Core Insights - The 10th Pharmaceutical Innovation and Investment Conference was held in Nanjing on October 26-27, highlighting advancements in China's drug development landscape [1] - The new phase of the "National Major Special Project for Innovative Drug Development" has been launched this year, building on the previous round of initiatives and achieving leapfrog development [1][2] - Significant breakthroughs have been made in major drug development, with 84 new class drugs approved, a substantial increase compared to prior to the implementation of related projects [1] Group 1 - The transition from a focus on imitation to independent creation in drug development has been fundamentally altered by the "Major New Drug Creation Major Special Project" from 2008 to 2020 [1] - China has gained strong international influence in specific fields such as Antibody-Drug Conjugates (ADC) and cell therapy [1] - The innovation capabilities of domestic companies have significantly improved, with some original drugs developed by local firms receiving FDA approval [1] Group 2 - The strategic planning for the new phase of the national drug development project emphasizes leveraging past experiences while targeting new high-peak areas [2] - The project aims to shift from single product development to a three-pronged approach focusing on products, talent, and platforms to enhance research capabilities [2] - The initiative will also focus on upstream innovation, addressing unmet clinical needs, and promoting forward-looking innovative approaches [2] Group 3 - The main tasks of the project will revolve around drug research connections, including new drug target discovery and traditional Chinese medicine development [3] - By 2035, the goal is to establish a self-controlled, efficient, and robust national drug innovation system, positioning China as a global center for new drug creation and biopharmaceutical industry [3]

Core Viewpoint - The Hong Kong innovative drug sector is experiencing a downturn, with significant declines in major stocks such as Hengrui Medicine and Innovent Biologics, leading to a drop in the Hang Seng Hong Kong Stock Connect Innovative Drug Selected Index below its six-month moving average [1][5]. Market Performance - The Hong Kong Stock Connect Innovative Drug ETF (520880) is tracking the index and has seen a widening premium in the market, indicating strong buying interest. Over the past ten days, the ETF has attracted over 184 million yuan in capital [3][5]. - The ETF's underlying index has lost volume and breached the six-month moving average, necessitating close monitoring of its future performance. Investors are advised to wait for a clear signal of a bottom before re-entering the market [5]. Fundamental Analysis - There are no significant negative factors affecting the innovative drug sector, with a continuation of high certainty in industry trends. A new round of the "National Science and Technology Major Project for Innovative Drug R&D" has been launched, aiming to establish a self-controlled national drug innovation system by 2035 [5]. - Historically, during the Federal Reserve's rate-cutting cycles, the valuation of Hong Kong innovative drug assets tends to expand, benefiting from a favorable liquidity environment for financing and R&D investments. The Fedwatch data indicates a high probability of two more rate cuts this year [5]. ETF Characteristics - The Hong Kong Stock Connect Innovative Drug ETF (520880) exclusively tracks the Hang Seng Hong Kong Stock Connect Innovative Drug Selected Index, which is composed entirely of innovative drug R&D companies, with over 70% of its holdings in large-cap leaders [6]. - As of the end of September, the ETF has shown a year-to-date increase of 108.14%, outperforming other innovative drug indices [6][7]. - The ETF has a total fund size of 1.806 billion yuan and an average daily trading volume of 493 million yuan since its inception, making it the largest and most liquid ETF in its category [7].

Core Insights - The new round of the "National Major Science and Technology Project for Innovative Drug Development" has officially launched, aiming for leapfrog development by 2025 [1] - The previous project from 2008 to 2020 achieved significant results, transitioning China's drug development from imitation to innovation [1] Industry Challenges - China's biopharmaceutical industry faces challenges, particularly in original innovation capabilities, with First-in-Class (FIC) drugs being significantly fewer compared to developed countries [2] - As of August 2025, the top 20 Chinese companies have only one-third of the FIC pipeline compared to the top 20 global pharmaceutical companies [2] - International clinical research participation is low, with only 2.6% of clinical studies conducted by Chinese companies being international multi-center studies, compared to 24.9% for foreign companies [2] Project Management Innovations - The new project introduces a "two total, two offices" management structure to enhance professional management and collaborative efficiency [3] - The project organization model shifts from universities and research institutions to innovative R&D enterprises, forming large interdisciplinary teams to address previous fragmentation [3] - There is a focus on strengthening collaboration with national-level technology plans and enhancing the regulatory science system to improve the review capabilities for innovative drugs [3] Future Goals and Focus Areas - The project aims to achieve four transformations by 2035, including a shift from variety-focused R&D to building new drug creation capabilities [3] - Emphasis will be placed on upstream innovation chains and supporting original drug development rather than just generic drugs [3] - The guidelines for 2025 and 2026 will focus on new targets, technologies, and theories, including AI-driven drug discovery and new mechanisms for pain management [4] - By 2035, the goal is to establish a robust national drug innovation system, breakthrough key technologies, and create high-level innovative drugs tailored to China's disease spectrum [4]

Core Viewpoint - The new round of the "National Major Science and Technology Project for Innovative Drug Development" has officially launched, aiming for leapfrog development in China's pharmaceutical industry by 2025 [1][2]. Summary by Sections Background and Achievements - From 2008 to 2020, the "Major New Drug Creation" project achieved significant results, transitioning China's drug development from imitation to innovation and enhancing the pharmaceutical industry from large-scale to strong [1]. Current Challenges - The Chinese biopharmaceutical industry faces challenges, including weak original innovation capabilities, with the number of First-in-Class (FIC) drugs in China's top 20 companies being only one-third of that in the global top 20 [2]. - There is a lack of core technologies driving new drug development, and the discovery of new targets and treatment strategies lags behind developed countries [2]. - International clinical research participation is low, with only 2.6% of clinical studies conducted by Chinese companies being international multi-center studies, compared to 24.9% for foreign companies [2]. Innovations in Project Management - The new project introduces a "two generals and two offices" management structure to enhance professional management and collaborative efficiency [3]. - The project organization model shifts from universities and research institutions to innovative R&D enterprises, forming large teams across institutions and disciplines to address fragmentation issues [3]. - There is a focus on strengthening collaboration with national-level scientific plans and enhancing the regulatory science system to improve the review capabilities for innovative drugs [3]. Future Goals and Directions - The project aims for four transformations by 2035: from focusing on variety development to building new drug creation capabilities; from emphasizing downstream industrial chains to focusing on upstream innovation chains; from supporting generic drugs to prioritizing original drug development; and from targeting 10 major diseases to addressing diseases based on China's disease spectrum and market failures [3][4]. - The guidelines for 2025 and 2026 will focus on new targets, technologies, and theories, including AI-driven original target discovery and new paradigms for traditional Chinese medicine [3][4]. Expected Outcomes - By 2035, the goal is to establish a self-controlled, efficient national drug innovation system, breakthrough key technologies in various drug categories, and create high-level innovative drugs with clinical value tailored to China's disease spectrum [4]. - The aim is to cultivate leading international enterprises with strong innovation capabilities and to position China as a global center for new drug creation and biopharmaceutical industry [4].