Core Viewpoint - The innovative drug sector has shown strong performance in the capital market, with significant stock price increases for related companies, driven by favorable policy changes and the recent initiation of the 11th batch of national drug centralized procurement, which excludes innovative drugs from procurement [1][2][3]. Group 1: Market Performance - The Hong Kong innovative drug-related ETFs have seen substantial gains, with some funds increasing nearly 90% year-to-date as of July 18 [1]. - Key stocks in the innovative drug sector, such as Kangfang Biotech and 3SBio, have experienced price surges of approximately 24% and 23%, respectively [1]. Group 2: Policy Changes - The new centralized procurement policy emphasizes "new drugs not included in procurement, procurement only for non-new drugs," alleviating market concerns regarding the inclusion of innovative drugs in procurement [3][4]. - The National Healthcare Security Administration (NHSA) has established a dynamic adjustment mechanism for the medical insurance catalog, reducing the adjustment cycle from a maximum of 8 years to 1 year [1][8]. Group 3: Industry Insights - The recent procurement policy directly addresses industry concerns about policy uncertainty, allowing companies to better assess the market protection period and commercialization potential of their products [2][4]. - The NHSA's measures indicate a balance between cost control and encouragement of innovation, with 80% of savings from procurement allocated to support innovative drug payments [5][9]. Group 4: Future Outlook - The innovative drug sector is expected to experience a valuation recovery, with the time from drug approval to inclusion in the medical insurance catalog significantly shortened from around 5 years to approximately 1 year [8]. - The number of new drugs entering the medical insurance catalog has increased dramatically, with 98% of new drugs listed within 5 years of their launch by 2024 [8]. - The innovative drug industry is anticipated to transition from a "policy disturbance period" to a "clear rules period," providing a better environment for long-term investment [9].