Core Viewpoint - The article highlights the strong performance and potential of the Guotai Innovation Drug ETF (589723), which tracks the Shanghai Stock Exchange's Innovation Drug Index, emphasizing its focus on biotech and small to mid-cap stocks, making it well-suited for the current market environment [1][2]. Group 1: Market Performance - The Innovation Drug Index has shown a stronger rebound from September 24, 2024, to June 2025 compared to the broader market and other pharmaceutical indices, indicating higher upward elasticity [1]. - The pharmaceutical sector's recovery is significantly driven by the performance of innovative drug companies, which have outperformed in the recent market rally [1]. Group 2: Policy Support - There is a clear policy inclination towards supporting innovative drugs, with future healthcare policies aimed at reducing the proportion of generic drugs and reallocating saved funds to support innovative drug development [1]. Group 3: Supply Side Developments - Domestic innovative drug companies have made significant advancements in research and development capabilities, leading to increased numbers of research pipelines and technical strength [1]. - The number of domestic drug companies participating in international markets and presenting clinical results at major academic conferences has seen a notable increase [1]. Group 4: Profitability Trends - Innovative drug companies are gradually achieving breakeven and even profitability after years of significant losses, with potential for further performance improvements driven by major business development events and new drug launches [2]. - The pharmaceutical sector currently has substantial room for valuation recovery and increased holdings, suggesting a favorable environment for investors to gradually accumulate shares in the Guotai Innovation Drug ETF [2].