Guoyuan 2025 Pharmaceutical and Biotechnology Investment Strategy Report: Bullish on Innovation and Going Overseas, Paying Attention to Fundamentals and Upward Trends in Specific Segments.

Guoyuan released a research report stating that the pharmaceutical sector is at a triple bottom of performance, valuation, and allocation in 2023, with the performance of the pharmaceutical sector greatly affected by anti-corruption measures. By 2024, performance growth has gradually stabilized, but valuation levels and fund allocation levels are still at the bottom. In 2025, with the gradual development of health commercial insurance, the payment end of the pharmaceutical industry is expected to gradually improve, and there are good prospects for pharmaceutical innovation. In addition, going global in the pharmaceutical industry remains the inevitable path for future Chinese pharmaceutical companies, with companies with strong product capabilities and channel capabilities expected to gain a first-mover advantage. Furthermore, it is recommended to focus on mergers and acquisitions, group purchasing, and undervalued individual stocks in specific areas. Guoyuan's main points are as follows: The payment end is expected to gradually improve, and there are good prospects for pharmaceutical innovation, pharmaceutical globalization, and other specific race tracks, as well as thematic opportunities such as mergers and acquisitions. Pharmaceutical innovation chain After more than ten years of research and development reserves, China's innovative drugs are now entering the stage of fruition. Progress has been made in the development of new drugs in various fields such as ADC, GLP-1, dual antibodies, and AD, with gradual listings in the domestic market. At the same time, breakthroughs in overseas authorization and listing applications of China's innovative drugs have been gradually achieved, proving the rapid improvement in the innovation capabilities of China's innovative drug companies. In 2025, the focus is on innovative drug companies in major race tracks with advanced research and development progress. Pharmaceutical globalization Going global with pharmaceutical products is a basic threshold and necessary path for growing into a global pharmaceutical giant. The global pharmaceutical market has vast space, with many products priced higher than in the domestic market. Developed countries have a large share of the regulatory pharmaceutical market, with high healthcare expenditures, making them important markets for pharmaceutical consumption. At the same time, emerging markets have higher growth rates than the world average, with large population bases and greater growth potential in the future. As China's pharmaceutical companies continue to strengthen, going global is a necessary path for future development, opening up long-term growth space for enterprises. The focus is on pharmaceutical companies with strong product capabilities and channel capabilities going global. Pharmaceutical mergers and acquisitions The China Securities Regulatory Commission issued the "Opinions on Deepening Market Reform of Mergers and Acquisitions of Listed Companies" on September 24, 2024, encouraging listed companies to strengthen industrial integration and improve the efficiency of merger and acquisition market transactions, paving the way for a wave of merger and acquisition restructurings. Currently, the pharmaceutical market in China is experiencing an accelerated increase in concentration, and merger and acquisition restructuring is expected to accelerate. It is recommended to pay attention to this area. Pharmaceutical collection The collection process in various pharmaceutical fields is accelerating, with the impact of collection in some specific race tracks already cleared. There is potential for new growth in the future, with a focus on insulin, orthopedics, and some generic pharmaceutical companies. After four years of adjustments, the valuation levels in some pharmaceutical race tracks are low, with improving fundamentals and event catalysts in the future, such as the essential drug list and state-owned enterprise reforms. It is advisable to focus on this area. Investment advice: Focus on mergers and acquisitions, group purchasing, and undervalued individual stocks in specific areas In 2025, with the gradual development of health commercial insurance, the payment end of the pharmaceutical industry is expected to gradually improve, with good prospects for pharmaceutical innovation. In addition, going global in the pharmaceutical industry remains the inevitable path for future Chinese pharmaceutical companies, with companies with strong product capabilities and channel capabilities expected to gain a first-mover advantage. Furthermore, it is recommended to focus on mergers and acquisitions, group purchasing, and undervalued individual stocks in specific areas. Risk warning: Policy risks in the pharmaceutical industry, risks of price reductions of products, and risks of research and development progress falling short of expectations.