Core Viewpoint - The public fund industry in China is undergoing a significant fee reform, highlighted by the successful early fundraising of the Oriental Red Medical Innovation Mixed Fund (QDII), which is the first floating management fee fund in the medical sector, reflecting investor confidence in the market and the asset management capabilities of Oriental Red [1][2]. Group 1: Fund Performance and Management - The Oriental Red Medical Innovation Mixed Fund (QDII) has gained recognition for its management capabilities, with the fund manager's income linked to investor returns, marking a shift towards prioritizing investor benefits over mere scale [2][4]. - Fund managers Jiang Qi and Gao Yi have extensive backgrounds in the medical and financial sectors, contributing to the fund's strong performance and investor trust [2][3]. - The Oriental Red Medical Upgrade Stock Initiation Fund, managed by Jiang Qi, has shown impressive results, with a net value growth rate of 102.43% over the past year [3]. Group 2: Industry Impact and Future Outlook - The introduction of floating fee structures is expected to have a profound impact across the industry, incentivizing fund managers to enhance their research and risk management capabilities, thereby fostering a culture of long-term value investment [4][5]. - The successful fundraising of the Oriental Red Medical Innovation Mixed Fund (QDII) indicates strong investor confidence in the long-term prospects of the medical industry and the asset management capabilities of Oriental Red [5]. - The collaboration between Oriental Red Asset Management and partners like Pudong Development Bank and Oriental Securities aims to provide long-term investment options and enhance investor engagement, contributing to the high-quality development of the asset management industry [5].

Core Viewpoint - The innovative drug sector is experiencing a significant resurgence, with the Oriental Red Medical Upgrade Fund achieving an annual return of 82.35% as of August 22, 2025, driven by a focus on fundamental changes in the market rather than speculative investments [1][2]. Group 1: Investment Strategy - The Oriental Red Medical Innovation Mixed Fund, managed by Jiang Qi and Gao Yi, emphasizes innovative drugs as a key investment focus, anticipating market differentiation where funds will favor truly innovative companies [2][9]. - Jiang Qi employs a unique industry classification system, dividing the pharmaceutical sector into 18 sub-industries and further refining high-growth areas based on growth potential and technological innovation [3][4]. - The investment approach is guided by two main principles: policy direction and growth rate, with a focus on sectors benefiting from national strategic shifts and those exhibiting a compound annual growth rate of 20% [3][4]. Group 2: Market Trends and Future Outlook - The innovative drug market is expected to see a wave of new products entering clinical stages, with 2026-2027 identified as critical years for the sector's growth, particularly in overseas market submissions [7][8]. - Recent policy measures, such as the introduction of a "commercial insurance innovative drug catalog," are anticipated to enhance the valuation logic for innovative drugs and direct resources toward leading companies with strong commercialization capabilities [8]. - The current market sentiment may lead to a shift in investment focus towards innovative companies with deep value, as the initial excitement subsides and rationality returns to the market [8][9].

Core Viewpoint - The innovative drug sector has shown strong performance this year, bringing the pharmaceutical industry back into the spotlight, with a focus on the potential for significant growth in the coming years [1][4]. Group 1: Fund Management and Strategy - The "Oriental Red Medical Innovation Mixed Fund" is managed by experienced professionals, including Jiang Qi, who has a strong background in both buy-side and sell-side research [1]. - Jiang Qi employs a "combination" strategy in the pharmaceutical sector, focusing on growth stocks, undervalued transformation targets, blue-chip stocks, and companies with stable cash flow, adjusting asset allocation based on market conditions [1][5]. Group 2: Performance and Future Outlook - The "Oriental Red Medical Upgrade Stock Initiation Fund" has demonstrated significant excess returns since its inception, with an A-class share net value growth rate of 71.72% compared to a benchmark decline of 6.17% [2]. - Jiang Qi believes that the innovative drug sector is at the beginning of a rapid growth phase, with many companies expected to transition from losses to profitability in the next five years [2][4]. Group 3: Market Dynamics and Investment Opportunities - The innovative drug industry is anticipated to enter a phase of explosive growth, with 2025 seen as a pivotal year for capital market developments [4]. - Despite the strong performance of innovative drugs, the overall market allocation to this sector remains limited, indicating that excess returns are likely to persist [5][6]. Group 4: Long-term Growth and Challenges - The pharmaceutical industry is characterized by its "long slope, thick snow" nature, where new growth points can be identified at any time, driven by technological advancements [7]. - The development of commercial insurance is expected to positively impact the innovative drug sector by allowing for better pricing and extending product life cycles [7]. Group 5: Technological Impact and Market Trends - AI applications in the pharmaceutical industry are primarily focused on drug discovery and development, with the potential for significant long-term benefits [8]. - The performance of innovative drug stocks in the Hong Kong market has outpaced that in the A-share market, largely due to differences in market liquidity rather than company quality [8][9]. Group 6: Investment Philosophy and Patience - Jiang Qi emphasizes the importance of patience in holding investments in innovative drugs, as the sector is expected to undergo substantial changes driven by fundamental developments [10][12]. - The focus should be on identifying companies with solid fundamentals and the potential for global clinical operations, as these will likely yield significant returns in the long run [10][11].

