Core Insights - The pharmaceutical sector is expected to recover from 2025 onwards, following a four-year adjustment period, with a cumulative increase of 4.57% in the pharmaceutical and biological industry as of May 30, 2025 [1][2] - The report suggests focusing on innovative drug companies with solid R&D foundations and competitive products for international markets, as well as traditional pharmaceutical companies with reasonable valuations [1] - AI is anticipated to empower the entire pharmaceutical supply chain, enhancing efficiency in drug development, production, and medical services [2] Group 1: Market Recovery - The pharmaceutical sector has experienced a recovery since 2025, ranking 6th among 31 primary industries in terms of performance, with a cumulative increase of 4.57% [1] - The holding of pharmaceutical stocks has increased but remains at historically low levels [1] - Multiple sub-sectors within the pharmaceutical industry are showing signs of stabilization and upward trends [1] Group 2: Growth Opportunities - Incremental opportunities are expected from innovative drugs and AI, while structural opportunities may arise from the recovery of left-side assets and valuation adjustments [2] - 2025 is projected to be a significant year for domestic innovative drugs entering international markets, with many companies transitioning from generic to innovative drugs since the "4+7" procurement policy in 2018 [2] - Some pioneering innovative drug companies are anticipated to reach breakeven and turn profitable [2] Group 3: Left-Side Assets - Left-side assets are entering a mild recovery phase, with traditional pharmaceutical companies, CXO, and consumer healthcare sectors gradually clearing existing risks [2] - The industry is expected to see a fundamental recovery as the risks associated with previous procurement policies and demand issues diminish [2]

Market Performance - As of May 7, 2025, the Hang Seng Healthcare Index (HSHCI) decreased by 3.02%, with mixed performance among constituent stocks [3] - Leading gainers included Yuan Da Pharmaceutical (00512) up 12.52%, Shanghai Pharmaceuticals (02607) up 2.23%, and China Traditional Chinese Medicine (00570) up 1.96% [3] - Major decliners were Sangfor Technologies (01530) down 8.40%, Ascentage Pharma-B (06855) down 8.13%, and BeiGene (06160) down 7.70% [3] - The Hang Seng Healthcare ETF (513060) fell by 2.65%, closing at 0.48 yuan, with an active trading volume of 1.096 billion yuan [3] Investment Insights - Dongfang Securities noted that the continuous release of diagnostic and treatment demand, along with the commercialization of domestic innovative products, is leading to marginal improvements in certain sectors [3] - The firm believes that the upcoming quarters will see confirmed industry growth due to supply-side innovations driving rapid demand growth, suggesting that now is an excellent time to allocate resources to the healthcare sector [3] Future Investment Trends - Guolian Minsheng Securities anticipates that overseas expansion of innovative drugs, AI integration, and left-side asset valuation recovery will be key investment themes in the pharmaceutical sector for 2025 [4] - Recommendations include traditional pharmaceutical companies with manageable risks and reasonable valuations, as well as innovative drug companies with strong R&D foundations and competitive products for overseas markets [4] ETF Performance Metrics - As of May 6, 2025, the Hang Seng Healthcare ETF has seen a 28.71% increase in net value over the past year [5] - The ETF's highest monthly return since inception was 28.34%, with an average monthly return of 6.79% [5] - The ETF's management fee is 0.50%, and the tracking error is 0.041%, indicating high tracking precision compared to similar funds [5] Top Holdings - The top ten weighted stocks in the Hang Seng Healthcare Index account for 57.17% of the index, with major players including BeiGene (06160) and WuXi Biologics (02269) [6][8]