Summary of the Conference Call on Hong Kong Pharmaceutical Sector Industry Overview - The Hong Kong pharmaceutical sector, particularly the innovative drug index, has experienced a correction of over 10% due to valuation digestion, profit-taking, and external policy disturbances. However, the trend of upgrading China's innovative drug industry remains unchanged, with CXO performance exceeding expectations, indicating that the long-term growth logic of the industry is intact [1][3][4]. Key Points and Arguments - **External Variables Impacting the Sector**: Key external variables include the Federal Reserve's monetary policy, international trade environment, and global competition landscape. These factors significantly influence the capital costs and risk preferences of global investors in the Hong Kong innovative drug sector [5][6]. - **Domestic Policy Environment**: The domestic policy environment has shifted from the impacts of medical corruption and healthcare cost control to clearer support for genuine innovation. Reforms in payment and approval processes are expected to provide higher valuation premiums for companies with core R&D capabilities and differentiated pipelines [6][7]. - **Valuation Logic Similar to Tech Stocks**: The valuation logic of the innovative drug sector is similar to that of technology stocks, relying on technological advancements, high R&D investments, and future growth assessments. Investor sentiment tends to be consistent across both sectors [8][9]. - **Shift from Theme Investment to Performance-Driven Investment**: The Hong Kong pharmaceutical sector is transitioning from theme-based investments to performance-driven investments. By the first half of 2025, 36 innovative drug companies are expected to turn around their overall losses, shifting market focus from R&D teams to product commercialization revenue and profit improvement [11][12]. - **Impact of Overseas Expansion**: Domestic innovative drugs are monetizing technology through overseas licensing, reshaping market valuation logic based on global product competitiveness and actual cash flow, rather than mere concept speculation [13][14]. Additional Important Insights - **Market Rotation Phenomenon**: There is a rotation phenomenon within the Hong Kong pharmaceutical sector, with market attention shifting from downstream innovative drug companies to CROs, life sciences services, and high-end medical devices, driven by improvements in fundamentals [2][16]. - **Profitability Turning Point**: The profitability turning point in the Hong Kong pharmaceutical sector is attributed to commercial maturity, accelerated overseas expansion, and internal management optimization. Leading companies are establishing a positive cycle from R&D to commercialization and profitability [12][15]. - **Systematic Revaluation of Chinese Innovative Drugs**: The systematic revaluation of Chinese innovative drugs is supported by multiple long-term industry trends, including improved R&D efficiency and quality, as well as a favorable policy environment that encourages innovation [15]. - **Investor Strategies**: Investors are advised to adopt a phased investment strategy when investing in the Hong Kong pharmaceutical sector, particularly in innovative drug ETFs, to mitigate risks associated with high volatility and to ensure a diversified portfolio [22][23]. - **Future Outlook**: Despite recent corrections driven by technical and emotional factors, the long-term outlook for the Hong Kong pharmaceutical sector remains optimistic, particularly in the context of a declining interest rate environment and ample liquidity [24][25].

Core Points - The Hong Kong Innovative Drug ETF (513120) experienced a decline of 0.52% on November 19, with a trading volume of 5.353 billion yuan [1] - The ETF's shares increased by 21.5 million, bringing the total shares to 18.636 billion, with a notable increase of 1.975 billion shares over the past 20 trading days [1] - The latest net asset value of the ETF is calculated at 24.997 billion yuan [1] - The performance benchmark for the ETF is the return rate of the CSI Hong Kong Innovative Drug Index (in RMB) [1] - Managed by Guangfa Fund Management Co., Ltd., the fund manager is Liu Jie, and since its inception on July 1, 2022, it has achieved a return of 34.12%, while the return over the past month is -2.04% [1]

