Investment Rating - The report maintains a rating of "Buy" for the pharmaceutical and biotechnology sector, specifically recommending companies like Zhaoli Pharmaceutical and Fangsheng Pharmaceutical as undervalued high-dividend Chinese medicine stocks [1]. Core Insights - The report highlights that the Chinese medicine sector is characterized by strong cash flow and low debt ratios, making it capable of high dividend payouts. This sector is less affected by international political dynamics, making it a viable defensive strategy in a volatile market [16][17]. - The report ranks sub-sectors in the following order of preference: innovative drugs > research services > CXO > Chinese medicine > medical devices > pharmacies [10][12]. Summary by Sections 1. Significant Excess Returns in Pharmaceutical Stocks - The A-share pharmaceutical index has shown a year-to-date increase of 18.85%, with a weekly decline of 2.48%. The Chinese medicine sector saw a slight increase of 0.38%, while other sectors like medical services and medical devices experienced declines [4][9]. 2. High Dividend Yield in Chinese Medicine Sector - The report emphasizes the attractiveness of high dividend yields in the Chinese medicine sector, with companies like Zhaoli Pharmaceutical expected to have a dividend yield of 4.1% in 2025, and Fangsheng Pharmaceutical at 3.1% [17][18]. 3. R&D Progress and Company Dynamics - Recent developments include the approval of innovative drugs and clinical trials by various companies, indicating ongoing advancements in the sector [4][12]. 4. Industry and Regulatory Insights - The report provides insights into the regulatory landscape affecting the pharmaceutical industry, noting that the impact of tariff wars on the sector is limited [4]. 5. Market Review - The report tracks the performance of various pharmaceutical sub-sectors, noting that the Chinese medicine sector has outperformed others in recent weeks [4][9].

Group 1 - The innovative drug sector is experiencing active performance due to multiple positive factors both domestically and internationally [1] - 3SBio announced that its ophthalmic product 601A (Bevacizumab intravitreal injection) has received acceptance for market application, marking a significant advancement in the ophthalmic field [1] - Bristol-Myers Squibb (BMS) announced an expansion of its collaboration with AI pharmaceutical company Insitro, with a potential total exceeding $2 billion for the development of new ALS drugs, highlighting the recognition of AI technology in drug development by multinational corporations [1] - Pfizer's CEO Albert Bourla stated on October 15 that the U.S. pharmaceutical industry needs to collaborate with the Chinese pharmaceutical industry [1] - Merck has initiated the 15th global Phase III clinical trial for the TROP2 ADC drug, Lurbinectedin (SKB264), licensed from Keren Biotechnology, reaffirming the global competitiveness and core value of China's ADC platform [1] Group 2 - The Guotai Innovation Drug ETF (589720) focuses on innovative drug companies on the STAR Market, 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 [2] - Since the "924 market" period, the STAR Market innovative 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 from September 24, 2024, to September 30, 2025 [2] - The STAR Market innovative drug index may help capture better returns during periods of increased market risk appetite [2]

Core Viewpoint - Sangfor Technologies (01530) experienced a significant stock increase of over 8%, reaching HKD 29.8 with a trading volume of HKD 550 million, following the announcement of its first market application for a self-developed drug [1] Company Developments - On October 15, Sangfor Technologies announced that it has submitted its first market application for the recombinant anti-VEGF humanized monoclonal antibody (generic name: Bevacizumab intravitreal injection solution, research code: 601A) for the indication of macular edema due to branch retinal vein occlusion (BRVO), which has been accepted by the National Medical Products Administration [1] - The Phase III clinical trial for 601A in BRVO has successfully completed, achieving its primary endpoint, showing that the best corrected visual acuity (BCVA) improvement at 24 weeks post-treatment is non-inferior to that of Ranibizumab [1] - In secondary efficacy endpoints, the proportion of patients with BCVA improvement of ≥5, ≥10, and ≥15 letters at 12, 24, and 52 weeks post-treatment was comparable between 601A and Ranibizumab, confirming the clear and sustained effect of 601A on vision improvement [1] Efficacy and Safety - In terms of central retinal thickness (CRT) changes, 601A demonstrated comparable efficacy to Ranibizumab at 12, 24, and 52 weeks, validating its effectiveness in improving macular edema [1] - The overall safety and tolerability of 601A treatment were reported to be good, indicating a positive benefit-risk profile [1]