Core Viewpoint - The Hong Kong pharmaceutical sector is experiencing strong gains, driven by performance from companies like BeiGene, which rose nearly 7%, and increased activity in AI healthcare stocks such as Ping An Good Doctor and JD Health [1] Group 1: Market Performance - The Hong Kong pharmaceutical sector is leading the market with significant gains, particularly in AI healthcare concepts [1] - The Hong Kong Stock Connect Medical ETF (520510), which has a high concentration of AI healthcare and CXO concepts, increased by over 2% [1] Group 2: Industry Developments - The negotiations for the 2025 National Basic Medical Insurance Drug List and the commercial insurance innovative drug list have been completed, with 120 domestic and foreign companies participating [1] - A total of 127 drugs from outside the list participated in the basic medical insurance drug negotiations, while 24 drugs were involved in the commercial insurance price negotiations [1] Group 3: Future Outlook - The period from November to December is expected to see active business development (BD) transactions, with significant industry conferences such as ASH (American Society of Hematology) and SABCS (San Antonio Breast Cancer Symposium) scheduled for December [1] - The abstracts for the ASH conference have already been released this week [1]

Core Viewpoint - The Hong Kong medical sector is experiencing a strong performance, with the CSI Hong Kong Stock Connect Medical Theme Index rising by 2.19%, driven by leading stocks such as BeiGene and Ping An Good Doctor [1][2]. Group 1: Market Performance - The Hong Kong medical ETF (159366) has increased by over 2%, and over the past three months, it has accumulated a rise of 1.74% as of November 11, 2025 [1][2]. - The CSI Hong Kong Stock Connect Medical Theme Index includes 50 listed companies in the medical device, medical services, and pharmaceutical sectors, reflecting the overall performance of the medical sector within the Stock Connect [2]. Group 2: Company Performance - BeiGene reported a total revenue of $1.4 billion for Q3, marking a 41% year-on-year increase, with a GAAP net profit of $125 million, reversing a loss from the previous year [4]. - The innovative drug sector is showing strong growth, with a 23.34% increase in revenue year-on-year, and CXO companies seeing a 55.90% increase in net profit [4]. Group 3: Market Trends - The CRO service market in China is projected to grow from 52.2 billion yuan in 2020 to 87.8 billion yuan by 2024, with a compound annual growth rate (CAGR) of 13.9% [3]. - The overall performance of the pharmaceutical and biotechnology sector has been under pressure, with a decline in revenue and net profit by 1.9% and 4.8% respectively for the first three quarters of 2025 [4].

Core Insights - The report emphasizes the investment strategy for the pharmaceutical and biotechnology industry, focusing on undervalued targets in the medical device and pharmacy sectors, which are expected to experience a valuation reversal [1][5]. - The overall investment rating for the sector is maintained at "outperform the market" [2]. Industry Performance Review - The pharmaceutical industry experienced a decline of 1.83% in October, underperforming the CSI 300 index by the same margin [9]. - The medical manufacturing sector reported a cumulative revenue of 1.8211 trillion yuan, down 2.0% year-on-year, with a total profit of 253.5 billion yuan, a decrease of 0.7% [8]. Sector Analysis - The report categorizes the CXO sector into three segments: CDMO, preclinical and clinical CRO, and generic drug CXO, highlighting the growth potential in each area [5]. - The CDMO segment shows promising growth with significant increases in new orders and emerging business areas such as peptides and oligonucleotides [5]. - The preclinical and clinical CRO segment is recovering with new order prices showing an upward trend [5]. - The generic drug CXO segment is facing challenges due to a reduced number of MAH clients and is actively seeking new growth points through innovation [5]. Investment Strategy - The report recommends focusing on undervalued medical device and distribution stocks, as well as the long-term positive trend in innovative drugs and their supply chains [5]. - A specific investment portfolio for November 2025 includes companies such as Mindray Medical, WuXi AppTec, and Aier Eye Hospital, among others [5][6]. Recent Developments - In October 2025, six innovative drugs or biosimilars were approved for market entry, indicating a robust pipeline for the industry [23][24]. - The report tracks ongoing centralized procurement initiatives for medical devices, which are expected to impact pricing and market dynamics [29]. Valuation Insights - The overall valuation of the pharmaceutical sector is currently at a PE (TTM) of 38.80, which is at the 81.52% historical percentile over the past five years, indicating a relatively high valuation compared to historical averages [17].