Core Viewpoint - The pharmaceutical theme funds are showing signs of recovery after a two-month adjustment period, driven by the introduction of the "Commercial Insurance Innovative Drug Directory" mechanism in the national medical insurance negotiations, which has significantly boosted market enthusiasm [1][2][3] Group 1: Pharmaceutical Fund Performance - Several pharmaceutical theme funds have demonstrated strong upward momentum, with some products doubling in net value this year due to favorable factors such as the expansion of innovative drug business development (BD) transactions [1] - As of late August, the Yongying Pharmaceutical Innovation A fund had a return rate of 113.05% for the year, but experienced a pullback starting in early September. Recently, it has stabilized, with a near one-month return rate of -0.66% as of November 18 [2] - The Fuguo Pharmaceutical Innovation A fund also saw a net value pullback from early September, but has begun to recover, with a near one-month return rate of 2.19% as of November 18 [2] Group 2: New Catalysts - The introduction of the "Commercial Insurance Innovative Drug Directory" during the 2025 national medical insurance negotiations is reigniting investment enthusiasm in innovative drugs, leading to a significant increase in trading volume for related ETFs, such as the Hang Seng Innovative Drug ETF, which saw daily trading volumes exceeding 1.2 billion yuan from November 12 to 14 [2][3] - The "Commercial Insurance Innovative Drug Directory" includes innovative drugs that exceed basic medical insurance coverage but have high clinical value and significant patient benefits, suggesting a shift towards a multi-layered medical insurance system [2] Group 3: Future Outlook for Innovative Drugs - Institutions remain optimistic about the investment prospects in the pharmaceutical industry and innovative drugs, viewing recent adjustments as a new opportunity for positioning [3] - The Chinese innovative drug industry is still in its early stages of international development, with significant growth potential as domestic innovative drug sales currently account for only about 10% of the overall pharmaceutical market [3][4] - The shift from relying on "story expectations" to focusing on "value realization" is expected to lead to a qualitative leap in the innovative drug sector, supported by continuous performance realization and payment system reforms [3]

Core Insights - The article provides an overview of fund managers' perspectives and strategies based on their recent quarterly reports, highlighting different investment styles and market outlooks [1][2]. Group 1: Fund Manager Perspectives - Fund managers express varying views on market conditions, with some maintaining optimism about equity assets due to low interest rates and the potential for corporate earnings recovery [17][18]. - Different investment styles are categorized, including deep value, growth value, balanced, and growth styles, each with distinct characteristics and focus areas [19][35][51]. Group 2: Deep Value Style - Deep value managers focus on low valuation metrics such as low P/E ratios and high dividend yields, primarily investing in sectors like finance, real estate, and energy [10][12]. - Historical performance shows that this style performed well in 2016-2017 and 2021-2024, while underperforming in 2019-2020 [15][16]. Group 3: Growth Value Style - Growth value managers prioritize companies with strong profitability and stable cash flows, often holding stocks for the long term [20][22]. - Concerns about market risks and valuation levels are noted, with some managers highlighting the extreme valuation disparities across sectors [22][24]. Group 4: Balanced Style - Balanced style managers seek a combination of growth and value, focusing on companies with favorable PEG ratios and exploring opportunities across various sectors [35][36]. - They emphasize the importance of maintaining a diversified portfolio while identifying high-quality investment opportunities [40][46]. Group 5: Growth Style - Growth style managers focus on high revenue and earnings growth, often investing in emerging industries such as AI, renewable energy, and technology [51][62]. - The article notes a shift in focus from technology to consumer sectors as the market stabilizes, with an emphasis on identifying companies with strong growth potential [55][58]. Group 6: Market Outlook - The overall market sentiment is cautiously optimistic, with expectations of continued structural opportunities despite potential short-term volatility [40][62]. - Fund managers are adjusting their portfolios in response to macroeconomic conditions, focusing on sectors with strong growth prospects and managing risks associated with high valuations [31][70].

