Pharmaceutical industry receives further policy support
On November 24, the General Office of the Shanghai Municipal People's Government issued Several Measures for Deepening the Reform of Drug and Medical Device Supervision and Promoting High-Quality Development of the Pharmaceutical Industry in Shanghai. It mentioned supporting clinical research on innovative traditional Chinese medicine (TCM) drugs and research on TCM compound formulations derived from ancient classic prescriptions, encouraging the cultivation of major TCM varieties and secondary development of classic varieties.
Support shortening the review and approval timelines for clinical trials of eligible innovative drugs to 30 working days and actively promote pilot experiences. Efforts will be made to expand the scope of medical insurance payments for medical service items and medical consumables, covering more innovative products. Encourage medical institutions to accelerate the pilot work of self-developed in vitro diagnostic reagents. Promote the application of clinical usage data of self-developed in vitro diagnostic reagents by registered medical institutions for product registration submissions.
Notably, several securities research institutions have recently released research reports expressing optimism about the innovative medical device and innovative drug industrial chains.
Shanghai issues significant policies
Recently, the General Office of the Shanghai Municipal People's Government issued Several Measures for Deepening the Reform of Drug and Medical Device Supervision and Promoting High-Quality Development of the Pharmaceutical Industry in Shanghai.
It was mentioned that focus would be placed on key areas and products such as cell and gene therapy, rare diseases, pediatric medications, high-quality first generics, artificial intelligence medical devices, medical robots, brain-computer interfaces, particle therapy equipment, and innovative TCM diagnostic equipment. A service list for key products under research will be established, providing proactive guidance in clinical trials, market registration, inspections, production licensing, and other stages.
Improve the ethical collaborative review mechanism for healthcare institutions by simplifying and unifying the acceptance process, increasing meeting frequency, and reducing review times. Promote cross-regional ethical collaborative reviews for multicenter clinical trials within the Yangtze River Delta region. Strengthen the standardization of clinical medical data and enhance its use in research and innovation. Establish a screening and evaluation mechanism for innovative medical devices guided by clinical value to accelerate their translation to market.
Support innovation in TCM research and development. Establish mechanisms for medical institutions to collect and organize human-use experience data in a standardized manner, exploring the use of real-world evidence derived from human-use experience data for drug registration applications. Formulate regulations for the filing management of TCM preparations prepared using traditional processes by medical institutions. Support the development of clinically effective and distinctively advantageous TCM preparations used in medical institutions, including those developed from famous senior TCM practitioners' prescriptions, into new TCM drugs. Encourage medical institutions, research units, and pharmaceutical companies to jointly create an innovation and industrial transformation platform for TCM, supporting clinical research on innovative TCM drugs and research on TCM compound formulations based on ancient classic prescriptions, and encouraging the cultivation of large-scale TCM varieties and secondary development of classic varieties. TCM formula granules produced according to national drug standards in other provinces and cities are exempt from filing when sold in Shanghai.
Actively participate in the formulation and revision of national standards for drugs and medical devices and international standard harmonization. Leverage the role of new types of standardization technical organizations to advance the standardization research of cutting-edge technologies such as AI medical devices, medical robots, brain-computer interfaces, particle therapy equipment, innovative TCM diagnostic equipment, and cell and gene therapies. Continuously conduct research on standards for TCM decoction pieces, TCM formula granules, and TCM medical devices, relying on international standardization platforms such as the International Organization for Standardization/Technical Committee on Traditional Chinese Medicine (ISO/TC249) to develop international standards for TCM.
Continuously optimize and improve the listing services for newly approved drugs in Shanghai, and actively apply to become the first province to list new drugs. Promote the expansion of medical service items and medical consumables covered by medical insurance to include more innovative products. Provide early guidance and pre-review of documentation for enterprises applying for charge codes for innovative products. Within one month of the release of the national medical insurance drug list and the 'new and excellent pharmaceuticals and devices' product catalog, promptly equip and utilize them based on clinical needs and hospital specialties. Explore efficient mechanisms for connecting 'new and excellent pharmaceuticals and devices' from research and development to use, optimize the hospital admission process for new drugs that are irreplaceable in the treatment of critically ill patients, gradually reducing the process from 30 working days to 15 working days. For 'new and excellent pharmaceuticals and devices' products that meet the regulations, timely study their inclusion in the scope of medical insurance payments, and encourage commercial health insurance products to cover more 'new and excellent pharmaceuticals and devices'.