Core Insights - The pharmaceutical sector showed signs of marginal recovery in Q3 2025, with a focus on academic conferences, policy changes, and business development catalysts expected in Q4 2025 [1][2] - The Hong Kong pharmaceutical market experienced a pullback in October due to sentiment decline and profit-taking, but the underlying fundamentals remain strong, with an anticipated stabilization in investment sentiment starting November [2] Market Performance - The Hang Seng Healthcare Index fell by 1.3% this week, outperforming the broader market, with traditional Chinese medicine, biopharmaceuticals, and distribution sectors showing better performance [1] - Domestic institutions increased their positions in high-value innovative drug targets, medical device companies, and service-oriented firms, particularly those benefiting from interest rate cuts and downstream demand recovery [1] Investment Recommendations - Focus on innovative drugs such as Sanofi and Deqi Pharmaceuticals, which have rich short-term catalysts and valuations that do not yet reflect the value of core products; companies like Xiansheng Pharmaceuticals, Hutchison China MediTech, and Legend Biotech are significantly undervalued with clear long-term growth logic [2] - In the CXO sector, leading firms benefiting from high downstream demand and marginal financing recovery are recommended, such as WuXi AppTec [2]

Investment Rating - The report maintains a positive outlook on the pharmaceutical industry, particularly focusing on innovative drugs, medical devices, and the innovation chain [10][12]. Core Insights - The pharmaceutical sector's revenue for Q1-Q3 2025 showed a slight decline of 1.9% year-on-year, with net profit down by 6.8%. However, Q3 2025 saw a revenue increase of 0.5% compared to the previous year, indicating a potential recovery [16]. - The "innovation chain" segment is highlighted as the fastest-growing area within the pharmaceutical industry, with significant contributions from CXO services [16][19]. - The report emphasizes the importance of focusing on differentiated products and internationalization in the innovative drug sector, suggesting a shift from quantity to quality in product offerings [10][12]. Summary by Sections Market Review - The report notes that the medical device index rose by 1.21%, outperforming the CSI 300 index by 1.64 percentage points, ranking 13th among 30 sectors [7]. - The top-performing stocks included 合富中国, 诺思格, and C禾元-U, while the worst performers were 赛诺医疗 and 惠泰医疗 [7]. Industry and Stock Events - The report identifies key trends in various segments, including innovative drugs, medical devices, and traditional Chinese medicine, with specific companies recommended for investment [10][12][19]. - The report highlights the recovery in the bidding volume for imaging equipment and the growth of home medical devices, suggesting a favorable market environment for companies like 迈瑞 and 鱼跃 [10]. Overall Pharmaceutical Industry - The pharmaceutical industry reported a total revenue of 177.2 billion yuan for Q1-Q3 2025, with a notable decline in the traditional pharmaceutical manufacturing sector [16]. - The innovative drug sector's revenue reached 450.7 billion yuan in Q1-Q3 2025, marking an 8.1% increase year-on-year, despite a significant drop in net profit [19]. - The raw material drug sector showed resilience, with a revenue decline of only 5.2% in Q1-Q3 2025, and companies are encouraged to explore CDMO business opportunities [21][22].