Core Viewpoint - The announcement by BaiLi TianHeng regarding its innovative drug izabren achieving dual primary endpoints in the Phase III clinical trial for advanced esophageal squamous cell carcinoma marks a significant breakthrough, indicating strong potential for meeting clinical needs in post-line treatment and reshaping market valuation perceptions of the company [1][2]. Group 1: Clinical Trial Results - Izabren has achieved both progression-free survival (PFS) and overall survival (OS) as dual primary endpoints in its Phase III clinical trial, a first for an ADC drug in this indication [2][3]. - The drug demonstrated a 39.6% objective response rate (ORR) and a median PFS of 5.4 months in earlier Phase Ib studies, reinforcing its therapeutic potential [3]. Group 2: Market and Commercialization Potential - Izabren's unique mechanism of action positions it favorably for commercialization across multiple cancer types, with significant advancements noted in nasopharyngeal carcinoma and non-small cell lung cancer [4][5]. - The drug's potential annual peak sales are projected to exceed $20 billion, supported by its broad indication coverage and the absence of similar products in the market [6]. Group 3: Strategic Decisions and Financial Position - The decision to delay the Hong Kong IPO reflects a strategic retreat in response to market conditions, allowing the company to focus on its robust pipeline and clinical data [7][8]. - BaiLi TianHeng has a strong cash position of 6.086 billion RMB, ensuring operational and developmental sustainability for the coming years [8].

Core Insights - The innovation drug sector indices, including the CSI Innovation Drug Industry Index and the CSI Biotechnology Theme Index, experienced a decline of 1.0% as of the market close, indicating a short-term adjustment in the market [1] - Despite the recent downturn, the innovation drug sector is showing improved resilience, with positive trends observed in investment and financing data, orders, and performance metrics [1] Group 1: Index Performance - The CSI Innovation Drug Industry Index fell by 1.0% with a rolling P/E ratio of 50.5 times and a valuation increase of 73.4% since its inception [5] - The CSI Biotechnology Theme Index also decreased by 1.0%, having a rolling P/E ratio of 55.4 times and a valuation increase of 65.3% since its launch [7] - The CSI 300 Healthcare Index declined by 0.7%, with a rolling P/E ratio of 31.0 times and a valuation increase of 47.2% since its inception [9] Group 2: Sector Focus - The CSI Innovation Drug Industry Index focuses on leading companies in the A-share market involved in innovative drug research and development, comprising no more than 50 stocks [4] - The CSI Biotechnology Theme Index targets leading companies in the A-share market engaged in genetic diagnostics, biopharmaceuticals, blood products, and other human biotechnology sectors [6] - The CSI 300 Healthcare Index encompasses leading companies in the A-share healthcare sector, covering various segments such as chemical pharmaceuticals, medical services, and medical devices [8]

Strategy Insights - The report highlights strong performance in the innovative drug sector and solid-state batteries, while robotics has seen a significant decline [1][8] - Key themes to focus on include innovative drugs, solid-state batteries, lithium batteries, energy storage, robotics, and commercial aerospace [2] Theme Investment Review - During the week of November 10-14, 2025, innovative drugs showed notable strength, while solid-state batteries experienced slight gains. Other sectors, particularly AI, faced declines [8] - The computing power index fell below the 60-day moving average, with MFI and RSI indicators continuing to decline [8] - The robotics index dropped, with MACD reaching its lowest point since April 7, and MFI entering the oversold zone below 20 [8] - Innovative drug stocks surpassed the 30-day moving average, with MACD trending upwards and MFI indicators showing an upward movement, though not yet in the overbought zone [8] - Solid-state batteries remain in an upward trend, with MA30 providing support, but MFI showed a significant decline this week, indicating a potential weakening of upward momentum [8] - Other sectors such as commercial aerospace, controllable nuclear fusion, quantum technology, and low-altitude economy are experiencing general fluctuations or weakness, but no clear oversold signals have emerged [8] Industry Chain Tracking AI Sector - The recent decline in storage was triggered by Kioxia's disappointing earnings, attributed to a fixed-price agreement with Apple that prevented it from benefiting from spot price increases. This is seen as an individual company issue rather than an industry turning point [41] - Future stock selection may shift from a broad rally to structural opportunities driven by AI, with a focus on core stocks that can benefit from rising storage prices [41] - Close monitoring of upstream manufacturers' capacity expansion plans and the actual implementation of AI demand is recommended [41] Lithium Battery Sector - Recent strong performance in lithium battery stocks is primarily driven by explosive growth in AIDC's electricity demand [42] - AIDC's power consumption has surged due to increased GPU power and AI cabinet upgrades, leading to significant power investment expansion [42] - AIDC's high reliability requirements for backup power are driving rapid growth and even premium pricing in the backup power market, with price increases expected to continue due to persistent supply-demand gaps [42] Technological and Industrial Developments - Baidu launched its native multimodal model, Wenxin Model 5.0, with 2.4 trillion parameters, aiming to enhance AI applications across various industries [47] - Avenzo's EGFR/HER3 dual antibody ADC drug received fast-track designation from the FDA, marking a significant breakthrough for domestic dual antibody ADCs internationally [47] - The successful launch of 13 low-orbit satellites using the Long March 12 rocket from Hainan's commercial aerospace launch site demonstrates advancements in China's commercial aerospace capabilities [47] - Developments in brain-computer interfaces and humanoid robots are also noted, indicating progress in these cutting-edge technologies [47]

