Core Viewpoint - The Hong Kong pharmaceutical sector experienced a significant decline on October 9, with the Hang Seng Biotechnology Index dropping over 5%, influenced by external factors such as U.S. tariff announcements on pharmaceutical products [1][3]. Group 1: Market Performance - The Hang Seng Hong Kong Stock Connect Innovative Drug ETF (520880) saw a decline of over 1% after initially opening up 1.75% [1]. - The Hang Seng Hong Kong Stock Connect Innovative Drug Selected Index recorded a weekly increase of 6.54% during the previous week, reflecting a positive trend before the recent downturn [1]. - Notable declines were observed in key stocks, with Innovent Biologics and China Biologic Products falling over 8% and 7% respectively [1]. Group 2: External Influences - U.S. President Trump's announcement on September 25 regarding a 100% tariff on pharmaceutical products without U.S. manufacturing facilities starting October 1, 2025, has raised concerns for Chinese innovative drug companies heavily reliant on the U.S. market [1][3]. - Southwest Securities predicts that companies with direct export capabilities to the U.S. without local manufacturing will face short-term pressure, while those utilizing business development (BD) strategies will be less affected [3]. Group 3: Future Outlook - Upcoming industry conferences, such as ESMO (October 17-21) and ASH (December), are expected to serve as catalysts for the innovative drug sector [3]. - The fourth quarter will see the implementation of domestic policy changes, including adjustments to the medical insurance catalog, which may impact the sector positively [3]. - The fund manager of the Hong Kong Stock Connect Innovative Drug ETF (520880) indicated that the current market adjustment could present a buying opportunity for high-quality innovative drug companies [3]. Group 4: ETF Characteristics - The Hong Kong Stock Connect Innovative Drug ETF (520880) is the first ETF tracking the Hang Seng Hong Kong Stock Connect Innovative Drug Selected Index, focusing exclusively on innovative drug R&D companies [4]. - The index has shown a year-to-date increase of 119.75%, outperforming other innovative drug indices, and aims to avoid the influence of contract research organizations (CROs) on its performance [5].

Group 1 - The core theme of the series of activities is "New Era, New Fund, New Value," aimed at promoting high-quality development of public funds in Beijing [1] - Public funds are actively responding to policy calls, enhancing their investment research layout, and demonstrating solid asset allocation capabilities in various hot investment sectors this year [1] - The biopharmaceutical sector is experiencing significant growth, showcasing diverse development potential across various sub-industries, including medical devices, innovative drugs, and traditional Chinese medicine [1] Group 2 - The innovative drug sector is expected to lead the pharmaceutical industry, with a strong performance anticipated through 2025, driven by favorable policies and improved fundamentals [2] - The Chinese government is supporting the pharmaceutical industry by optimizing the approval process for innovative drugs and including them in basic medical insurance, which enhances market opportunities for domestic companies [2] - The innovative drug industry is entering a new phase of "dual breakthroughs," with domestic companies transitioning from following global trends to leading them [2] Group 3 - 嘉实基金 has systematically planned its investment research capabilities and product layout in the innovative drug sector, focusing on high-growth areas [3] - The company has established a dedicated research team for the health sector, covering various sub-sectors of biopharmaceuticals, and has created an innovative drug industry chain research group to support investment decisions [3] - 嘉实基金 offers a diverse product line in the innovative drug sector, including passive investment options that track pharmaceutical indices and actively managed products targeting opportunities in A-shares and Hong Kong stocks [3]

