Core Insights - In October, the net value return of the GF CSI Hong Kong Innovative Drug ETF (QDII) decreased by 11.61% due to fluctuations in the Hong Kong stock market [1] - The fund's scale reached 24.889 billion yuan, with the top ten holdings including companies like Innovent Biologics, BeiGene, WuXi Biologics, and others [1] - The fund manager, Liu Jie, has over 10 years of experience in managing public funds since 2014 [1] Fund Performance - The GF CSI Hong Kong Innovative Drug ETF (QDII) reported a net value growth rate of -11.61% with a net value of 1.3337 yuan and a total scale of 24.889 billion yuan [2] - The GF CSI Hong Kong Innovative Drug ETF Initiated Link (QDII) C and A also experienced declines of over 11% in October, with net values of 1.3853 yuan and 1.3937 yuan respectively [2] - The largest holding, Innovent Biologics, saw a decline of 9.75% in October, while another major holding, CanSino Biologics, dropped over 19% [1]

Core Insights - The pharmaceutical industry is positioned as a perennial growth sector due to aging populations, urbanization, and changing disease profiles, with a strong recovery expected in 2025 after a downturn from 2022 to 2024, driven by both innovative drugs and medical devices [2][3] - Demand and supply dynamics will remain central to the pharmaceutical industry's research, with innovation cycles and policy adjustments influencing demand growth [2][3] - The supply side is characterized by limited supply and high entry barriers, with increasing participation of Chinese companies in international competition, leading to the emergence of world-class enterprises in the pharmaceutical sector [3][4] Industry Overview - The pharmaceutical industry is expected to see significant growth in 2025, driven by a resurgence in demand for innovative drugs and a recovery in domestic medical device needs, alongside strong external demand [2] - The demand for pharmaceuticals typically fluctuates with innovation and policy cycles, with a notable increase in overseas business development (BD) opportunities anticipated in 2025 [2][5] - The Chinese pharmaceutical sector is increasingly recognized globally, with local companies making strides in various niche markets [3][4] Investment Opportunities - Opportunities in innovative drugs are highlighted, particularly in oncology, metabolic diseases, and autoimmune diseases, with a focus on next-generation therapies and precision medicine [5][29] - The report emphasizes the importance of understanding the supply-demand structure and industry upgrades when conducting detailed research on specific segments within the pharmaceutical industry [4][5] - The report identifies key players and segments for investment, including CXO services, medical devices, and consumer healthcare, with specific companies recommended for increased holdings [6][5] Market Dynamics - The report outlines the competitive landscape among top global pharmaceutical companies, noting significant changes in rankings due to the performance of key products [11][19] - Chinese companies are becoming a major source of projects for multinational corporations (MNCs), with increasing transaction volumes and values in recent years [19][21] - The report discusses the strategic focus of MNCs on acquiring innovative assets and technologies to strengthen their market positions, particularly in oncology and metabolic disease sectors [12][18] Future Trends - The report anticipates breakthroughs in various therapeutic areas, including oncology, metabolic diseases, and autoimmune diseases, with a focus on innovative treatment modalities such as TCE and in vivo CAR-T [29][30] - The small nucleic acid field is expected to accelerate, with significant advancements anticipated in 2026 across multiple indications [29][30] - The report highlights the importance of collaboration and co-development models as a means for Chinese companies to enhance their global competitiveness [25][28]

Core Insights - Merck has initiated a rare financing move by securing $700 million from Blackstone for the global development of sac-TMT, a significant ADC product, indicating the company's strong commitment to this asset [1][4]. Group 1: Financing and Strategic Importance - The financing will be used for the global development of sac-TMT, with Merck retaining control over its development, production, and commercialization decisions [1]. - This financing reflects Merck's high regard for sac-TMT, which has already gained attention in the industry since its licensing from Keren Biotechnology [1][4]. - Merck's CFO highlighted that this agreement will allow the company to fully leverage the potential of sac-TMT, emphasizing its importance in the company's broader product development strategy [5]. Group 2: Clinical Development and Market Potential - Merck is conducting 15 global Phase III clinical trials for sac-TMT across various cancer types, including lung, breast, and gastric cancers [5]. - The upcoming release of nine Phase III clinical trial data between 2027 and 2029 is expected to validate sac-TMT's significant market potential and solidify its core position in Merck's pipeline [5]. - Sac-TMT has shown promising results, including approvals in China and recognition at the ESMO conference, where it received multiple awards, highlighting its breakthrough efficacy in treating non-small cell lung cancer [4][5]. Group 3: Blackstone's Role and Market Outlook - Blackstone's investment reflects its strategic insight in the biopharmaceutical sector, having previously supported successful therapies, indicating confidence in sac-TMT's potential [6]. - The collaboration is expected to accelerate the global development of sac-TMT, positioning it as a cornerstone product in cancer treatment with vast market opportunities [6].

