SINOLINK SECURITIES·2025-04-16 10:10Investment Rating - The report maintains a positive outlook on China's innovative pharmaceutical companies, suggesting they can navigate the current tariff cycle effectively [2][10]. Core Insights - The potential impact of U.S. tariffs on China's innovative drug sector is expected to be minimal due to the small trade volume and the prevalent use of Business Development (BD) models for overseas expansion [10][11]. - The report identifies two main logical frameworks: the limited exposure of innovative drugs to U.S. tariffs and the strategic use of BD to mitigate risks associated with potential tariffs [12][20]. Summary by Sections Investment Logic - The report highlights that the U.S. has historically maintained low tariffs on pharmaceuticals, with the WTO's 1994 agreement eliminating many tariffs on drugs [9]. - The potential U.S. tariffs on pharmaceuticals are seen as unlikely to significantly impact China's innovative drug companies due to their limited export volume to the U.S. [12][15]. From China's Perspective - China's exports of innovative drugs to the U.S. are relatively small, with only about $1.16 billion in exports, representing 16.55% of total pharmaceutical exports to the U.S. [14][15]. - The majority of China's innovative drugs are exported through BD agreements, which do not involve the physical transfer of drugs and thus are less affected by tariffs [20][28]. From the U.S. Perspective - The report suggests that the primary focus of U.S. tariffs will be on European countries, indicating that the impact on China will be limited [10][11]. - The challenges in achieving the U.S. government's goals of lowering drug prices and relocating production back to the U.S. are highlighted, suggesting that the implementation of tariffs may face significant hurdles [10][11]. Investment Recommendations - Investors are encouraged to focus on innovative pharmaceutical companies that have already engaged in BD activities abroad, such as Hengrui Medicine, Kelun-Biotech, and Innovent Biologics [2][10].