Core Viewpoint - Heng Rui Medicine has received approval from the National Medical Products Administration for clinical trials of Fumaric Acid Tegeline Injection, marking a significant step in the development of China's first independently developed Class 1 opioid analgesic [1] Group 1: Product Development - Fumaric Acid Tegeline Injection is a μ-opioid receptor (MOR) biased small molecule agonist [1] - The product is expected to be launched in China in January 2024 [1] - The company has invested approximately 200 million yuan in the research and development of this project [1] Group 2: Market Context - Oliceridine, a similar product developed by Trevena, was approved for sale in the United States in 2020 [1] - Jiangsu Enhua Pharmaceutical Co., Ltd. has obtained exclusive licensing from Trevena for Oliceridine, which was approved for sale in China in May 2023 [1] - No sales data for Oliceridine in China has been reported as of now [1]

Investment Rating - The report continues to recommend the innovative drug and medical device industry chain, indicating a high level of investment interest in this sector [1][5]. Core Views - The report highlights the high prosperity in innovative drugs, suggesting potential value revaluation for companies such as Jiangsu Heng Rui Medicine, Hansoh Pharmaceutical Group, 3SBio, Sichuan Kelun Pharmaceutical, and Jiangsu Nhwa Pharmaceutical [2][5]. - It emphasizes the importance of Biopharma/Biotech companies with innovative pipelines and performance entering a volume increase phase, including Innovent Biologics, BeiGene, and others [2][5]. - The report also points out the recovery potential for leading medical equipment companies like United Imaging Healthcare, Lepu Medical, and others [2][5]. Summary by Sections A-Shares Performance - In the second week of November 2025, the A-Shares pharmaceutical sector outperformed, with the SW Pharmaceutical and Biological index rising by 3.3% while the SHCOMP fell by 0.2% [2][30]. - The pharmaceutical commerce, chemical raw materials, and chemical preparations sub-sectors showed strong performance, with increases of 5.7%, 5.1%, and 4.4% respectively [2][30]. - Notable stock gains included GDK (+61.6%), HPGC Renmintongtai Pharmaceutical Corporation (+61.1%), and Chengda Pharmaceuticals Co., Ltd. (+58.3%) [2][30]. Hong Kong and U.S. Market Performance - The Hong Kong pharmaceutical sector also outperformed, with the Hang Seng Healthcare index increasing by 6.8% and the Hong Kong Biotechnology index by 7.1% [2][31]. - In the U.S., the S&P Healthcare Select Sector rose by 3.9%, significantly outperforming the S&P 500, which only increased by 0.1% [2][32]. Valuation Metrics - As of November 14, 2025, the premium level of the pharmaceutical sector relative to all A-Shares is at a normal level, with a current relative premium rate of 77.0% [2][15]. - The report provides earnings forecasts and valuation metrics for various companies, indicating expected growth rates and price-to-earnings ratios for the coming years [6][7].

Core Viewpoint - Heng Rui Medicine has received approval from the National Medical Products Administration for the clinical trial of Fumaric Acid Tegilide Injection, marking a significant step in the development of China's first independently developed class 1 opioid analgesic [1] Company Summary - Heng Rui Medicine's Fumaric Acid Tegilide Injection is a μ-opioid receptor (MOR) biased small molecule agonist, expected to be approved for domestic market launch in January 2024 [1] - The company has invested approximately 199.99 million yuan in the research and development of Fumaric Acid Tegilide Injection to date [1] Industry Summary - Fumaric Acid Tegilide Injection is positioned as a novel opioid analgesic in China, with a similar product, Oliceridine (brand name: Olinvyk), developed by Trevena, already approved in the U.S. in 2020 [1] - Jiangsu Enhua Pharmaceutical Co., Ltd. has obtained exclusive licensing from Trevena for Oliceridine, which was approved for sale in China in May 2023, although sales data is currently unavailable [1]

