Core Insights - The recent National Medical Insurance negotiation concluded on November 3, with results expected in early December, marking a significant shift in the landscape for innovative drugs in China [1] Group 1: Impact of the Dual Directory System - The introduction of the "dual directory" system in the National Medical Insurance negotiation aims to reshape the ecosystem for innovative drugs by incorporating a commercial insurance directory for high-value innovative drugs that cannot be included in the basic directory [3] - This new mechanism is expected to enhance the payment capabilities for innovative products, balancing basic coverage and support for innovation, thereby invigorating the domestic market for pharmaceutical payments [3] - The commercial insurance directory is anticipated to address accessibility and affordability issues for high-priced innovative drugs, particularly those for rare diseases, thus expanding market opportunities [3] Group 2: Policy Benefits and Market Growth - The policy benefits supporting innovation in the National Medical Insurance have been progressively released, with nearly 90% of innovative drugs successfully negotiated between 2021 and 2024 entering the insurance directory within two years of approval, a significant increase from previous years [3] - As the policy benefits continue to unfold, the revenue for innovative drugs included in both insurance directories is expected to rise rapidly, benefiting patients and leading to growth for related pharmaceutical companies [3] Group 3: Future Catalysts for Innovative Drugs - The industry is poised for structural opportunities beyond policy support, including a surge in outbound licensing transactions for Chinese innovative drugs, which are reaching new highs in both quantity and value [6] - The integration of AI in pharmaceutical research is projected to accelerate, with the smart pharmaceutical market expected to exceed 500 billion yuan by 2030, maintaining a compound annual growth rate of over 15% [6] - An improved external financing environment, driven by lower global funding costs due to U.S. interest rate cuts, is expected to provide crucial liquidity for the high-investment, long-cycle nature of the innovative drug sector [6]

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]