Core Viewpoint - The Hong Kong stock market is expected to perform well in 2025, with the Hang Seng Index and Hang Seng Tech Index leading global stock markets, driven by valuation attractiveness and structural changes in the economy [1] Investment Strategy - The investment strategy of the fund manager focuses on growth style, with a balanced approach that does not exceed 25% in any single industry, emphasizing valuation and a bottom-up investment approach [2][3] - The manager's investment philosophy includes three main characteristics: a growth-oriented style, balanced investment across sectors, and a focus on valuation [2][3] Stock Selection Framework - The stock selection framework is based on three dimensions: competitive barriers, market conditions, and valuation [3][4] - Competitive barriers are prioritized, focusing on business models and corporate culture, with an emphasis on differentiation and scale effects [3] - Market conditions are particularly important for TMT companies, while valuation is assessed using a five-year implied return to evaluate cost-effectiveness [4] Market Outlook - The outlook for the A-share market remains positive, with a focus on technology sectors such as 3D stacking, semiconductor manufacturing, and cloud computing [4] - The Hong Kong market is expected to benefit from economic stabilization and a potential influx of foreign capital due to the U.S. interest rate cuts [5][6] Investment Focus - The investment focus is on identifying companies with clear alpha characteristics rather than merely chasing beta trends, particularly in the context of small-cap stocks in the Hong Kong market [6] - The manager emphasizes the importance of free cash flow and believes that the valuation of leading companies in the Hong Kong market presents strong cost-effectiveness [5][6] Innovation Drug Sector - The innovation drug sector has entered a long-term reversal phase, with significant growth potential as leading companies achieve breakeven and improve self-sustainability [6][7] - The investment strategy in the innovation drug sector is shifting towards leading companies, with a focus on business development and commercialization stages [7]

Summary of the Conference Call on Innovative Drug Investment Industry Overview - The conference call focuses on the innovative drug industry, particularly in China, and its expansion into overseas markets [2][6][14]. Key Points and Arguments 1. **Risk-Adjusted Success Rate Assessment** - The success rate of innovative drugs is assessed based on existing clinical data, with phase I data improving success rate expectations to 70%-80% if results are favorable [2][4]. 2. **Market Expansion Strategies** - Chinese innovative drug companies expand overseas through two main strategies: "borrowing a boat" (collaborating with foreign companies) and "building a boat" (establishing their own teams abroad) [2][6]. 3. **Global Recognition of Chinese Innovative Drugs** - The recognition of Chinese innovative drugs internationally is attributed to the engineer dividend, accumulated experience in small molecule drug development, and the emergence of globally competitive products [2][7]. 4. **License Out Transaction Process** - The license out process involves several steps: finding partners, signing confidentiality agreements, material transfer agreements, letters of intent, due diligence, and final licensing agreements, with a joint steering committee established for management [2][8][9]. 5. **Geopolitical Factors** - Geopolitical factors have a limited impact on the international layout of Chinese pharmaceutical companies, despite potential restrictions from U.S. policies [10]. 6. **Advantages in Macromolecule Drug Development** - China has advantages in macromolecule drug development due to the engineer dividend and cost-effectiveness, with lower R&D costs compared to the U.S. [11]. 7. **Performance of Innovent Biologics** - Innovent Biologics has shown outstanding performance in innovative drug development, particularly in the PD-1 interleukin 2 field, showcasing a shift from quantity to quality in Chinese drug innovation [12]. 8. **U.S. Pharmaceutical Companies' Interest in China** - U.S. pharmaceutical companies are interested in acquiring Chinese assets due to the impending expiration of patents and the high cost of U.S. assets [13]. 9. **Trends in Chinese Innovative Drug Exports** - The trend of Chinese innovative drugs going overseas is strong, with expectations of a more than 50% increase in outbound activities in the latter half of the year compared to the first half [4][15]. 10. **Valuation Methodology** - The valuation of innovative drugs is based on relative and absolute valuation methods, with current PS multiples in Hong Kong and A-shares being significantly lower than expected [3][16]. 11. **Future Valuation Potential** - The innovative drug sector has the potential for significant valuation increases, with estimates suggesting a doubling of current valuations compared to historical highs [17]. 12. **Outlook for the Innovative Drug Sector** - The innovative drug sector is expected to enter a new phase of rapid valuation restructuring and high-quality development, supported by favorable policy, industry upgrades, and a growing number of companies entering profitability [18][19]. 13. **Impact of Macroeconomic Factors** - Current macroeconomic disturbances have minimal impact on the innovative drug sector, allowing for strategic investments despite market sentiment [20]. Additional Important Insights - The innovative drug sector is experiencing a transformation with a focus on both domestic and international markets, indicating a robust growth trajectory [19]. - The emphasis on early-stage investments to capture potential returns is highlighted as a strategic approach for investors [5].

