Did you know? Pharmaceutical stocks have recently become a hot topic in investment circles! In Hong Kong stocks, Lepu Biotech soared by 17% in a single day, while Jacobi Therapeutics and Ascletis also rose by more than 10%; in A-shares, Changshan Biochemical’s year-to-date gain has even surged past 160%. None of this is accidental: from the continuous strengthening of new drug approval policies by the state, to domestic anti-cancer drugs making big strides overseas to earn US dollars, and AI helping to accelerate research and development, an all-round transformation is driving the popularity of pharmaceutical stocks. Simply put, with technological breakthroughs, supportive policies, and profitable enterprises, investors’ enthusiasm has naturally soared.

The new drug regulatory rules just introduced in Beijing have shortened the start-up time of clinical trials to within 20 weeks, and the mutual recognition rate of ethical reviews has exceeded 90%, doubling the efficiency of new drug research and development. The national drug regulatory conference emphasized "risk prevention in all links and innovation promotion in the whole chain", focusing on the quality supervision of centralized procurement drugs and the supervision of contract production to ensure drug safety and reliability. The medical insurance payment system has also undergone major changes: 835 new drugs have been added to the basic medical insurance catalog, high-value innovative drugs have been covered by commercial insurance catalogs for the first time, and the price confidentiality mechanism has helped domestic drugs go global. Local policies are also keeping pace: Beijing has established a 50 billion yuan medical and health industry fund, including a 10 billion yuan merger and acquisition fund, to accelerate the replacement of imported high-end medical devices with domestic ones.

Innovative drug research and development has entered a period of explosion: in the first half of 2025, the National Medical Products Administration approved 11 innovative drugs, 7 of which are Class 1 new drugs. AI technology has shown its prowess in the pharmaceutical field. Beijing has deployed 10 "AI + pharmaceutical" scenarios, directly cutting the R&D cycle by half and reducing costs. Clinical trial data has gained global recognition: Sinopharm’s "Defu Combination" anti-cancer drug was showcased at the 2025 American Society of Clinical Oncology Annual Meeting, increasing the median time for lung cancer treatment to 11 months and reducing risks by 30%. Domestic GLP-1 drugs and ADC targeted drug technologies are already on par with international giants.

Domestic drugs have reaped huge profits overseas: 3SBio’s PD-1/VEGF bispecific antibody was licensed to Pfizer, with a record-breaking transaction value of 6.05 billion US dollars; Hengrui Medicine launched the "NewCo model" to promote the globalization of GLP-1 preparations, attracting a steady stream of international orders. Corporate financial reports are also impressive: domestic new drug licenses in European and American markets have brought substantial income, domestic market sales have continued to grow with the improvement of health awareness, and pharmaceutical companies’ profits have steadily increased.

The capital market has responded enthusiastically: Hong Kong-listed biomedical stocks have led the gains, directly catalyzed by the over 90% success rate of innovative drug medical insurance negotiations and the expansion of payment channels through commercial insurance catalogs. Everbright Securities analyzed that the price-to-earnings ratio of Hong Kong-listed pharmaceutical stocks is still at a low level, and BD transactions continue to catalyze valuation repairs. Three major investment themes are clear: innovation and overseas-oriented companies such as Hengrui Medicine and Rongchang Bio; consumer-oriented pharmaceuticals including chronic disease drugs and weight-loss drugs; and high-dividend defensive sectors such as leading OTC Chinese medicine companies.

Demand continues to expand: the intensification of population aging has driven the demand for chronic disease drugs, and the number of diabetic patients in China remains the highest in the world. The trend of consumption upgrading is obvious. Patients pay more attention to curative effect and medication experience, and sales of high-end drugs such as GLP-1 have increased significantly. The supply side is constantly upgrading: domestic substitution has deepened in the field of high-end medical equipment, with surgical robots and AI imaging equipment breaking the imported monopoly. After the optimization of the centralized procurement policy, the focus has shifted from simply "low-price orientation" to quality evaluation, and the profit space of leading pharmaceutical companies has become more stable.

The industry also faces challenges: homogeneous competition has intensified. For example, R&D of PD-1 targets is clustered, and national policies have begun to emphasize the orientation of "genuine innovation". Uncertainties in going global have increased: geopolitical factors such as the U.S. Biosecurity Act have affected the progress of authorization, and the internationalization progress of some pharmaceutical companies has slowed down. Investors should view it rationally: in the short term, pay attention to enterprises with better-than-expected interim report performance and those included in the first batch of commercial insurance catalogs; in the long term, it is necessary to select pipelines with global clinical value advantages, such as ADC or cell therapy technologies.