Core Insights - The current mainstream antidepressants face challenges such as slow onset, limited efficacy (40%-65%), insufficient long-term tolerability, and low patient adherence [1][2] - The domestic antidepressant market is still dominated by traditional SSRIs, but local innovative drug development is entering a harvest period, with micro-innovative drugs like Trospium and Venlafaxine showing promise [1] - Future development directions focus on precision treatment and personalized medication [1] Current Treatment Shortcomings - Depression is one of the most common mental disorders, characterized by persistent low mood, anhedonia, and decreased energy, with unclear etiology [1] - Existing first-line antidepressants like SSRIs have limited efficacy, with about one-third of patients not achieving relief after multiple treatment steps [1] - Current antidepressants have a slow onset, typically requiring 1-4 weeks for improvement and 4-8 weeks to reach treatment goals, posing risks of suicide during acute phases [1] - There is room for improvement in precision treatment for different subtypes and special populations, as well as addressing issues like patient-initiated drug discontinuation [1] Efficacy and Long-term Use - The efficacy of existing antidepressants ranges from 40% to 65%, with variations based on the heterogeneity of depression and specific patient characteristics [2] - Long-term use highlights the importance of safety and tolerability, with common adverse effects including gastrointestinal reactions, CNS effects, and sexual dysfunction [2] - Some drugs, like Escitalopram and Venlafaxine, have lower adverse event rates, while certain adverse effects may benefit specific patients [2] Domestic Market Overview - In 2024, the sales of antidepressants in China exceeded 8 billion yuan, with SSRIs accounting for 3.58 billion yuan (43.44%) of the market [3] - SNRIs and traditional Chinese medicine also hold significant market shares, with the top-selling antidepressants including Escitalopram and Agomelatine [3] - Generic drugs are expected to maintain a considerable market share due to price advantages, while innovative drugs will benefit patients through improved safety and efficacy [3] Development of Domestic Antidepressants - Currently, there is one approved innovative antidepressant in China, with over twenty in clinical trials, indicating a harvest period ahead [4] - The only marketed local innovative drug is Trospium (Ruxinlin), which is expected to see growth after entering the medical insurance system in 2025 [4] - Promising candidates in various stages of clinical trials include monoamine neurotransmitter antidepressants and NMDA antagonists [4]

Investment Rating - The report does not explicitly state an investment rating for the antidepressant drug industry Core Insights - Depression disorders are the most common mental disorders, characterized by persistent low mood, loss of pleasure, and decreased energy. The etiology remains unclear, with various hypotheses including the monoamine hypothesis and glutamatergic system abnormalities [5][23] - There are unmet clinical needs in depression treatment, including limited efficacy of current first-line antidepressants, slow onset of action, and the need for precision treatment for different subtypes and special populations [5][27] - The current market for antidepressants in China is substantial, with over 8 billion yuan in hospital sales, where SSRIs and SNRIs account for approximately 60% of the market share [5][6] - New drug development is focusing on deepening monoamine research, exploring amino acid classes, and other mechanisms, with a gradual entry into a harvest period for innovative drugs [5][6] Summary by Sections Unmet Clinical Needs - Current first-line antidepressants like SSRIs have limited efficacy, with about one-third of patients not achieving remission after multiple treatment steps [27] - The onset of current antidepressants is slow, typically requiring 1-4 weeks for initial improvement and 4-8 weeks to reach treatment goals, posing risks for patients during acute phases [27][28] - There is a need for precision treatment for different subtypes of depression and special populations such as children and the elderly [27] Market Overview - The antidepressant market in China saw over 8 billion yuan in sales, with SSRIs leading at 3.58 billion yuan (43.44% market share) and SNRIs at 1.42 billion yuan (17.18% market share) [5][6] - The top-selling antidepressants include escitalopram oxalate, agomelatine, and sertraline [5] Drug Development Trends - The report highlights ongoing research into monoamine neurotransmitter drugs, with 128 clinical-stage products targeting various mechanisms [5][6] - Innovative drugs are gradually entering the market, with one local innovative drug already launched and over twenty in clinical trials [5][6]

Core Insights - The fentanyl concept index declined by 0.31%, ranking among the top decliners in the concept sector, with notable declines in stocks such as Botao Bio, Oriental Bio, and Lingrui Pharmaceutical [1][2] - Conversely, three stocks within the sector saw price increases, with Renfu Pharmaceutical, Enhua Pharmaceutical, and China National Pharmaceutical Modern rising by 1.02%, 0.52%, and 0.19% respectively [1][2] Market Performance - The fentanyl concept sector experienced a net inflow of 0.22 billion yuan, despite five stocks facing net outflows, with Oriental Bio leading the outflow at 14.71 million yuan [2] - Other stocks with significant net outflows included China National Pharmaceutical Modern (10.27 million yuan), Wanfu Bio (7.15 million yuan), and Botao Bio (3.49 million yuan) [2] Stock Movements - The top gainers in the fentanyl concept included Renfu Pharmaceutical, China National Pharmaceutical, and Lingrui Pharmaceutical, with net inflows of 42.39 million yuan, 15.59 million yuan, and 2.54 million yuan respectively [2] - The stock performance of Oriental Bio showed a decline of 0.97% with a turnover rate of 1.75%, while Renfu Pharmaceutical had a gain of 1.02% with a turnover rate of 1.51% [2]