Core Viewpoint - The report provides a comprehensive overview of the pharmaceutical industry performance for the first three quarters of 2025, highlighting the challenges and opportunities within various segments, including innovative drugs, medical devices, and traditional Chinese medicine [15][16]. Market Review - The CITIC Pharmaceutical Index increased by 1.21%, outperforming the CSI 300 Index by 1.64 percentage points, ranking 13th among 30 primary industries [9]. - The top ten stocks by increase included Sainuo Medical (+49.01%) and Huakang Clean (+35.62%), while the top ten stocks by decrease included Sainuo Medical (-25.00%) and Huatai Medical (-14.81%) [6][9]. Industry and Company Events - The pharmaceutical sector's revenue for Q1-Q3 2025 showed a year-on-year decline of 1.9%, with net profit down 6.8% and non-recurring profit down 14.6%. In Q3 2025, revenue increased by 0.5%, but net profit and non-recurring profit still faced declines of 4.1% and 8.6%, respectively [16]. - The "Innovation Chain" segment was the fastest-growing within the pharmaceutical industry, with revenue growth of 12.3% and 10.7% in Q1-Q3 and Q3 2025, respectively [16]. - The pharmaceutical manufacturing sector experienced the most significant revenue decline, with specific segments like vaccines and raw materials showing declines of 28.2% and 5.2%, respectively [16]. Overall Pharmaceutical Industry - The pharmaceutical industry reported revenues of CNY 17,720 million in Q1-Q3 2025, with a notable decline in various segments, including traditional Chinese medicine and medical devices [15]. - The innovative drug sector saw revenues of CNY 450.7 million in Q1-Q3 2025, marking an 8.1% increase, while net profit decreased by 32.7% [21]. Pharmaceutical Manufacturing - The raw material drug sector reported revenues of CNY 1,078.3 million in Q1-Q3 2025, with a decline of 5.2% year-on-year, while net profit decreased by 3.6% [25]. - The report emphasizes the potential for growth in the raw material drug sector due to the upcoming patent expirations and the expansion of CDMO (Contract Development and Manufacturing Organization) services [25].

Group 1 - The core viewpoint of the articles highlights the strong performance of Kanglong Chemical in Q3, with a revenue of 3.645 billion yuan, representing a year-on-year growth of 13.44%, and a net profit of 440 million yuan, which is a significant increase of 42.52% compared to last year [1] - Kanglong Chemical has raised its full-year revenue growth target to 12-16% based on the performance in the first three quarters of the year [1] - The company announced the acquisition of 82.54% of Baiaode for 1.346 billion yuan, enhancing its capabilities in drug discovery through comprehensive services from gene analysis to cryo-electron microscopy [1] Group 2 - The recent strong performance reports from leading CXO companies like WuXi AppTec and Kanglong Chemical have boosted market confidence in the innovative drug sector [1] - The innovative drug sector is expected to see more policy-driven catalysts as concerns over market bubbles have diminished following a phase of adjustment [1] - Related ETFs in the innovative drug industry include the Hong Kong Stock Connect Medical ETF (520510), which has a leading CXO content, and the Hang Seng Pharmaceutical ETF (159892), which emphasizes innovation [2]

Investment Rating - The industry investment rating is maintained at "Outperform the Market" [1] Core Views - In Q3 2025, the overall heavy holdings of public funds in the pharmaceutical sector decreased slightly, with a focus on innovative drugs and CXO holdings becoming more concentrated [2][6] - The total scale of pharmaceutical funds reached 434.6 billion yuan, with a quarter-on-quarter increase of 28.4%, indicating a growing interest in the sector [19] - The proportion of passive funds in the pharmaceutical sector has increased significantly from 18% in Q1 2018 to 52% in Q3 2025, reflecting a shift in investment strategies [19] Summary by Sections Overall Holdings - The heavy holdings ratio of all public funds in the pharmaceutical sector was 9.7%, down 0.1 percentage points quarter-on-quarter, with an overweight ratio of 3.3% [2][9] - The heavy holdings ratio of all active public funds in the pharmaceutical sector was 10.8%, down 0.3 percentage points quarter-on-quarter, with an overweight ratio of 4.36% [2][9] - The heavy holdings ratio of all non-pharmaceutical funds in the pharmaceutical sector was 4.4%, down 0.2 percentage points quarter-on-quarter, with an underweight ratio of -2.03% [2][9] Fund Structure - The proportion of active funds in the pharmaceutical sector decreased slightly, with active pharmaceutical funds accounting for 31% of the total heavy holdings market value, down 0.5 percentage points [3][13] - The total market value of pharmaceutical funds was 434.6 billion yuan, with active funds at 206.7 billion yuan and passive funds at 228 billion yuan [19] Heavy Holdings by Fund Type - The overall structure of holdings showed an overweight in innovative drugs and CXO, while traditional Chinese medicine and high-value consumables were underweighted [6] - The top three sectors with increased holdings among all public funds were CXO, Bio-Pharma, and online pharmacies, while medical devices, traditional Chinese medicine, and specialty chains saw declines [6] Heavy Holdings of Individual Stocks - The top five stocks by total market value held by all public funds included WuXi AppTec (45 billion yuan), Hengrui Medicine (42.4 billion yuan), and Innovent Biologics (21.7 billion yuan [6] - The top three stocks with increased holdings among active funds were BeiGene H (+4.8 billion yuan), CanSino Biologics (+4.2 billion yuan), and China National Pharmaceutical Group (+3.9 billion yuan) [6]

