Core Insights - The innovative drug sector is experiencing a significant resurgence, with the Oriental Red Medical Upgrade Fund achieving a year-to-date return of 82.35% as of August 22, 2025, significantly outperforming its benchmark [1] - The fund manager emphasizes the importance of understanding the fundamental changes in the market rather than relying on market fluctuations [1][2] - The launch of the Oriental Red Medical Innovation Mixed Fund (QDII) on September 10, 2023, indicates a continued focus on innovative drugs as a key investment area [2] Investment Strategy - The fund manager believes that the innovative drug market may see differentiation, with funds favoring truly innovative companies [2] - A long-term perspective is taken, with a focus on various sub-sectors such as ADC, dual antibodies, multi-antibodies, gene therapy, and innovative small molecules [2][3] - The manager employs a unique industry classification system, dividing the pharmaceutical sector into 18 sub-industries to better capture growth opportunities [3] Market Dynamics - The investment approach is influenced by policy cycles and growth rates, with a focus on sectors benefiting from government support [3][4] - The manager prefers to identify opportunities in sectors at the bottom of their cycles, emphasizing the importance of solid company operations even in challenging times [4] - A rigorous valuation methodology is applied, with different metrics used for various types of companies, including PE, PEG, and specific criteria for innovative drugs [5][6] Future Outlook - The year 2024 is seen as a critical turning point for innovative drug companies, with expectations for significant market developments in 2026-2027 [7] - Recent policy measures aimed at supporting high-quality development in innovative drugs are expected to enhance the industry's growth potential [8] - The manager anticipates a shift in market sentiment towards companies with genuine innovation and deep value as the market stabilizes [9]