Advance reforms in the pharmaceuticals sector. Support qualified innovative drugs to have their clinical trial review and approval timelines shortened to 30 working days, and actively promote pilot experiences. Relying on a big data regulatory platform for clinical trials, enhance the quality and efficiency of clinical trials. Reform the supplementary application review and approval process for chemical drugs, providing pre-verification and inspection services for significant changes in drug registration applications in Shanghai prior to submission, achieving a reduction in the review and approval timeline for chemical drug supplements requiring verification and testing to 60 working days. Strive for pilot programs in the review and approval of supplementary applications for overseas-manufactured drugs and the filing review for generic drugs, accelerating the market entry of first-to-file generic drugs.
Promote reforms in the medical device field. Encourage medical institutions to accelerate the piloting of self-developed in vitro diagnostic reagents. Advance the use of clinical usage data from registered medical institutions’ self-developed in vitro diagnostic reagents for product registration applications. Support the construction of facilities such as testing and inspection, water and gas systems that meet requirements in high-density medical device industry parks, for shared use by medical device manufacturing companies within the park.
Institutions are optimistic about the innovative drug industry chain.
Recently, in the secondary market, the pharmaceutical sector has experienced widespread pullbacks along with the broader market, with previously strong sub-sectors such as innovative drugs, CRO (Contract Research Organizations), and CDMO (Contract Development and Manufacturing Organizations) seeing significant declines. Meanwhile, thematic rotations have accelerated, and last week, stocks related to influenza themes also experienced some pullback.
Zhongtai Securities stated that considering the overall positive performance of the market this year, funds may seek stability towards the end of the year, suggesting active positioning during pullbacks for opportunities in 2026. The fundamentals of the pharmaceutical sector have not changed but are gradually improving. After multiple rounds of adjustments, the pharmaceutical sector is at the bottom of its valuation range. Continued optimism exists for innovation-driven mainlines and opportunities arising from reversals in undervalued segments.
Recently, there have been frequent developments in the small nucleic acid drug field globally, drawing significant attention from both the industry and investment communities. Everbright Securities pointed out that small nucleic acid drugs have moved from proof-of-concept to the eve of industrial rise. Since 2025, breakthroughs in delivery technology have expanded indications from the liver to cardiovascular, CNS, and other areas, combined with the commercial scaling of blockbuster products and large-scale acquisitions by multinational pharmaceutical giants, ushering the industry into a golden period driven by dual themes of ‘technological breakthrough + commercial realization.’ Domestic pharmaceutical companies are accelerating their R&D progress; since 2025, many companies have entered clinical research stages, recommending focused attention on leading innovative pharmaceutical enterprises with advanced technology platforms and differentiated pipelines, as well as innovative supply chain companies poised to benefit from the overall upward trend of the industry.
Everbright Securities noted that with changes in domestic and international macroeconomic and policy environments, future investments in the pharmaceutical sector should increasingly focus on the essential logic of clinical value—addressing the clinical needs of doctors and patients. Whether it’s domestic medical insurance policies or global strategies, higher premiums are being placed on clinical value. Optimism remains high for the innovative drug industry chain and innovative medical devices.
Guojin Securities believes that the mainline of innovative drugs and the reversal of left-side sectors’ difficulties will remain the biggest investment opportunities in the pharmaceutical sector in 2025. For innovative drugs, focus on bispecific/multispecific antibodies with pan-cancer potential and chronic disease drugs addressing unmet clinical needs. Continue to monitor investment opportunities in ADCs (antibody-drug conjugates), bispecific/multispecific antibodies, and small nucleic acid tracks. Marginal improvements have been observed in domestic and international innovative drug financing data, with upward trends in CXO (contract research and manufacturing organizations) industry orders, accompanied by downstream technological iteration in innovative drugs, industry recovery, and anticipated improvements in both valuations and performance. Meanwhile, high-quality assets with low valuations in left-side sectors, such as leading OTC traditional Chinese medicine companies and pharmacy chains, are expected to see operational improvements, warranting continued attention.
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