According to Zhitong Finance APP, Guosen Securities Co.,Ltd. released a research report stating that the pharmaceutical sector demonstrated excellent stock price performance in the first half of the year. The innovative drug sector led the gains, benefiting from continuous BD overseas deals, outstanding clinical data readouts, and policy support. The sector is in a phase of rapid sales volume expansion. As a series of blockbuster products receive approval for listing and are included in medical insurance coverage, domestic product sales are experiencing rapid growth. Overseas licensing revenue has also become an important income source for innovative drug companies. Focus should be placed on innovative drug companies with differentiated innovation capabilities and products with global commercialization potential.

Guosen Securities Co.,Ltd.'s main viewpoints are as follows:

**Innovation Going Global 2.0 Achieves Outstanding Results**

Domestic innovative drugs have entered a stage of differentiated, high-quality innovation. Excellent preclinical/clinical data serves as the foundation for supporting innovative drug overseas expansion and demonstrating global competitiveness. An increasing number of domestic innovative drugs are presenting clinical data at top global academic conferences such as ASCO, ESMO, and WCLC, continuously validating their potential as global best-in-class candidates. Moreover, more domestic innovative drugs are entering global Phase 3 clinical trials.

**Chinese Innovative Drugs Occupy More Important Position in Global Market**

From the perspective of overseas licensing transactions, the proportion of Chinese innovative drug assets in MNC BD transactions, both in terms of quantity and amount, has increased rapidly. The fields involved in innovative drugs have gradually expanded from oncology to autoimmune and metabolic chronic disease areas. In the first half of the year, represented by the collaboration between 3SBio and Pfizer, domestic innovative drug companies completed a series of overseas licensing transactions.

**Domestic Market: Continuous Payment-side Optimization**

Medical insurance negotiations and renewal price reductions over the past two years have become relatively moderate. Most innovative drugs have achieved volume growth in exchange for price concessions after entering medical insurance, with sales expanding rapidly. With policy support for innovative drugs in various regions, newly launched blockbuster products are expected to quickly realize domestic commercialization value. This year's catalog adjustment added a commercial insurance innovative drug directory, applied for simultaneously with the basic medical insurance directory, which is expected to provide new incremental opportunities for innovative drugs.

**Risk Warnings**

Risk of clinical data falling short of expectations; risk of commercialization not meeting expectations; risk of regulatory policy adjustments.