Soochow Securities·2025-12-28 13:26Investment Rating - The report maintains an "Accumulate" rating for the pharmaceutical and biotechnology industry [1] Core Insights - The number of innovative drugs listed in China continues to grow, with domestic products accounting for approximately half of the total market share. The R&D capabilities for innovative drugs in China are also increasing, attracting global attention. Notably, the number and value of domestic innovative drug business development (BD) transactions have reached new highs, with ADC, bispecific antibodies, small nucleic acids, and CAR-T being the four key R&D directions to watch in 2026 [15][21][22] - The Chinese innovative drug market has seen a significant increase in the number of new drug applications (NDA), with domestic products making up a growing proportion. From 2017 to 2024, the number of innovative drugs listed in China rose from 41 to 92, with domestic products accounting for 50% of the total by 2024 [17][21] - The report highlights that the license-out transaction volume and total amount for Chinese companies reached $92.03 billion in the first three quarters of 2025, a 77% increase compared to the total for 2024. The upfront payment for license-out transactions has also surpassed the total financing amount in the primary market for the same period [22][25] Summary by Sections Industry Trends - The A-share pharmaceutical index has shown a year-to-date increase of 14.29%, while the Hang Seng Healthcare Index has surged by 62.29% [3][8] - The report notes that the pharmaceutical sector has experienced fluctuations, with raw materials and medical devices showing positive growth [8] R&D Progress and Company Dynamics - The report provides an overview of the R&D progress for innovative and modified drugs, including approvals and clinical applications [5] - It lists key companies to watch in various sub-sectors, including innovative drugs, research services, and medical devices, with specific recommendations for companies like Innovent Biologics, Hengrui Medicine, and WuXi AppTec [11][12] Market Insights and Regulatory Observations - The report tracks the price-to-earnings ratio of the pharmaceutical index, noting that it is currently lower than historical averages [5] - It emphasizes the importance of the regulatory environment and market dynamics in shaping the future of the pharmaceutical industry [5]