Core Viewpoint - The company maintains a strong belief in the innovation drug market, viewing it as a significant trend that will last for two to three years, regardless of market fluctuations [1][16][17]. Group 1: Market Outlook - The current innovation drug market is considered to be in the first half of its cycle, supported by a three to five-year industry cycle and the global value of quality companies' mid-term product pipelines [2][32]. - The innovation drug sector is characterized by high alpha attributes, requiring selective stock picking rather than blind holding [35]. Group 2: Investment Strategy - The company emphasizes the importance of long-term holding in the innovation drug sector, suggesting that frequent tracking of short-term information may lead to losses [33][34]. - As the number of listed companies in the sector increases, the significance of stock selection ability and professional expertise will become more pronounced [36][37]. Group 3: Company Performance - The fund managed by the company has shown strong performance, with a return rate of 85.64% in the first half of the year, ranking first among equity funds [3]. - The fund's assets currently total 16.764 billion yuan, with a focus on the pharmaceutical innovation sector in the Hong Kong market [4][6]. Group 4: Competitive Landscape - The company highlights the increasing global interest in Chinese innovation drugs, driven by high efficiency, output, and cost-effectiveness in drug development [9][19]. - The trend of multinational companies increasing their investments in China is expected to continue, with a significant rise in licensing deals from Chinese firms projected for the coming years [21][22][28].

Core Viewpoint - The innovative drug market is not over yet, with numerous catalysts and potential growth opportunities ahead [1][2] Group 1: Market Catalysts - Upcoming academic conferences such as WCLC, ESMO, ASH, and ERS will provide platforms for companies to showcase their latest pipeline data [1] - Continuous disclosure of high-quality data will lead to an increase in pipeline valuations, driving market capitalization and valuations upward [1] Group 2: Market Dynamics - The pharmaceutical sector, particularly innovative drugs, has seen significant gains since the beginning of the year, with rapid rotation within the industry [1] - Short-term fluctuations in core innovative drug targets are primarily influenced by capital flow, with recent adjustments reaching a relative extreme, potentially indicating a bottom or a good entry point for accumulation [1] Group 3: Investment Opportunities - Focus on undervalued segments with growth potential, such as hepatitis B interferon treatment and digital robotics, which are at a critical stage of development [2] - Chain pharmacies are at historical lows and may present future investment opportunities as performance improves and market styles shift [2] - The pharmaceutical industry is characterized by essential demand and long-term growth potential, making it suitable for systematic investment [2]

Core Viewpoint - Several well-known public fund managers, including Ge Lan, Zhao Bei, and Zhu Shao Xing, have participated in the private placement of the innovative drug leader Bai Li Tian Heng during a period of market adjustment in the innovative drug sector [2][11]. Fund Participation - Ge Lan's fund, the China Europe Medical Health Mixed Fund, subscribed to 1,855,877 shares of Bai Li Tian Heng at a total cost of approximately 588.31 million yuan, representing 1.79% of the fund's net asset value [4][7]. - Zhao Bei's funds subscribed to a total of approximately 2.79 billion yuan worth of Bai Li Tian Heng shares across multiple funds, including 94,637 shares from the Industrial Bank of China Medical Insurance Industry Fund [8][9]. Market Context - The innovative drug sector has experienced a recent adjustment after a prior surge, with the innovative drug index showing a decline of 1.96% as of September 23, 2023 [14][15]. - Analysts suggest that the market is rebalancing between long-term prospects and short-term risks, with some stocks being overvalued after previous increases [17]. Future Outlook - Ge Lan remains focused on the innovative drug and medical device sectors, while Zhao Bei is optimistic about trends in refractive surgery technology and dental implants [17]. - Zhang Wei emphasizes investment in innovative drugs with global competitiveness and high-barrier medical equipment [17].

