Summary of Key Points
In the first half of 2026, the performance of multinational pharmaceutical and medical device companies in China was no longer characterized by a uniform increase or decline; instead, there was a clear differentiation among them. Some companies experienced growth (for example, Novartis China saw a 13% increase), while others faced declines (for instance, Merck Sharp & Dohme’s revenue dropped by 33% in the first quarter). The underlying reason is that the days of easily making profits through brand recognition, being originators of products, and having mature products are over. However, growth has not disappeared; it has instead concentrated in a few companies with differentiated innovations, specific product areas, and key links in the industrial chain. New rules for success have emerged: innovation is now the key to entering the market, with product value, scale capability, and resilience of the product portfolio becoming crucial factors.
Detailed Analysis
1. Pharmaceuticals: Growth Depends on Individual Products, Not Entire Companies
In the past, the performance of multinational pharmaceutical companies in China could be assessed by the overall growth rate of the company. No longer is that the case; now, it’s essential to look at the fate of individual products.
- For example, although Novartis China had an overall 7% increase, there was internal variation: its innovative drug Leqvio saw a surge in sales after being included in the national healthcare insurance program (with a 68% global increase in the first half of the year), whereas its older drug Cosentyx saw a decline.
- AstraZeneca is a more typical example. Its older diabetes drug decreased in sales due to government procurement policies, but its innovative drug Fasenra for asthma experienced a 75% increase in sales in the second quarter after being included in the insurance program.
In simple terms: It’s no longer about the company being strong; it’s about having products that consumers are willing to buy. Even if a company’s overall performance declines, one innovative drug can drive growth against the trend. Conversely, even large companies cannot withstand the impact of government procurement policies or the emergence of generic drugs if they rely on older drugs.
2. Medical Devices: New Product Portfolios Compensate for Price Pressure from Government Procurement
Medical devices are more directly affected by price cuts from government procurement, but growth opportunities have not been completely eliminated. Companies can use the sales from innovative products to offset declines in revenue from older products.
- Boston Scientific faced pressure on its mature products in the urinary and cardiovascular sectors due to government procurement policies, but its AGENT product (a paclitaxel-coated balloon for coronary interventions) saw a 15% increase in sales, and its PFA (pulsed field ablation) technology for electrophysiology grew by more than 20%. Overall, its business in China still achieved double-digit growth.
- Johnson & Johnson’s MedTech division stabilized its performance with its traditional wound closure products, while newly acquired companies like Shockwave (inventor of cardiovascular innovations) and its electrophysiology products contributed to growth.
In simple terms: Government procurement policies may reduce profits from older products, but companies with high-barrier innovative products can still expand their market share. The resilience of medical device companies depends on the number of innovative products they have in their portfolio.
3. Upstream Companies: Pharmaceutical Companies Are Spending More on Equipment, Driving Industrial Recovery
The growth in the pharmaceutical and medical device sectors has also boosted upstream companies that supply research and development equipment and consumables, indicating a true recovery in the industry.
- Danaher experienced mid-single-digit growth in the Chinese market for two consecutive quarters, with its life sciences business seeing an increase of more than 10% in orders (as customers purchased equipment for experiments and production).
- Thermo Fisher Scientific had strong growth in the Asia-Pacific region (including China) in the second quarter, as academic and government clients began to purchase high-end instruments, and pharmaceutical companies increased their investments.
In simple terms: Pharmaceutical companies need to invest in equipment and consumables for research and development. Increased orders from upstream companies show that they are confident about the future of the industry, indicating a shift from simply selling drugs to engaging in comprehensive innovation across the entire value chain.
4. New Rules: Innovation Is the Only Way Forward
The trends in the pharmaceutical, medical device, and upstream sectors all point to one conclusion: old advantages (such as brand recognition, being originators of products, and importing goods) are no longer effective. The new rules are clear:
- Rule 1: Brands are no longer as valuable; product value is what truly matters. For example, Enhertu’s success in sales is due to the continuous approval of new indications for treating more types of cancer, not because of its brand.
- Rule 2: Price cuts are not a problem if they lead to increased sales. Novo Nordisk’s obesity drug Wegovy saw a 104% increase in sales in the second quarter despite price reductions, indicating higher profits.
- Rule 3: Company labels (such as being well-known brands) are no longer decisive; the product portfolio determines a company’s resilience. Although Roche Pharmaceuticals’ overall performance declined in China, its innovative drugs like Phesgo continued to grow due to local demand.
- Rule 4: Growth has shifted from simply selling drugs to investing in innovation. AstraZeneca spent nearly $2 billion in Chinese domestic innovative drugs (such as those developed by Dizhe Medicine), transforming China from a mere sales market into a source of innovative products.
In simple terms: Multinational companies are changing their approach in China. They no longer just bring drugs from Europe and the United States to sell here; they now seek innovation, develop it locally, and then sell it in China. The days of easy profits are over, but the real opportunity for significant growth lies in innovation.
Conclusion
Multinational pharmaceutical and medical device giants can still make money in China, but the era of quick profits is behind us. The new era is about generating revenue through innovation. Innovation is the key to success in this market.