Investment Rating - The report maintains a positive outlook on the innovative pharmaceutical sector, indicating a preference for companies within this space due to their strong performance and growth potential [3][10]. Core Insights - The pharmaceutical and biotechnology sector experienced a decline of 2.4% this week, ranking 29th among 31 sub-industries [4][6]. - The overall valuation of the pharmaceutical sector stands at 30.1 times earnings, placing it 10th among 31 primary industries [6][14]. - The report highlights the successful conclusion of the 2025 National Basic Medical Insurance Drug List negotiations, with 120 companies participating [10]. - The implementation of AI in healthcare is emphasized, with a goal for widespread adoption by 2030 [11]. - Notable performance in the third quarter was observed among weight-loss drug manufacturers, with Eli Lilly reporting a 125% increase in sales for its drug, totaling $24.837 billion [3][17]. Market Performance - The pharmaceutical sector's index fell by 2.4% this week, while the Shanghai Composite Index rose by 1.1% [4][6]. - Among the sub-sectors, chemical preparations saw a decline of 4.4%, while traditional Chinese medicine increased by 0.8% [6][10]. Recent Key Events - The report notes the collaboration between Eli Lilly and NVIDIA to develop a supercomputer for drug discovery [15]. - Manifold Bio's partnership with Roche aims to create new blood-brain barrier drugs, with a total deal value exceeding $2 billion [16]. - Pfizer's acquisition of Metsera for up to $8.625 billion focuses on obesity treatments [17]. Company Performance - The report summarizes the third-quarter performance of major pharmaceutical companies, with Eli Lilly achieving a 54% year-over-year revenue increase [18][19]. - Notable companies include Merck, which reported a 4% increase, and Pfizer, which experienced a 6% decline in revenue [18][19]. Investment Recommendations - The report recommends focusing on innovative drug sectors, medical devices, and AI healthcare applications, highlighting companies such as Hengrui Medicine, Mindray Medical, and WuXi AppTec [3][10].

Core Viewpoint - The introduction of the commercial insurance innovative drug directory is expected to address the accessibility and affordability issues of high-priced innovative drugs by guiding market forces [1][3]. Group 1: Policy Changes - The National Medical Insurance Administration organized a 5-day negotiation for the medical insurance drug directory and commercial insurance innovative drug directory, with 120 domestic and foreign companies participating [2]. - The new directory is set to be released in early December and will officially take effect on January 1 of the following year [2]. Group 2: Market Opportunities - The commercial insurance innovative drug directory aims to open market space for high-cost or rare disease medications, particularly for rare disease treatments and high-value innovative drugs [3]. - Notably, five CAR-T drugs have been submitted for approval, which could significantly benefit patients due to their high annual treatment costs [3]. Group 3: Drug Submission Strategies - The introduction of the "dual directory" submission allows companies to choose between submitting for both the basic medical insurance directory and the innovative drug directory, providing more strategic options [4]. - For example, BMS's O drug (Nivolumab) opted for dual submission after previous failures, while competitors like Merck's K drug (Pembrolizumab) have not submitted any applications [4]. Group 4: Competitive Landscape - Domestic innovative drugs are becoming major competitors to imported drugs, with examples like the TROP2 ADC drug Gosituzumab (Gilead) and its domestic counterpart [5]. - The increasing support for innovative drugs from the government and the diversification of the medical insurance payment system are expected to create new market demand for innovative drugs [5]. Group 5: Investment Recommendations - The medical insurance bureau is encouraging the high-quality development of innovative drugs, indicating a warming trend in payment policies [6]. - Relevant investment targets include companies such as Heng Rui Medicine, Kelun Pharmaceutical, and others that are actively transitioning towards innovation [6].

