Futu News financial app learned that pharmaceutical innovation, as one of the five major sectors in the technology industry, the innovative drug industry chain is entering the period of commercial realization driven by pure incremental growth. The pharmaceutical sector's scarce incremental prosperity continues to rise, with international competitiveness also increasing, and there is still room for valuation improvement. The R&D of innovative drugs has strong technological barriers, the innovative drug industry chain, which has undergone comprehensive adjustments in the earlier stages, has great valuation and performance elasticity, with expected room for improvement.

The pharmaceutical sector has scarce incremental growth, with prosperity continuously rising.

The pharmaceutical industry's stock drug consumption faces continuous tightening policy pressure, while the innovative drug industry chain, driven purely by incremental growth and having accumulated R&D efforts over the past few years, is entering the period of commercial realization. According to publicly available data, the amount of medical insurance payments for innovative drugs in 2022 was 48.189 billion yuan, accounting for only 1.96% of total medical insurance expenditure in 2022. Compared to the total medical insurance expenditure of 2.46 trillion yuan in 2022, there is still ample room for medical insurance funds to increase payments for innovative drugs.

International competitiveness continues to increase, and there is room for valuation improvement.

Balitaiheng, BMS, Kelun Pharmaceutical, and Merck have continued to land major deals, and Akeso's excellent clinical data disclosure, continuously validating the enhanced international competitiveness of local Chinese innovations. More local innovative drugs stand out in international competition, providing significant room for valuation elasticity (core competitiveness, strong attributes of technological innovation) and sales elasticity brought by internationalization.

Select high-quality leading innovative drugs and innovative supporting industry chains with sufficient valuation adjustments.

The R&D of innovative drugs has strong technological barriers and provides efficient and high-quality R&D outsourcing (CRO) and production outsourcing services (CDMO) to upstream enterprises (referred to collectively as CXO and research upstream), pushing forward the technological innovation (innovative drugs) in the pharmaceutical industry. Along with the Federal Reserve's interest rate cuts and the bottoming out of investment and financing, the innovative drug industry chain, which has undergone comprehensive adjustments in the earlier stages, has great valuation and performance elasticity.

Key symbols: Sichuan Kelun Pharmaceutical (002422.SZ), Wuxi Apptec (603259.SH), Novozan (688105.SH).

Risk warning: Market sentiment fluctuates more than expected, policy implementation falls short of expectations, listed company performance falls short of expectations, etc.