After Four Years of Silence, Is Medical Device Investment Set to Recover?

China’s innovative medical devices have already taken center stage in the global investment market.

Entering 2026, the innovative medical devices, which had been dormant for four years, finally welcomed a small surge of their own.

On February 5, Beijing Xincheng Medical Technology Co., Ltd. was listed on the STAR Market, becoming the first medical device company to be listed through the fifth set of standards on the STAR Market in recent years. The company's stock price surged by 183% on its debut day, and the current stock price exceeds 40 yuan, more than twice the offering price of 17.52 yuan.

Over the past three years, the A-share medical device index has seen a maximum decline of over 50%. Raising funds through listings has also become difficult. From the end of the pandemic to mid-2025, the number of initial public offerings (IPOs) for medical devices on the US stock market can be counted on one hand, among which there are also cases of large enterprises spinning off subsidiaries for listing. The number of medical device IPOs in China, while not reaching previous highs, is better than overseas, with seven medical device companies going public in 2025, including on the A-share and Hong Kong stock markets.

The first-tier market investment and financing for medical devices in China also showed signs of recovery in 2025. According to data from Arterys, the financing amount for medical devices and consumables in 2025 has surpassed that of 2023 and 2024, returning to the 2022 level.

According to conventional wisdom, the primary market always serves as a leading indicator for investment trends in the secondary market and the entire sector. Has the medical device industry entered a recovery phase? Do Chinese innovative medical devices possess frontier global innovation capabilities comparable to those of innovative pharmaceuticals?

During the Spring Festival, Caijing conducted a dialogue with Cao Yibo, Managing Director of Sequoia China, the largest institutional shareholder of Northchip Life.

Caijing: Biolink Life's IPO on the STAR Market has attracted participation from many well-known private equity funds in the "new stock subscription." Could this become a new trend in medical device investment?

Cao Yibo: Actually, compared to "flipping new stocks," the strategic investor system of the STAR Market may be more worthy of attention, as this system allows institutions to participate more actively. Under the previous A-share issuance system, institutions could to some extent participate in pricing, but it was difficult for them to secure allocations. The STAR Market has drawn on some of the issuance systems in Hong Kong, providing more opportunities for investors willing to participate for the long term.

Innovative medical devices have their own distinct characteristics. While innovative drugs offer higher potential investment returns, they also face high risks and the challenge of prolonged unprofitability. However, a significant portion of secondary market investors seek rapid profitability. These risk-averse investors are more interested in companies that can generate cash flow sooner, making them more actively engaged in strategic placements of innovative medical devices.

Many medical device companies with good cash flow, including some worth hundreds of billions, currently have a "cold" stock performance. Why are newly listed companies the only ones that are "hot"?

Cao Yibo: Of course, new stocks and second-tier new stocks have an advantage in trading. However, in the overall new industry sectors, higher premiums are usually obtained during their rapid development phase, so the independent trend of innovative medical devices is also normal.

Currently, many medical device companies with large market capitalizations actually have decent performance, but the overall valuation multiples for the traditional medical device industry in the secondary market, after digesting negative impacts, are in a phase of correction, which will have some impact on the stock price performance in the secondary market.

"Caijing": The pressure of industry rectification, the pressure of centralized procurement, and the overall pressure on medical institutions' operations, how to cope with new business areas?

Cao Yibo: The changes at the macro level of the industry have a significant and varied impact on enterprises in different sectors and at different stages. For example, centralized procurement (CP) can actually be a dual benefit for some new sectors. On the one hand, the mechanism of medical device CP has been optimized, no longer relying solely on price competition, with prices gradually stabilizing. On the other hand, rounds of CP have reduced the cost of medical supplies for both the medical insurance and patients, freeing up more payment space for the diagnosis and treatment end. For instance, after the overall price of coronary stents was reduced through CP, the payment capacity for other interventional products has increased. Therefore, CP has instead allowed some innovative companies with differentiated products to achieve revenue growth more quickly.