Core Insights - The global landscape of the innovative pharmaceutical industry is undergoing a significant shift, driven by the impending patent cliffs faced by major US companies like Merck and Pfizer, which are expected to result in annual sales losses of up to $100 billion between 2025 and 2030 [1] - In contrast, China's share of the global drug pipeline is projected to rise to 26.7% by 2024, making it the second-largest contributor after the US, with the country ranking third in the number of new drug approvals [1] - The total value of domestic innovative drug business development (BD) transactions reached a record high of $52.3 billion in 2024, with upfront payments hitting $4.1 billion, indicating a robust growth trajectory [3] Industry Dynamics - The innovative drug sector's growth is supported by the global recognition of Chinese pharmaceutical technology, with local companies making breakthroughs in advanced fields such as ADC and bispecific antibodies, attracting partnerships with multinational firms [3] - The capital market for pharmaceuticals, which had been stagnant for three years, is experiencing a resurgence in 2025, driven by a combination of valuation recovery, fundamental improvements, and policy support [7][10] - The Hang Seng Hong Kong Stock Connect Innovative Drug Index has seen a year-to-date increase of over 110% as of August 15, 2025, significantly outperforming the CSI 300 Index's 6.8% rise during the same period [5] Fund Performance - The Oriental Red Medical Upgrade Fund has demonstrated exceptional performance, with its Class A shares yielding an 82.35% return year-to-date as of August 22, 2025, significantly exceeding its benchmark [6] - The fund's strategy focuses on high-concentration holdings in innovative drug companies, maintaining a stock allocation of around 90% since its inception, which has allowed it to capitalize on the booming innovative drug market [14][18] Technological and Policy Support - Advances in biotechnology and artificial intelligence are shortening research cycles and reducing clinical costs, propelling China's new drug development to a leading position globally [10] - The National Medical Products Administration reported a nearly 60% year-on-year increase in innovative drug approvals in the first half of 2025, with 43 new drugs approved, indicating a supportive regulatory environment [10] Future Outlook - The Chinese innovative drug industry is at a historical turning point, transitioning from a "0-1" phase (2015-2024) to an anticipated "1-10" explosive growth phase (2025-2029), driven by increasing healthcare demands due to an aging population and rising chronic disease rates [19][20] - The shift from a focus on generic drugs to innovative therapies positions China as a competitive player in the global biopharmaceutical arena, enhancing its core capabilities in biotechnology [20]

Core Viewpoint - The pharmaceutical sector is experiencing a significant rebound after three years of stagnation, driven by overseas licensing deals, advancements in R&D capabilities, and supportive policies, presenting multiple opportunities for investors [1] Group 1: Industry Outlook - The long-term excess returns in the pharmaceutical industry are fundamentally driven by technological growth and value creation, with innovative drugs expected to be the fastest-growing sub-sector [1][6] - The industry is transitioning from a phase of investment (2015-2024) to a harvest phase (2025-2029), with innovative drugs moving from the initial stage to a more advanced stage of development [6][7] - The next phase for innovative drugs is anticipated to be a "1-10" growth stage, with more products entering the market and global competitiveness being validated through partnerships with major overseas pharmaceutical companies [6][8] Group 2: Fund Performance - Since its inception, the Oriental Red Medical Upgrade Fund has achieved a return of 36.12% against a benchmark decline of 16.94%, resulting in an excess return of 53.06% [2][3] - Over the past year, the fund has increased by 47.54%, significantly outperforming the benchmark's 14.37% return, leading to an excess return of 33.17% [2][3] - The fund ranks third among 40 similar funds in terms of net value growth over the past three years [2][3] Group 3: Investment Strategy - The core investment strategy focuses on "combination, cycle, and growth," emphasizing a diversified portfolio to navigate industry complexities while adjusting allocations based on sub-sector cycles [3][4] - The approach includes dynamic allocation between low-risk and high-growth investments, prioritizing companies with growth potential while avoiding purely undervalued but stagnant firms [4][8] - Continuous learning and forward-looking research are essential for identifying investment opportunities in the rapidly evolving innovative drug sector [9][8]