approval falling short of expectations risk; macroeconomic environment volatility risk.