After years of sustained R&D investment, China's innovative drug industry is gradually moving past the early stage of heavy spending and profit pressure, with the profit realization capability of the industrial chain expected to improve continuously. A batch of recently disclosed interim reports confirms this fundamental improvement trend: a leading CRO company achieved record-high first-half results, with net profit attributable to shareholders breaking the 10 billion yuan mark for the first time; meanwhile, several companies reported double-digit profit growth in the second quarter. Against the backdrop of a recovering industry sentiment, trading activity in related products has also heated up. Notably, as the only ETF in the current A-share market tracking the Hang Seng Innovative Drug Index, the Huatai Baorui Hang Seng Innovative Drug ETF (520500) has attracted net inflows of 2.503 billion yuan over the past year, boosting its fund shares and net asset value to 2.210 billion units and 3.208 billion yuan respectively, representing year-over-year growth of 232% and 152%, with relatively prominent liquidity advantages.

Looking at the global pharmaceutical industry landscape, overseas multinational pharmaceutical companies are facing a concentrated patent cliff for blockbuster drugs and urgently need to replenish their medium-to-long-term growth drivers with high-quality innovative pipelines. Chinese innovative drug companies, leveraging their efficient R&D systems, well-designed clinical trial protocols, and cost advantages, have become high-quality partners for overseas pharmaceutical companies' pipeline collaborations, driving a surge in industry BD licensing deals. Data from PharmCube shows that in the first half of 2026, the total value of outbound licensing transactions by Chinese pharmaceutical companies reached 99.7 billion U.S. dollars, already exceeding 70% of the full-year transaction scale of 2025, and among the top 10 global licensing transactions, China accounted for 8 seats. Recently, the wave of overseas expansion continues, with three major cross-border cooperation projects landing simultaneously on August 10th, further confirming the global industrial value of Chinese innovative drugs.

Alongside continuous breakthroughs in overseas commercial collaborations, the independent R&D capabilities of local pharmaceutical companies have also significantly improved, with the industry's R&D approach gradually shifting to a model of "first-in-China launch, global synchronization, and global leadership." According to data released by the National Medical Products Administration, a total of 38 Category 1 innovative drugs were approved in China in the first half of 2026, 11 of which are self-developed domestic drugs targeting entirely new targets and with novel mechanisms of action. Continued policy support from the industrial sector also provides a foundation for the long-term development of the innovative drug industry. On August 10th, the Shanghai Municipal Commission of Commerce, in conjunction with six other departments, released the "Shanghai National Service Trade Innovation Development Demonstration Zone Construction Plan," introducing targeted support measures for the biomedical industry. The policy explicitly supports global registration and certification for innovative drugs, modern traditional Chinese medicine, and high-end medical devices, helping local medical products expand their domestic and international sales channels. It also encourages cross-border industrial cooperation in innovative biomedical achievements, providing ongoing policy support for the globalization of the innovative drug industry.

It is understood that the Hang Seng Innovative Drug Index, closely tracked by this ETF, invests in 40 leading Hong Kong-listed innovative drug companies through the QDII mechanism, primarily focusing on mid-to-upstream sectors such as biopharmaceuticals, chemical pharmaceuticals, and active pharmaceutical ingredients, assembling a group of R&D-driven enterprises with strong research capabilities and development potential. The Huatai Baorui Hang Seng Innovative Drug ETF (520500), with its large scale, good liquidity, and support for intraday T+0 trading, may serve as a convenient tool for investors looking to capture opportunities in the Hong Kong-listed innovative drug sector against the backdrop of BD deal realization, an earnings inflection point, and policy support. The fund manager, Huatai Baorui Fund, is one of the first batch of ETF managers in China, with over 19 years of experience in the index investment field, offering investors transparent, easily tradable, low-cost index tools like the Huatai Baorui CSI 300 ETF (510300) and the Huatai Baorui CSI A500 ETF (563360). As of the end of June 2026, the company's ETFs have generated over 180.6 billion yuan in cumulative profits for holders over the past two years, making it one of only three mutual fund companies in the entire A-share market to achieve cumulative profits exceeding 160 billion yuan during the same period. A MACD golden cross signal has formed, suggesting these stocks are showing strong upward momentum.