Core Insights - Merck has initiated a rare financing move by securing $700 million from Blackstone for the global development of sac-TMT, a promising ADC drug, indicating the company's strong commitment to this asset [1][4][5] Group 1: Financing and Strategic Importance - The financing agreement allows Merck to retain control over the development, production, and commercialization of sac-TMT while leveraging future revenue rights [1] - This financing elevates the importance of sac-TMT within Merck's pipeline, especially as the company faces the impending patent cliff of its blockbuster drug Keytruda [4][5] Group 2: Clinical Development and Market Potential - Merck is conducting 15 global Phase III clinical trials for sac-TMT across various cancer types, including lung, breast, and gastric cancers, showcasing its extensive development strategy [5] - The upcoming release of nine Phase III trial data between 2027 and 2029 is expected to validate sac-TMT's potential in the global market, solidifying its role as a cornerstone in Merck's oncology portfolio [5] Group 3: Blackstone's Investment Insight - Blackstone's investment reflects its strategic vision in the biopharmaceutical sector, drawing parallels to its previous successful investments, such as the siRNA therapy that became a core asset for Novartis [6] - The collaboration with Merck highlights Blackstone's recognition of sac-TMT's potential and its willingness to support the acceleration of its global development [6]

Core Viewpoint - The innovative drug sector has rebounded strongly since September, driven by the upcoming 2025 National Negotiation, with significant trading activity observed in the Hang Seng Innovative Drug ETF (520500) on the first trading day of November [1]. Group 1: Market Activity - The Hang Seng Innovative Drug ETF (520500) recorded a half-day trading volume of 1.105 billion yuan on November 1, 2025, indicating active market participation [1]. - The ETF's trading volume has increased significantly, with total trading amounts of 604 million yuan and 1.654 billion yuan on October 30 and 31, respectively, compared to an average daily trading volume of 584 million yuan since October [1]. Group 2: Policy Developments - The 2025 National Medical Insurance Directory negotiations commenced on October 30, 2025, introducing a commercial health insurance innovative drug directory, marking a shift from a "basic insurance only" model to a "medical insurance + commercial insurance" collaborative payment approach [1]. - A total of 535 drug generic names were approved for the basic drug directory, while 121 were approved for the commercial insurance innovative drug directory, with 79 names submitted for both directories [1]. Group 3: Industry Outlook - The establishment of the commercial insurance innovative drug directory is expected to diversify payment methods, particularly benefiting high-value innovative drugs and multinational pharmaceutical products, potentially opening up new growth opportunities for the industry [1]. - The Hang Seng Innovative Drug ETF (520500) is designed to track companies involved in innovative drug research, development, and production, focusing on firms with strong R&D capabilities [1]. - As of October 31, 2025, the top five constituents of the index include BeiGene, China Biologic Products, Innovent Biologics, Kelun-Biotech, and CanSino Biologics, reflecting the index's focus on high-potential companies in the innovative drug sector [1].

Core Viewpoint - The Hong Kong Stock Connect Innovative Drug ETF (Southern, 159297) has shown significant market activity, with a recent increase of 3.38% and a trading volume of 170 million yuan, indicating strong investor interest in the innovative drug sector [1] Group 1: Market Performance - The Hong Kong Stock Connect Innovative Drug ETF (Southern, 159297) reached a new high in both scale and shares since its inception as of October 31 [1] - The ETF has experienced net inflows for 4 out of the last 5 trading days, totaling 18.9 million yuan [1] - The index it tracks, the National Certificate Hong Kong Stock Connect Innovative Drug Index, rose by 3.67%, with notable increases in component stocks such as Senhwa Biosciences (up 10.11%) and Kanglongda (up 8.80%) [1] Group 2: Policy and Industry Insights - The ongoing negotiations for the National Medical Insurance drug list are complemented by a new commercial health insurance innovative drug directory, aimed at providing new payment channels for high-value innovative drugs [1] - The CAR-T cell drug, Rukiyou Lunsai injection from WuXi AppTec, is making progress in negotiations to be included in the commercial health insurance innovative drug directory, with a listed price of 1.29 million yuan per injection [1] - Open Source Securities notes that the current innovative drugs included in both medical insurance and commercial insurance are in the early stages of volume growth, with potential for rapid revenue increases as policies continue to support innovative drugs [2] Group 3: Institutional Investment Trends - According to Guotou Securities, the proportion of all funds heavily invested in Biotech innovative drug companies has increased to 27.53%, reflecting a 2.61 percentage point rise, indicating growing institutional interest in the innovative drug sector [2] - The increasing allocation of funds to the innovative drug sector suggests a strong market recognition of its long-term development potential [2]

