Core Viewpoint - China is expected to transition from a "big pharmaceutical country" to a "strong pharmaceutical country" as the domestic innovative drug market grows and evolves [5][18]. Group 1: Market Trends and Performance - The Hang Seng Innovative Drug Index saw a maximum increase of 141.24% from January 1 to early September 2025, followed by a decline of 22.63% until October 30 [2]. - As of October 31, the index rebounded with a maximum increase of 4.84% [2]. - The scale of business development (BD) transactions for Chinese pharmaceutical companies has exceeded $100 billion this year, with China's innovative drugs accounting for 46% of global pharmaceutical licensing transactions, making it the largest source of licensing transactions globally [5][22]. Group 2: Challenges in the U.S. Market - The difficulty and cost of expanding into the U.S. market are expected to increase, influenced by stricter regulations from the U.S. FDA [8][10]. - The U.S. government is implementing measures to limit drug imports from China, including more rigorous reviews and higher regulatory fees [8][9]. - The FDA's new guidelines emphasize overall survival in cancer drug approvals, potentially increasing costs by 1 to 2 times [8]. Group 3: Evolution of Outbound Strategies - Chinese pharmaceutical companies are evolving their outbound strategies from out-licensing to more collaborative models like NewCo and Co-Co [12][13]. - The Co-Co model involves deep collaboration with multinational corporations (MNCs) for joint development and commercialization, allowing for shared decision-making and risk [12][13]. - Different products may require tailored outbound strategies, with companies like Heng Rui Pharma adopting a two-step internationalization strategy [14]. Group 4: Domestic Market Potential - The Chinese innovative drug market is currently underperforming compared to its potential, with a market share significantly lower than that of the U.S., Europe, and Japan [16][17]. - The average price of innovative drugs in China is substantially lower than in the U.S., which is a key factor hindering market growth [17]. - Recent policy adjustments, including the introduction of commercial insurance and price negotiations, are expected to gradually align domestic drug prices with international standards over the next 3 to 5 years [18]. Group 5: Future Outlook - By 2035, China is projected to develop a number of leading pharmaceutical companies and become a global center for new drug creation [20]. - The emergence of top global pharmaceutical companies from China is anticipated, with the potential for significant breakthroughs in innovative drug development [20][21]. - The current surge in innovative drugs is driven by fundamental changes in the market, particularly in BD transactions, and the recognition of the value of Chinese innovative drugs by multinational companies [22].