Investment Rating - The report maintains an "Overweight" rating for the medical device industry [5]. Core Insights - The medical device industry in China has a prominent supply chain advantage, with overseas markets expected to maintain rapid growth. The brain-computer interface (BCI) sector is at a critical turning point, likely to see demand release. AI medical applications are gradually becoming operational, poised to reshape the health market [3]. Summary by Relevant Sections Investment Recommendations - For the overseas medical device sector, recommended stocks include: United Imaging Healthcare, Nanwei Medical, Microelectronic Physiology, Guichuang Tongqiao, Yuyue Medical, and New Industry. Stocks to watch include: Jingfeng Medical, MicroPort Scientific, and Chuangli Medical [5]. - In the brain-computer interface sector, recommended stocks are: Lepu Medical, Weisi Medical. Stocks to watch include: Meihao Medical, Xiangyu Medical, Mcland, Xinwei Medical, Aipeng Medical, Chengyitong, Chuangxin Medical, and Botuo Bio [5]. - For the AI + device sector, recommended stocks are: Yuyue Medical, BGI Genomics, KingMed Diagnostics, and United Imaging Healthcare. Stocks to watch include: Dian Diagnostics [5]. Overseas Market Growth - The supply chain advantage of domestic medical devices is significant, with exports expected to grow rapidly. In the first three quarters of 2025, United Imaging Healthcare's overseas revenue increased by 41.97% year-on-year, becoming a crucial growth driver for the company. The company continues to expand its market share in key regions due to superior product performance and localized service capabilities. By December 2025, MicroPort Scientific's global cumulative order volume exceeded 160 units, with core products in endoscopy, orthopedics, and vascular intervention surpassing 230 units in total orders. In 2025, Jingfeng Medical achieved a breakthrough in multiple key global markets, leading to explosive growth in overseas orders [5]. Brain-Computer Interface Market - The brain-computer interface market is at a pivotal turning point, with anticipated demand release. China's "14th Five-Year Plan" explicitly suggests a forward-looking layout for future industries, promoting BCI as a new economic growth point. In December 2025, Elon Musk announced that Neuralink would begin large-scale production of BCI devices in 2026, transitioning to a more streamlined and nearly fully automated surgical process. In January 2026, China's BCI company Strong Brain Technology announced it had completed a new round of financing of approximately 2 billion yuan, setting a record for the second-largest single financing in the field globally, following Neuralink. The funds will be used to accelerate core technology research and development, extreme engineering breakthroughs, and product scaling and mass production [5]. AI Medical Applications - AI medical applications are gradually becoming operational, with the potential to reshape the health market. In June 2025, Ant Group launched the AI Health Manager AQ, which was officially upgraded to "Antifufu" in December 2025. By January 2026, the "Antifufu" app had over 30 million monthly active users, with daily inquiries exceeding 10 million, 55% of which came from third-tier cities and below. In January 2026, Tempus AI reported preliminary revenue of approximately 1.27 billion USD for 2025, representing an 83% year-on-year increase, exceeding initial expectations. OpenAI announced the acquisition of the healthcare tech startup Torch to expand into the healthcare sector, while Google launched the next-generation open-source medical AI model MedGemma1.5 and released the open-source medical speech-to-text model MedASR [5].

Investment Rating - The report rates the pharmaceutical and biotechnology industry as "Outperforming the Market" [1][8]. Core Insights - The report highlights a significant increase in the success rate of negotiations for high-value innovative drugs, with the 2025 National Medical Insurance Directory adding 114 new drugs, including 50 innovative drugs, and achieving a negotiation success rate of 88%, up from 76% in 2024 [3]. - The introduction of a commercial insurance drug directory marks a new phase in healthcare, aiming to create a multi-layered insurance system that complements basic medical insurance, with 19 innovative drugs included in the first version [3]. - The report emphasizes the potential for Chinese innovative drugs to expand internationally, with a focus on ADCs, bispecific antibodies, small nucleic acids, and weight-loss drugs as key investment opportunities [3]. Summary by Sections Industry Performance - The SW Pharmaceutical and Biotechnology Index decreased by 0.74% in the week of December 1-7, underperforming the Shanghai and Shenzhen 300 Index, which increased by 1.28% [2]. - Within the pharmaceutical sector, the drug distribution (+6.48%) and offline pharmacy (+1.85%) segments performed relatively well, while raw materials (-2.54%), vaccines (-1.62%), and CXO (-1.29%) segments showed weaker performance [2]. National Medical Insurance Directory - The 2025 version of the National Medical Insurance Directory will officially implement on January 1, 2026, with a total of 3,253 drugs included, enhancing coverage for critical areas such as oncology, chronic diseases, mental health, rare diseases, and pediatric medications [3]. - Notably, 105 of the newly added drugs are exclusive products, including 98 Western medicines and 7 traditional Chinese medicines [3]. Commercial Insurance Drug Directory - The first version of the commercial insurance innovative drug directory includes 19 drugs, focusing on high clinical value and significant patient benefits, which are beyond the scope of basic medical insurance [5]. - This directory includes treatments for rare diseases, cancer therapies, and Alzheimer's disease, establishing a foundation for the development of a multi-tiered medical insurance system [3][5]. Investment Recommendations - The report suggests a positive outlook for the international expansion of Chinese innovative drugs and recommends monitoring ADCs, bispecific antibodies, small nucleic acids, and weight-loss drugs for investment opportunities [3]. - Key companies to watch include Yiming Biotechnology-B, WuXi AppTec, Maiwei Biotechnology-U, Kelun-Biotech, and Kangfang Biotech [3].