Centralized procurement has reduced the difficulty of channel coverage and hospital entry for innovative medical devices, and the pricing mechanism also offers preferential treatment to innovative products in niche areas. For example, Beijing Chip Bio’s intravascular ultrasound (IVUS) diagnostic system—specifically its 60 MHz product, the first of its kind approved for marketing in China—was assigned a separate price during centralized procurement, indicating that payers are willing to offer a relatively appropriate price for high-quality products.

Many innovative medical device products used to have their sales stuck between 100 million and 200 million yuan after market entry, with a period of growth stagnation. However, after being included in the centralized procurement, and with revenue from other new pipelines, Beixin Life's overall company revenue quickly reached 500 million yuan. It benefited from domestic substitution through the centralized procurement.

Caijing: What kind of products are subject to centralized procurement, the optimization of the centralized procurement mechanism, etc., when initially investing in some innovative companies, it was also difficult to foresee?

Cao Yibo: Actually, if product competition is sufficient and the market size is large enough, centralized procurement is inevitable, it's just a matter of time. What you need to figure out is how to achieve your development goals under the centralized procurement rules.

Caijing: For investment in medical devices, can it be considered that the secondary market and the primary market have achieved "synchronized movements"?

Cao Yibo: It must be resonance, obviously there is mutual transmission. Overall, the first level will lead the second level for a period of time. Generally, in markets with higher capitalization, the resonance will be more pronounced.

In the Chinese market, the secondary market’s reaction may lag behind the primary market by three to four years. Moreover, volatility in the secondary market is significantly higher than in the primary market. For instance, when a certain concept is just gaining acceptance in the secondary market, companies related to that concept may not yet be listed; nevertheless, the stock prices of relevant listed companies rise first, resulting in a temporary divergence from the primary market’s performance.

Caijing: So the sectors currently drawing attention in the secondary market are precisely those that the primary market heavily invested in three or four years ago?

Cao Yibo: There are some, such as artificial intelligence, brain-computer interfaces, and robotics, including the artificial heart, which is receiving a lot of attention at the IPO stage now. These were all hotspots for investment in the primary market a few years ago. This includes cardiovascular interventions. The last round of financing for Northchip Life before its listing was in September 2022, and at that time, the spots were still highly sought after.

Caijing: If we consider the transmission from the primary market, by 2025, the investment and financing in medical devices have become very active. Does this mean that the entire medical device investment is recovering?

Cao Yibo: In my personal view, the situation is stabilizing now. Compared to the peak in 2021, it's difficult to return to that era of the most enthusiastic investment, and the current liquidity is not at the same level as it was then. However, the prosperity back then, through a certain premium, attracted global R&D talent and capital to invest in China's innovative medical research and development, giving us a quantitative accumulation.

At the same time, thanks to the favorable financing environment back then, a batch of medical enterprises were able to secure the funds to sustain themselves until today.

Currently, the medical device sector in China has established a solid foundation for development, especially in the integration of medicine and engineering—i.e., the convergence of clinical expertise and industrial technology. Previously, this integration was suboptimal in China: although physicians generated many innovative ideas, few were effectively realized. Today, globally novel medical devices originating from clinical practice—such as PADN (Pulmonary Artery Denervation)—have already emerged.

Caijing: In the past few years, what consensus has the primary market reached regarding the investment in innovative products?

Cao Yibo: Our assessment of the innovative medical device sub-sector underwent an “expectation gap.” For instance, when we initially invested in Beixin Life Science, it was based on our research into international markets, which revealed that China’s precision diagnosis and interventional therapy for cardiovascular and cerebrovascular diseases remains at an early stage compared to the global market. In the interventional treatment of coronary heart disease, there are two categories: one comprises passive (non-powered) implantable products, which dominate the Chinese mainstream market; the other—active (powered) interventional devices—represents an emerging sub-sector in China, presenting an opportune moment for market entry and filling a domestic gap.