Group 1 - The innovative drug sector has shown remarkable performance this year, driven by fundamental breakthroughs, policy support, and valuation recovery [1][2] - The total value of BD transactions in the innovative drug sector exceeded $60 billion in the first half of 2025, surpassing the total for 2024 [1] - The Chinese innovative drug market has significant growth potential, with current innovative drug market share below 20%, compared to over 50% in developed countries [5] Group 2 - The innovative drug sector is currently in the early stages of its investment cycle, with substantial room for growth and valuation improvement [4][5] - The market is witnessing a shift from homogeneous imitation to differentiated innovation, with leading companies expanding their market share [6][7] - Key areas of opportunity include ADC and dual-antibody therapies, which are expected to take over the current market positions of PD-1 and chemotherapy [6]

Core Insights - The article discusses the challenges of applying traditional value investment principles to the innovative pharmaceutical sector, highlighting the need for a tailored approach that incorporates dynamic probability management and phase-specific investment strategies [1][3][4]. Investment Strategy - Investment in innovative pharmaceuticals should differentiate between three stages: R&D, commercialization, and maturity, matching different durations of capital accordingly [2][4]. - A three-dimensional evaluation system should be constructed to assess pipeline value, utilizing a valuation method based on peak sales, success probabilities, and discount factors [2][6]. - A recommended asset allocation strategy includes 20% of funds in early-stage projects, 50% in projects at commercialization inflection points, and 30% in cash flow-generating assets [2][5]. Traditional Value Investment Conflicts - Traditional value investment principles conflict with the characteristics of innovative pharmaceuticals, such as the non-permanence of competitive advantages, non-linear profitability, and the failure of safety margins [3][4]. - The concept of a "moat" is challenged by the temporary nature of patent protections, leading to significant revenue declines post-patent expiration [3]. - The high failure rates in clinical trials, particularly in Phase III, create substantial risks that can lead to drastic market value losses [3][4]. Dynamic Valuation Approach - A shift from static asset valuation to dynamic probability-based valuation is necessary, incorporating a three-dimensional assessment of clinical, commercial, and technical platform values [6][7]. - The proposed valuation formula calculates enterprise value by summing the product of pipeline peak sales, success probabilities, and discount factors [7][9]. Risk Management Framework - A systematic risk management framework is essential to address the inherent risks throughout the R&D and commercialization phases [10][11]. - A "steady dual-drive allocation strategy" is suggested, balancing investments in high-certainty assets with those in high-growth potential companies [12]. - A Bayesian mechanism for dynamic tracking of portfolio companies is recommended, utilizing a monitoring matrix and decision trees to manage risks proactively [13]. Conclusion - The article emphasizes the need for a redefined investment framework in the innovative pharmaceutical sector, focusing on duration matching, probability-based valuation, and dynamic risk management to capture industry opportunities effectively [14].

创新药仍在阶段性调整区间。9月19日，A股市场上，康弘药业跌6%，信立泰、科伦药业跌逾3.8%，重 仓A股创新药的药ETF（562050）场内跌1.91%。 港股方面，100%聚焦创新药研发的港股通创新药ETF（520880）高开低走，场内跌1.58%，成交3.35亿 元。成份股映恩生物-B跌14.22%居前，权重股信达生物跌5.44%。 【港股通创新药ETF（520880）：不含CXO，纯正创新药，港股高弹性】 值得关注的是，港股通创新药ETF（520880）盘中翻绿走低区间，场内再起溢价，且跌幅愈深，溢价愈 高，反映或有资金逢跌吸筹。 近期行情波动加大，低吸资金持续涌入。数据显示，截至9月18日，520880已连续13日吸金，金额合计 超6.7亿元。兴证全球策略首席张忆东日前提示，9月份或是创新药布局良机。 本周（9月15日-19日），港股通创新药板块波动进一步加大，高弹性港股通创新药ETF（520880）场内 累跌4.01%，周线两连阴，单周成交21.59亿元，环比显著缩量。 短期波动不改板块长期逻辑，消息面上并无实质性利空，港股通创新药ETF（520880）基金经理丰晨成 认为，现在应保持对创新药板块 ...