Investment Rating - The investment rating for the biopharmaceutical industry is "Positive" [6] Core Insights - The biopharmaceutical industry in China is undergoing a structural upgrade, with innovation becoming the new driving force for growth. The number of research pipelines has increased from 701 in 2014 to 6,119 in 2024, representing a compound annual growth rate (CAGR) of 24%. The global share of China's research pipelines has risen from 6% to 27% during the same period, driven by continuous R&D investment from Chinese pharmaceutical companies [1][11] - The internationalization of Chinese innovative drugs is accelerating, with significant growth in both transaction numbers and amounts. The license-out transaction amount increased from $0.9 billion in 2019 to $51.9 billion in 2024, with a CAGR of 125.0% [2][17] - The sector has experienced deep adjustments, and there are opportunities for valuation recovery. The optimization of drug procurement policies is expected to improve the competitive environment, allowing mainstream biopharmaceutical companies to recover profits and enhance their positions in the industry [3][25] - The report suggests focusing on companies such as Heng Rui Medicine, WuXi AppTec, and Enhua Pharmaceutical as potential investment opportunities [4][36] Summary by Sections Section 1: Structural Upgrade and Innovation - The biopharmaceutical industry is transitioning from generic drugs to innovative drugs, with a significant increase in the number of innovative drugs launched since 2019. The proportion of domestic innovative drugs is also on the rise, indicating enhanced innovation capabilities among Chinese biopharmaceutical companies [1][14] Section 2: International Market Expansion - The international competitiveness of Chinese innovative drugs has significantly improved, with the number of license-out transactions increasing from 22 in 2019 to 94 in 2024. This trend is expected to continue, providing additional revenue growth for Chinese biopharmaceutical companies [2][17] Section 3: Valuation Recovery Opportunities - The biopharmaceutical sector has undergone deep adjustments, and the valuation is expected to recover due to improved competitive dynamics and supportive policies for innovative drug development. The report highlights the potential for a "Davis Double" effect in the industry [3][25] Section 4: Key Companies - Heng Rui Medicine focuses on innovative drug development in oncology, surgical medications, and cardiovascular drugs, benefiting from the industry's shift towards innovation [36] - WuXi AppTec is a leading global platform for pharmaceutical and medical device R&D, providing comprehensive services from drug discovery to commercialization [37] - Enhua Pharmaceutical specializes in central nervous system drugs and is positioned to benefit from the expanding innovative drug market [38]