Market Overview - The pharmaceutical and biotechnology index increased by 2.19%, outperforming the Shanghai Composite Index by 2.65 percentage points, ending a nearly two-month period of sluggish performance [4] - The innovative drug index (BK1106) rose by 4.93%, while the Hang Seng Healthcare Index (HSCICH) surged by 7.18%, and the Hong Kong innovative drug ETF (513120) increased by 5.90% [4][5] Investment Insights - The recent rebound in the pharmaceutical sector indicates a recovery in market sentiment, with a notable increase in risk appetite [5] - Investors are advised to focus on two main themes: capitalizing on valuation recovery opportunities in innovative drugs and medical devices, and being cautious of concept stocks lacking fundamental support [5] - Companies with strong global innovation capabilities and progress in international markets are highlighted as key investment targets [5] Company Developments - Fuxiang Pharmaceutical, primarily engaged in the development and sales of anti-infection drug raw materials, has seen its stock performance closely tied to the rising prices of lithium battery electrolyte additives, rather than traditional pharmaceutical concepts [5] - The company is expanding into synthetic biology and microbial protein businesses [5] Clinical Trials and Approvals - A total of 94 new clinical trial registrations were disclosed, with 37 in Phase II or above [9] - Notable clinical trials include the evaluation of HLX43 for late-stage pancreatic cancer, which has commenced its Phase II study [15] - The approval of innovative drugs includes the launch of Vepaglutide by Paig Biological, aimed at improving blood sugar control in adults with type 2 diabetes [13][14] IPO and M&A Activity - Jiahe Biopharma is pursuing a reverse merger with Yiteng Pharmaceutical, marking the first reverse acquisition case under the Hong Kong 18A listing rules for biotech companies [7][8] - Jiahe Biopharma reported a revenue of 32.245 million yuan, a year-on-year increase of 122.84%, despite a loss of 54.373 million yuan during the same period [7]

Market Overview - The pharmaceutical and biotechnology index increased by 2.19%, outperforming the Shanghai Composite Index by 2.65 percentage points, ending a two-month period of sluggish performance [3] - The innovative drug index (BK1106) rose by 4.93%, while the Hang Seng Healthcare Index (HSCICH) saw a 7.18% increase [3] - The Hong Kong innovative drug ETF (513120) experienced a 5.90% rise [3] Company Highlights - Fuxiang Pharmaceutical, primarily engaged in the research, production, and sales of anti-infection drug raw materials and intermediates, saw its stock price surge by 64.46% [4] - Beibete-U, an innovative drug company that recently listed on the STAR Market, faced a significant decline, attributed to its slow clinical trial progress and lack of immediate product support [5] - Jiayou Bio's merger proposal with Yiteng Pharmaceutical Group marks the first reverse acquisition case under the Hong Kong 18A listing rules for biotech companies [6][7] Clinical Trials - A total of 94 new clinical trial registrations were disclosed, with 37 being in Phase II or above [9] - Notable trials include HLX43, an ADC targeting PD-L1 for advanced pancreatic cancer, which has commenced its Phase II clinical study [18] Product Approvals - Three innovative drugs received approval, including Vepaglutide for type 2 diabetes, marking a significant milestone for Paige Bio [13][15] - The competitive landscape for GLP-1 drugs is intensifying, with major players like Novo Nordisk and Eli Lilly holding a combined market share of 84% [15][16]