Core Viewpoint - The medical innovation sector is experiencing a structural recovery, with significant inflows into the Medical Innovation ETF and positive performance from key companies in the sector [1][2]. Group 1: Market Performance - On October 29, the Medical Innovation ETF (516820.SH) fell by 1.28%, with component stocks showing mixed results; Chuaning Biological (301301) led gains at 5.12%, while Ailis (688578) saw the largest decline at 5.13% [1]. - The Medical Innovation ETF has seen continuous net inflows over the past five days, with a peak single-day net inflow of 38.68 million yuan, totaling 66.42 million yuan and an average daily net inflow of 13.28 million yuan [1]. Group 2: Industry Trends - The pharmaceutical sector has undergone a prolonged valuation adjustment, but a significant structural recovery trend has emerged recently, supported by policies promoting commercial insurance development [1]. - The investment and financing landscape in the pharmaceutical sector is expected to recover, driven by a rebound in the secondary market, with continued positive sentiment in the CXO and upstream segments [1]. - Recent quarterly reports from several CXO companies, including WuXi AppTec, Tigermed, and others, indicate a positive outlook for the industry [1]. Group 3: Future Outlook - The CXO sector continues to show strong performance, with companies like WuXi AppTec and Boteng surpassing expectations in their quarterly results [2]. - The innovative drug sector is on a long-term upward trend, with opportunities arising from both domestic revenue growth and international expansion [2]. - The expectation of interest rate cuts in the U.S. is likely to enhance global liquidity and support the trend in technology stocks, providing an opportunity for investors to capitalize on the rebound in core pharmaceutical assets through the Medical Innovation ETF [2].

Core Viewpoint - The Hong Kong Innovative Drug 50 ETF (513780) has shown significant growth, with a 44.49% increase over the past six months, indicating strong performance in the innovative pharmaceutical sector [1][2] Group 1: ETF Performance - As of October 27, 2025, the Hong Kong Innovative Drug 50 ETF rose by 1.16%, reaching a peak increase of over 2% during the trading session [1] - The ETF ranks first among similar index funds in terms of growth, reflecting robust investor interest in innovative pharmaceuticals [1] Group 2: Company Earnings - WuXi AppTec reported a revenue of 32.857 billion yuan for the first three quarters of 2025, marking an 18.61% year-on-year increase, with a net profit of 12.076 billion yuan, up 84.84% [1] - In Q3 2025, the company achieved a revenue of 12.057 billion yuan, a 15.26% increase year-on-year, and a net profit of 3.515 billion yuan, reflecting a 53.27% growth [1] Group 3: Market Trends and Insights - Everbright Securities noted that the Federal Reserve has initiated a rate-cutting cycle, which is favorable for the innovative pharmaceutical sector, particularly for innovative drugs and devices [1] - The current investment focus in the pharmaceutical industry should emphasize clinical value, addressing patient needs, with both domestic and international policies providing higher premiums for clinical value [1] - The reduction in interest rates is expected to improve the financing environment for pharmaceutical companies, particularly benefiting biotech firms and increasing demand for CXO services, positively impacting new orders and performance growth [1] Group 4: Industry Dynamics - The innovative drug market is transitioning from a broad rally to a focus on "quality factors," where only leading innovative drugs with strong clinical data and commercialization capabilities will achieve financial success [2] - The Hong Kong Innovative Drug 50 ETF tracks the CSI Hong Kong Stock Connect Innovative Drug Index, which includes leading companies like WuXi Biologics, Innovent Biologics, and BeiGene, with nearly 90% weight in biopharmaceuticals and chemical drugs [2] - The ETF allows T+0 trading and has established off-market connection funds for investors to maintain interest in the high-volatility Hong Kong innovative drug sector [2]