Core Viewpoint - The A-share and Hong Kong stock markets experienced a pullback, particularly in the pharmaceutical sector, with innovative drugs, medical devices, and CXO concepts facing significant declines. However, several representative ETFs showed premium, indicating some capital may be moving against the trend [1][3][5]. Group 1: Market Performance - The A-share innovative drug sector saw a notable decline, with Kanghong Pharmaceutical dropping 6.79%, and other companies like ShenZhou Cell and BaiLi TianHeng falling over 5%. The only drug ETF (562050) closed down 2.22%, marking a new low in this adjustment phase [1]. - The medical sector also declined, with CXO concepts collectively falling. Notable drops included Zhaoyan New Drug at 4.81% and WuXi AppTec at 2.7%. The largest medical ETF (512170) fell 1.63% [3]. - The Hong Kong innovative drug ETF (520880) experienced a 2.61% drop after two consecutive days of gains, with a total transaction volume of 347 million yuan. Only one of the 37 covered innovative drug companies, Hengrui Medicine, saw a gain, while major stocks like Kangfang Biotech and 3SBio fell by 6% and 5.85%, respectively [5]. Group 2: Policy and Future Outlook - The recent conclusion of the five-day medical insurance negotiations and the pricing discussions for innovative drug catalogs has drawn attention, with a focus on high-value innovative drugs and CAR-T therapies. The final results of the 2025 medical insurance catalog adjustments are expected in early December [7]. - According to Open Source Securities, the current innovative drugs included in the medical insurance and commercial insurance are mostly in the early stages of volume expansion. The ongoing policy support for innovative drugs is expected to lead to rapid revenue growth for these drugs, benefiting patients and driving growth for related companies [7]. - Zhongtai Securities views the recent adjustments in the innovative drug sector as relatively benign, with no negative changes in the industry fundamentals. The pharmaceutical sector is believed to be at a relatively low point, with strong safety margins and potential for upward movement as market dynamics shift [7]. Group 3: Investment Strategies - The current market conditions are seen as a favorable time for medium to long-term investments in the biopharmaceutical sector, with recommendations for balanced allocations within the sector. This includes a rotation towards large-cap blue-chip companies and balancing investments in underperforming segments like medical devices and services [7]. - The investment strategies suggest focusing on specific ETFs: the Hong Kong innovative drug ETF (520880) for pure innovative drug exposure, the drug ETF (562050) as the only one tracking the pharmaceutical index, and the medical ETF (512170) as the largest in the market [8][9].