Report Summary 1. Investment Rating The provided content does not mention the industry investment rating. 2. Core Views - Qi Zhen, a fund manager at Huabao Fund, has a "policy + industry" dual - driven investment framework, focusing on innovative drugs in the medium term. His investment style combines growth and certainty with flexible valuation tolerance, and he prefers long - term holding with low turnover and portfolio structure optimization [3][17][45]. - Since Qi Zhen took office, Huabao Big Health A has achieved remarkable returns, outperforming over 90% of similar pharmaceutical theme funds. Although its drawdown control is slightly weak, it still offers good risk - return performance [4][13][44]. - Qi Zhen is an excellent fund manager with a profound professional background, a mature investment system, and strict risk awareness. He is expected to continue generating excess returns as the Chinese innovative drug industry develops [46]. 3. Summary by Directory 3.1 Fund Manager Information - **Manager Introduction**: Qi Zhen holds a biotechnology bachelor's degree and a biology doctorate from Shanghai Jiao Tong University. He has worked in Northeast Securities and Essence Securities and joined Huabao Fund in October 2020. Since February 2023, he has been the fund manager of Huabao Big Health Hybrid Securities Investment Fund [4][9][44]. - **Managed Product Introduction** - **Representative Product**: Qi Zhen has managed Huabao Big Health A (006881.OF) since February 28, 2023. As of September 30, 2025, its total scale is 268 million yuan [4][10][44]. - **Representative Product Net Value Performance**: After excluding the 3 - month establishment period, Huabao Big Health A significantly outperformed the CSI All - Pharmaceutical Index, recording a cumulative positive excess return of 60.00%. Its return performance ranks among the top in pharmaceutical theme funds, surpassing over 90% of similar funds [11][13][15]. 3.2 Fund Manager Investment Ability Analysis - **Investment Scope - Policy + Industry Dual - Driven, Medium - Term Focus on Innovative Drugs**: Qi Zhen has a biological professional background and a large amount of professional reading. His investment framework is "policy + industry" dual - driven. He focuses on innovative drugs, with a position ratio of over 90%. He mines Alpha stocks with pipeline differentiation or expected inflection points and adjusts the portfolio dynamically [20][21][45]. - **Stock - Holding Characteristics - Balancing Growth and Certainty, Flexible Valuation Tolerance**: For innovative drug companies, Qi Zhen uses pipeline market value conversion for valuation, considering factors such as clinical stage success rate and management credibility. He gives higher valuation space to innovative drugs and focuses more on static valuation and performance improvement in traditional sub - industries [29][45]. - **Operation Characteristics - Preference for Long - Term Holding, Low Turnover, and Portfolio Structure Optimization**: Qi Zhen's operation strategy is mainly long - term holding of core positions, with an annualized turnover rate of only 2 - 3 times. He prefers to invest when the stock price is at the bottom or oversold. He controls drawdown by adjusting the portfolio structure rather than market timing and shows flexibility in A/H share allocation [35][36][45]. 3.3 Summary - Qi Zhen is an outstanding fund manager with a "policy + industry" analysis framework, pipeline market value valuation method, and multi - level risk control system. He is expected to create excess returns as the Chinese innovative drug industry develops. Investors can allocate his products to participate in the investment opportunities of the Chinese pharmaceutical industry upgrade [46]. 3.4 Appendix - The appendix provides product elements of Huabao Big Health A, including fund name, abbreviation, full name, establishment date, comparison benchmark, investment target, investment scope, management fee rate, and current fund manager's tenure [48].