As early as 2018, when Sequoia Capital China first evaluated Beikin Life, there was not yet strong consensus—primarily because the R&D costs for active implantable devices were measured in hundreds of millions of RMB, unlike passive implantable stent products, whose R&D costs were on the order of tens of millions of RMB. At that time, believing that the company would secure continued funding to sustain development and ultimately recoup investments through commercialization entailed considerable risk. Yet this very lack of consensus enabled us to capture the upside from the expectation gap.

Caijing: Looking at the entire market, are there any cases where performance has diverged from expectations—situations where initial hot topics have now completely cooled off?

Cao Yibo: Hotspots and non-hotspots are determined by the characteristics of the industry. When information is not sufficiently available, or when there is not much experience, overly optimistic judgments are inevitable.

For example, in the past, heart valves in the medical device sector had clear clinical demand, but excessive enthusiasm led to distorted strategies. Due to intense competition, sales expenses remained persistently high, preventing companies from establishing a healthy commercial environment. Subsequent price reductions then put significant pressure on the sector's development. However, from the patient's perspective, they can now access transcatheter valve therapy at a fraction of the cost of foreign alternatives, avoiding open-heart surgery, with similarly good clinical outcomes—clearly benefiting patients.

Moreover, it has also cultivated many R&D talents in complex interventional and implantable products for the industry, laying a solid foundation for product innovation in China.

Caijing: What is the next hotspot in the medical equipment industry?

Cao Yibo: Going global. Innovative Chinese medical-engineering integrated products, especially high-value and complex ones, will follow a similar path as innovative drugs and expand overseas. The R&D investment for such products is extremely high, and you must access a larger market to recoup these costs. Particularly for products that deliver superior clinical benefits and help healthcare institutions and insurers reduce costs and improve efficiency, the willingness to pay abroad is stronger than in China.

Caixin: During the boom in overseas business development (BD) deals for innovative drugs, there have also been many discussions about BD for innovative medical devices, but it seems few tangible results have emerged.

Cao Yibo: This stems from the inherent differences between drugs and medical devices. Early introduction of medical devices is less mature compared to drugs; large-scale early licensing deals are relatively rare, whereas innovative drugs can secure backing and upfront licensing payments from multinational pharmaceutical companies at an earlier stage. Over the past five to ten years, the global medical device industry has undergone significant consolidation, leaving only four or five true industry leaders—unlike the pharmaceutical sector, where roughly twenty to thirty multinational companies actively compete to in-license products. Moreover, these leading device companies possess distinct strategic focuses and product portfolios, so they do not feel the same urgency to acquire products as pharmaceutical companies do. Instead, they typically wait until a device has received regulatory approval and even generated initial sales before pursuing business development (BD) or acquisition, resulting in later deal timing compared to the pharmaceutical industry.

On the other hand, there is a perception gap in the secondary market regarding medical device companies' overseas expansion. While some medical device companies have a relatively high proportion of overseas revenue, much of it comes from low-value products sold through distributors, which is relatively less sustainable. This leads to a mismatch between market expectations for overseas revenue and its actual growth rate and stability.

Caijing: What Should Sustainable Medical Device Export Look Like?

Cao Yibo: For medical device companies going global, first, you must sell a highly distinctive product—exclusive or semi-exclusive—to secure sufficient resources for promotion; second, you must drive the entire process—from regulatory registration and clinical trials—proactively toward commercialization, rather than relying on distributors. Currently, few companies follow this path—large firms such as Mindray and United Imaging, as well as several innovative companies in fields like artificial hearts and robotics, are already on this trajectory.

Caijing: At the beginning of 2026, how should we view medical device investment and the future of the entire healthcare sector?

Cao Yibo: We have become a global mainstream player and entered the world's major battlefields.

Overseas investors and industry players are increasingly embracing China, viewing it as a major global source of innovation. Over the past one to two years, overseas investors and industry players have been highly active—some leading institutions may even send half of their teams to China every two months for visits. Both sides are actively engaging with each other. In the realm of global innovation, I believe this landscape is now irreversible.

Actually, the financing environment for innovative medical devices in China is now better than overseas.