2025-12-22 15:47Summary of Conference Call on Hainan Free Trade Port's Impact on the Pharmaceutical Industry Industry Overview - The conference call discusses the impact of the Hainan Free Trade Port (FTP) on the pharmaceutical industry, highlighting the benefits of zero tariffs, low tax rates, and value-added tax exemptions for pharmaceutical companies operating in the region [1][2]. Key Points and Arguments 1. Cost Reduction and Profitability - The zero tariff policy and 30% value-added tax exemption in Hainan significantly reduce operational costs for pharmaceutical companies, enhancing their gross margins. For instance, Weili Medical in Haikou High-tech Zone benefits from these policies by utilizing imported latex for processing [3][5]. 2. Accelerated Drug Approval Processes - The establishment of real-world data research in the Lecheng Pilot Zone has expedited the approval process for innovative drugs and medical devices, saving companies substantial costs in clinical trials and shortening the cash flow recovery period [3][4]. 3. Investment Fund Expansion - The Hainan Free Trade Port Construction Investment Fund is set to expand from 10 billion to 20 billion yuan, focusing on supporting innovation in the biopharmaceutical sector and cross-border mergers and acquisitions [1][5][6]. 4. Growth in Haikou High-tech Zone - The Haikou High-tech Zone accounts for approximately 70%-80% of Hainan's pharmaceutical output, with a reported output of 420 million yuan as of August 2025, and an expected growth of 20%-30% in 2023 [4][5]. 5. Tax Incentives and Internationalization - The corporate income tax rate in Hainan is 15%, positioning it as a potential offshore center for Chinese pharmaceutical companies, attracting international capital and enhancing local industry competitiveness [5][9]. 6. Medical Device Maintenance and Repair - The combination of zero tariffs and a bonded maintenance model allows foreign equipment to be repaired in Hainan before being re-exported, reducing maintenance costs and improving customs efficiency [5][9]. 7. Patient Access and Drug Availability - The establishment of medical alliances with hospitals across provinces has improved patient access to special medications, with an anticipated patient flow conversion rate of 70% [2][14][15]. 8. Regulatory Adjustments Post-Closure - Post-closure, the regulatory framework in the Lecheng Pilot Zone will focus on balancing safety and convenience, including measures for drug traceability and online follow-up services [16]. 9. Fund Focus for 2025 - The investment strategy for the Hainan Free Trade Port Fund in 2025 will emphasize licensing in and medical technology transformation, leveraging unique policy advantages for biopharmaceutical development [17]. 10. Cross-Border Financial Advantages - The unique EF account system in Hainan facilitates seamless cross-border capital flow, exempting new foreign direct investments from corporate income tax, which attracts large pharmaceutical companies to establish operations in the region [18]. Additional Important Insights - The Haikou High-tech Zone is actively attracting companies in the stem cell and cell therapy sectors, although economic benefits from these new entrants have yet to materialize [7]. - The real-world data research pathway has led to the approval of numerous products, with a goal of reaching 1,000 approved products to enhance international competitiveness [7][12]. - Successful case studies, such as SuSheng Bio and Huaxi Bio, illustrate the potential for rapid growth and operational success in Hainan due to favorable policies [10]. This summary encapsulates the critical insights from the conference call regarding the Hainan Free Trade Port's influence on the pharmaceutical industry, emphasizing the strategic advantages and growth opportunities presented by the region's policies.