Core Insights - The report maintains a neutral rating for the pharmaceutical and biotechnology industry, indicating that while there are pressures on performance, there are also opportunities in specific segments that are experiencing growth [5][30]. Market Performance Review - In the first ten months of 2025, the SW pharmaceutical and biotechnology index increased by 21.10%, outperforming the CSI 300 index by approximately 2.26 percentage points, ranking 12th among all Shenwan primary industries [14][19]. - Most sub-sectors within the industry recorded positive returns, with the medical research outsourcing and chemical preparation sectors leading with increases of 60.54% and 40.80%, respectively. Conversely, the blood products and vaccine sectors saw declines of 7.89% and 1.60% [15][19]. - As of October 31, 2025, the overall price-to-earnings (PE) ratio for the SW pharmaceutical and biotechnology industry was approximately 53.97 times, which is 4.06 times higher than the CSI 300 index, indicating an increase in industry valuation [19][20]. Policy Outlook for H1 2026 - The 11th batch of national drug centralized procurement is expected to be fully implemented in the first half of 2026, involving 55 varieties and 272 companies, with a selection rate of 57% [30][31]. - The procurement results show a high match between selected brands and clinical needs, with strong supply capabilities from mainstream companies [30]. Sub-sector Highlights Innovative Drugs - Continuous policy optimization supports the development of innovative drugs, with a comprehensive approach to enhance pricing management, insurance coverage, and investment [38]. - The industry is gradually moving away from homogeneous competition, with a significant increase in the proportion of First-in-Class new drug development, which rose by 23 percentage points to 35% since 2020 [38][39]. - Domestic innovative drugs are gaining international recognition, with outbound licensing transactions reaching $66 billion in the first half of 2025, reflecting a growing global presence [41][44]. Medical Devices - The aging population in China is projected to exceed 400 million by 2035, driving demand for medical services and supporting stable growth in the medical device market [50]. - The global medical device market is expected to grow at a compound annual growth rate (CAGR) of 5.7%, reaching $869.7 billion by 2030 [52]. - China's medical device market is rapidly expanding, with projected revenues of 187.5 billion yuan by 2025, indicating significant growth potential [53]. Aesthetic Medicine - The domestic aesthetic medicine market is expected to steadily increase, supported by various policies aimed at promoting healthy industry development and improving market concentration [39]. Synthetic Biology - The market size for synthetic biology is anticipated to approach $40 billion by 2027, driven by multiple factors including technological advancements and increased investment [39].