Core Insights - The innovative drug sector is experiencing a correction, with the Sci-Tech Innovation Drug ETF (589720) dropping over 2.5% today, indicating potential buying opportunities as funds may be looking to accumulate at lower prices [1] - Since September, innovative drugs have seen a valuation adjustment to a more reasonable range, and as the fourth quarter approaches, business development (BD) transactions are expected to increase, potentially revitalizing the innovative drug market [1] - Dongwu Securities projects that by 2026, innovative drugs will remain a key investment theme due to their improving international standing, explosive growth in overseas BD, significant market capitalization potential, and a shift towards profitability [1] - The focus areas for innovative drugs include next-generation ADC+2.0 IO and small nucleic acids, which are expected to be pivotal in the sector's growth [1] - The Sci-Tech Innovation Drug ETF (589720) targets innovative drug companies on the Sci-Tech Innovation Board, tracking a representative index of 30 high-quality companies, primarily in high-growth biotech, with a 20% limit on daily price fluctuations to better align with sector volatility [1]

Core Viewpoint - The innovative drug industry trend remains unchanged, with sufficient adjustments made currently, and it is expected that innovative drugs will rise again after the third quarter reports [1] Group 1: Industry Trends - The CXO sector is performing well, benefiting from potential performance catalysts and high prosperity, with the overseas CXO industry entering a phase of accelerated recovery [1] - There is a clear recovery trend in macro-level BD transactions and mergers and acquisitions, while micro-level new molecular businesses maintain high prosperity [1] - The medical device sector is experiencing a policy turning point, with stock prices, valuations, and allocations at the bottom, and the fundamentals are expected to improve [1] Group 2: Investment Recommendations - It is recommended to focus on innovative drugs, the innovative drug industry chain (export-oriented CXO), and medical devices as the main lines for medium to long-term investment [1] Group 3: ETF Performance - The Guotai Innovation Drug ETF (589720) focuses on innovative drug companies on the Sci-Tech Innovation Board, tracking 30 representative quality companies in the Shanghai Stock Exchange Sci-Tech Innovation Drug Index, primarily featuring high-growth biotech [1] - Since the "924 market" last year, the Sci-Tech Innovation Drug Index has outperformed the Hang Seng Hong Kong Stock Connect Innovative Drug Index, with respective gains of 117.04% and 109.62% during the market rebound period from September 24, 2024, to September 30, 2025 [1] - The Sci-Tech Innovation Drug Index may help better share the elasticity of the Sci-Tech Innovation Board when market risk appetite rebounds [1]

Core Insights - The trend of Chinese innovative drugs going global is a long-term development, with limited impact from external environmental changes [1] - In the first half of 2025, there were 72 License-out transactions from China, exceeding half of the total transactions in 2024, with a total transaction value 16% higher than that of 2024 [1] - The number of significant business development (BD) deals from listed companies has decreased, and NewCo format BDs have not met market expectations [1] Industry Performance - The China Science and Technology Innovation Drug ETF (GTJA, 589720) focuses on innovative drug companies on the Sci-Tech Innovation Board, tracking an index of 30 representative high-quality companies [1] - Since the "924 market" rally last year, the Sci-Tech Innovation Drug Index has outperformed the Hang Seng Hong Kong Stock Connect Innovation Drug Index [1] - During the market rebound from September 24, 2024, to October 10, 2025, the Sci-Tech Innovation Drug Index and the Hang Seng Hong Kong Stock Connect Innovation Drug Index increased by 103.5% and 100.5% respectively [1]

Group 1 - The pharmaceutical sector is experiencing positive developments, with a joint initiative from the National Health Commission and other departments aiming to enhance ear and hearing health services by 2030, targeting a coverage of over 90% in prefecture-level cities [1] - The medical device industry is expected to benefit from policy support, particularly in AI and imaging/surgical applications, with significant potential for domestic equipment replacement [1] - The impact of centralized procurement on the medical consumables sector is gradually diminishing, leading to a potential recovery in high-value consumables [1] Group 2 - The innovative drug sector is showing positive performance driven by policy and funding, with expectations for overseas business development and clinical data to catalyze industry upgrades [1] - The Chinese herbal medicine sector is nearing the end of inventory clearance, with attention on beneficiaries of innovation-driven and centralized procurement policies [1] - The CXO sector is seeing improvements in fundamentals, with orders increasing quarterly as the industry enters an upward cycle [1] Group 3 - China's innovative drugs are entering a phase of realization of results, with numerous research and development advancements that are not affected by trade frictions, expected to remain a key investment theme in the pharmaceutical sector through 2025 [1] - The Guotai Innovation Drug ETF (589720) focuses on innovative drug companies in the Sci-Tech Innovation Board, tracking an index of 30 representative high-quality companies, primarily in high-growth biotech, with a 20% limit on daily price fluctuations to better align with sector volatility [1][2] Group 4 - Since the "924 market" rally last year, the Sci-Tech Innovation Drug Index has outperformed major Hong Kong innovation drug indices, with respective gains of 75%, 70%, and 70% during the market rebound from September 24, 2024, to June 30, 2025 [2] - The Sci-Tech Innovation Drug Index may help capture better returns when market risk appetite increases [2]

Group 1 - The ETF focuses on innovative drug companies listed on the Sci-Tech Innovation Board, tracking a representative index of 30 high-quality companies [1] - Since the "924 market" rally, the Sci-Tech Innovation Drug Index has outperformed major Hong Kong innovation drug indices, with returns of 75% compared to 70% for both Hong Kong innovation drug indices during the rebound period from September 24, 2024, to June 30, 2025 [1] - The product's 20% limit on daily price fluctuations aligns it more closely with the volatility of the sector, potentially allowing better participation in the Sci-Tech Board's resilience when market risk appetite increases [1]