Investment Rating - The report maintains an "Overweight" rating for the pharmaceutical sector, specifically recommending the innovative drug and medical device industry chain [5][10]. Core Insights - The pharmaceutical sector shows a positive recovery trend in Q3 2025, with overall revenue growth of 0.6% year-on-year and a net profit increase of 0.3% year-on-year. This indicates a return to growth after previous declines [6][13]. - Specific segments such as medical devices and medical research outsourcing are experiencing significant growth, with revenue and net profit growth rates of 10.6% and 0.6% for medical devices, and 10.9% and 47.9% for medical research outsourcing, respectively [13][14]. - The report highlights a continued recommendation for specific A-share and H-share stocks, including 恒瑞医药 (Hengrui Medicine), 科伦药业 (Kelun Pharmaceutical), and others, indicating strong potential for investment [7][10]. Summary by Sections 1. Continued Recommendation for Innovative Drug and Medical Device Industry Chain - The report continues to recommend the innovative drug and medical device industry chain, maintaining "Overweight" ratings for several A-share stocks including 恒瑞医药, 科伦药业, and others, and H-share stocks like 翰森制药 and 三生制药 [7][10]. 2. Recovery Trend in Pharmaceutical Sector Q3 2025 - The pharmaceutical sector's overall revenue increased by 0.6% year-on-year in Q3 2025, with net profit rising by 0.3%. Medical devices and medical research outsourcing are leading this recovery with notable growth rates [13][14]. 3. Performance of Pharmaceutical Sector in October 2025 - In October 2025, the pharmaceutical sector underperformed compared to the broader market, with the SW pharmaceutical index declining by 1.8% while the Shanghai Composite Index rose by 1.9% [15][26]. 4. Performance of Hong Kong and US Pharmaceutical Sectors - The Hong Kong pharmaceutical sector also underperformed, with the Hang Seng Healthcare index down by 11.1%, while the US pharmaceutical sector showed strength with a 3.5% increase in the S&P healthcare index [26][27]. 5. Valuation and Premium Levels - As of October 31, 2025, the pharmaceutical sector's premium level relative to all A-shares is at a normal level, with a current relative premium rate of 76.7% [25][28].

Investment Rating - The report maintains a focus on innovative pharmaceuticals and medical devices, highlighting key A-share and H-share targets for investment [6][32]. Core Insights - The pharmaceutical sector showed a good recovery in Q3 2025, with overall revenue increasing by 0.6% year-on-year and net profit attributable to shareholders rising by 0.3% year-on-year [11][32]. - Medical equipment benefited from procurement recovery, with Q3 revenue and net profit growth of 10.6% and 0.6% year-on-year, respectively [11][32]. - Medical R&D outsourcing continued to achieve high growth, with Q3 revenue and net profit growth of 10.9% and 47.9% year-on-year [11][32]. - The offline pharmacy sector improved, with Q3 revenue and net profit growth of 2.1% and 37.8% year-on-year [11][32]. Summary by Sections 1. Focus on Innovative Pharmaceuticals and Medical Devices - Key A-share targets include Jiangsu Heng Rui Medicine, Sichuan Kelun Pharmaceutical, Huadong Medicine, Changchun High-tech Industry, Jiangsu Nhwa Pharmaceutical, WuXi AppTec, Hangzhou Tigermed Consulting, Lepu Medical, APT Medical, and related target Guangdong Zhongsheng Pharmaceutical [6][32]. - Key H-share targets include Hansoh Pharmaceutical Group, 3SBio, Akeso, and related target Innovent Biologics, WuXi AppTec [6][32]. 2. Q3 2025 Pharmaceutical Sector Recovery - The pharmaceutical sector's overall revenue increased by 0.6% year-on-year, with net profit attributable to shareholders up by 0.3% year-on-year [11][32]. - Specific segments such as medical devices and medical R&D outsourcing showed significant growth [11][32]. 3. October 2025 Market Performance - In October 2025, the pharmaceutical sector underperformed the market, with the SW Pharmaceutical and Biological index falling by 1.8% while the SHCOMP rose by 1.9% [14][32]. - The relative premium of the pharmaceutical sector compared to all A-shares was at a normal level, with a current relative premium rate of 76.7% [23][32]. 4. Hong Kong and U.S. Market Performance - The Hong Kong pharmaceutical sector underperformed, with the Hang Seng Healthcare index falling by 11.1% [24][32]. - In contrast, the U.S. S&P 500 healthcare sector rose by 3.5% [24][32].