Core Viewpoint - The pharmaceutical sector in Hong Kong is experiencing a paradox where revenue growth is slowing down while profit growth is accelerating, primarily driven by systemic reforms such as DRG [1][12]. Group 1: Performance of Domestic Innovative Pharmaceutical Companies - The 18A biotech stocks listed in Hong Kong are projected to see sustainable revenue growth from 27.2 billion in the first half of 2024 to 37.6 billion in the first half of 2025, with total annual revenue expected to reach 78-80 billion [2]. - Net losses for these companies are expected to improve significantly, from a loss of 11.2 billion in the first half of 2024 to a loss of 2.5 billion in the first half of 2025, with profitability anticipated by 2026 [2]. Group 2: Overall Pharmaceutical Sector Performance - The overall revenue growth rate for major listed pharmaceutical companies in Hong Kong is expected to decline from 5.7% in 2024 to 2.1% in the first half of 2025, despite strong profit growth [4][5]. - The profit growth is attributed to a shift in operational strategies from aggressive expansion to cost control, leading to improved profit margins [8][9]. Group 3: Reasons for Revenue Slowdown - The slowdown in revenue growth is linked to the DRG reform, which has introduced a competitive pricing mechanism that pressures hospitals and healthcare providers to reduce costs [15][19]. - The DRG reform has resulted in a decrease in average hospitalization costs, which has negatively impacted hospital revenues and, consequently, the upstream pharmaceutical sector [14][15]. Group 4: Impact of DRG Reform - The DRG payment model emphasizes standardized clinical value over individual physician decision-making, which is expected to accelerate the growth of innovative pharmaceuticals while putting pressure on traditional hospital revenue streams [24][25]. - The reform is likely to create a more competitive environment among hospitals, potentially leading to the exit of less efficient operators from the market [23][36]. Group 5: Future Outlook - Despite the current challenges, the pharmaceutical industry is expected to eventually return to a stable growth trajectory as the pressures from the DRG reform ease and new growth drivers emerge [20][36]. - The focus on clinical value is anticipated to foster innovation in pharmaceuticals and medical devices, particularly for those that can demonstrate significant clinical benefits [28][32].