Core Viewpoint - The Hong Kong Innovative Drug ETF (159567) has shown significant growth in both share volume and fund size since its inception, indicating strong investor interest and market performance [1][2]. Group 1: Fund Performance - As of October 31, 2024, the Hong Kong Innovative Drug ETF (159567) closed with a gain of 5.46% and a trading volume of 3.327 billion yuan [1]. - The fund's share volume increased by 1968.65% from 3.95 million shares at the end of 2023 to 81.79 million shares by October 30, 2024 [1]. - The fund's size grew by 1650.00%, from 378 million yuan to 6.612 billion yuan during the same period [1]. Group 2: Liquidity - Over the last 20 trading days, the cumulative trading amount for the fund reached 23.202 billion yuan, with an average daily trading amount of 1.16 billion yuan [1]. - Year-to-date, the cumulative trading amount for the fund is 234.346 billion yuan, averaging 1.172 billion yuan per day over 200 trading days [1]. Group 3: Fund Management - The current fund manager, Ma Jun, has managed the Hong Kong Innovative Drug ETF (159567) since its inception, achieving a return of 64.72% during the management period [2]. - The fund's top holdings include companies such as BeiGene, CanSino Biologics, Innovent Biologics, and others, with significant percentages of the portfolio allocated to these stocks [2].

Core Viewpoint - The innovative drug sector is experiencing a rise in stock prices despite market conditions, driven by new policies and strong quarterly performances from several pharmaceutical companies [1] Group 1: Stock Performance - Innovent Biologics (01801) saw an increase of 8.12%, reaching HKD 87.25 [1] - Three-Sixty Biopharma (01530) rose by 11.42%, trading at HKD 30.84 [1] - Kelun-Biotech (06990) increased by 6.97%, priced at HKD 451 [1] - Connaissance-B (02162) gained 4.71%, with a price of HKD 60.05 [1] - Hansoh Pharmaceutical (03692) rose by 4.56%, trading at HKD 35.76 [1] Group 2: Policy Changes - The 2025 National Medical Insurance negotiation commenced on October 30, introducing a "commercial insurance innovative drug catalog" mechanism for the first time [1] - This year's negotiations continue the regular adjustment mechanism of the medical insurance catalog [1] Group 3: Market Activity - As of October 21, 2023, there have been 115 licensing agreements for innovative drugs in China, totaling USD 101.24 billion, significantly surpassing the total of USD 51.9 billion for the entire year of 2024 [1] Group 4: Company Performance - Hengrui Medicine reported a net profit of CNY 5.751 billion for the first three quarters, a year-on-year increase of 24.5% [1] - Innovent Biologics achieved total product revenue exceeding CNY 3.3 billion in Q3, maintaining a robust year-on-year growth of approximately 40% [1] Group 5: Industry Outlook - The pharmaceutical industry is showing signs of marginal improvement, with a potential shift in market focus towards high-growth sectors supported by performance [1] - Recommendations include focusing on companies with Q3 performance likely to exceed expectations, as well as sectors such as CXO, upstream life sciences, medical device recovery, and innovative drugs [1]

Market Overview - The Hang Seng Index fell by 0.89%, down 232 points, closing at 26,050 points, while the Hang Seng Tech Index dropped by 1.91% [1] - The early trading volume in the Hong Kong stock market reached HKD 142.3 billion [1] Biotechnology Sector - The Hang Seng Biotechnology Index rebounded by 2.16%, with notable gains in several stocks: - InnoCare Pharma (09606) surged by 10.88% - 3SBio (01530) increased by over 10% - Innovent Biologics rose by 6.82% - Kelun-Biotech (06990) gained 5.69% [1] - Fosen Pharmaceuticals (01652) saw a significant increase, with a peak rise of nearly 74% and an early gain of 59.42% following the approval of Enzalutamide soft capsules and the potential selection of Metformin and Empagliflozin for national procurement [1] - Rongchang Biopharma (09995) rose by 6.75%, reporting a 40% year-on-year revenue growth and a significant reduction in losses for the first three quarters [1] Medical Sector - Spring Medical (01858) increased by over 21%, turning a profit of HKD 77.06 million in the third quarter as the company actively expands its international market [2] New Stocks Performance - Newly listed Dipo Technology (01384) continued to rise, gaining 18.97% and doubling its stock price within three days of listing [3] Financial Sector - China Everbright Bank (06818) fell by 5% post-earnings, with both revenue and profit declining in the third quarter, facing pressure from fair value changes [4] Other Notable Stocks - Huahao Zhongtian Pharmaceutical-B (02563) experienced a significant drop of over 37% due to a large unlock of shares after one year of listing [5] - Lion Holdings (02562) plummeted over 24% to a new low, planning to issue convertible bonds to raise approximately HKD 260 million for investments in gold and related products [6] - Air China (00753) dropped over 8%, with a more than 11% decline in net profit for the third quarter, and plans to raise up to HKD 20 billion through A-share placement [7]

Group 1 - The stock of Kelun-Biotech (06990.HK) increased by nearly 5%, with a current rise of 3.42%, trading at 436 HKD [2] - The trading volume reached 88.673 million HKD [2]