The innovative drug sector has recently experienced multiple catalysts, with favorable policies and accelerated global expansion resonating to attract market attention and capital to the Hong Kong-listed innovative drug segment. Trading sentiment for high-quality on-exchange instruments like the Huatai Bairui Hang Seng Innovation Drug ETF (520500) remains consistently active. Data shows its trading volume reached 26.84 billion yuan on July 9th, with a daily average turnover of 25.49 billion yuan so far in July, a significant increase from the daily average of 8.81 billion yuan in the first half of the year. Capital is also accelerating its deployment pace; the fund's outstanding shares reached 2.109 billion on July 9th, representing a substantial increase of 52.16% over the past three months.
Policy Catalysts for the Innovative Drug Sector
The policy environment for innovative drugs is witnessing a concentrated series of catalysts. On July 9th, the National Health Commission released the "National Essential Medicines List (2026 Edition)", which will take effect on September 1st. This update marks the first time innovative drugs have been included within the scope for selection and adjustment for the essential medicines list, with four domestically developed Class 1 innovative drugs newly added. On the same day, the National Healthcare Security Administration provided its first detailed disclosure during a routine press conference on the implementation progress of the commercial health insurance innovative drug directory—by the end of May, drugs listed in the commercial insurance innovative drug directory were available at 1,486 designated medical institutions, more than double the number at the beginning of the year, with coverage for these drugs included in the benefit responsibilities of over 100 inclusive insurance (Hui Min Bao) products.
A research report from Huatai Securities noted that this directory adjustment is the first time innovative drugs have been positioned as a key direction for essential medicine selection, reflecting a further strengthening of policy support for innovative varieties with high clinical value. According to the National Health Commission, the selection criteria for this directory adjustment are based on high clinical value, a broad patient population, and suitability for use across various levels of healthcare institutions. Subsequently, the process from market launch to inclusion in the essential medicines list will be further shortened during the periodic adjustments and dynamic optimization of the directory, supporting the development of innovative drugs.
Acceleration in Review and Approval Processes
The review and approval process is also speeding up. On July 3rd, the National Medical Products Administration released a draft for public comment proposing to include eligible Cell and Gene Therapy (CGT) drugs in the innovative drug "30-day channel", compressing the review cycle from 60 working days to 30 working days. Coupled with policies such as the exemption of patent-protected innovative drugs from the twelfth batch of national centralized procurement and the implementation of a priority review channel for active pharmaceutical ingredients starting in August, the industry's policy orientation has comprehensively shifted from "cost control and price reduction" to "fostering excellence and strengthening competitiveness".
Robust Global Expansion Activity
Simultaneously, outbound licensing deals for innovative drugs remain highly active. Data from PharmCube shows that in the first half of 2026, China's innovative drug Business Development (BD) transactions set a new historical record for the same period with a total value of $99.7 billion, approaching 73% of the full-year 2025 total of $135.7 billion and nearly doubling the full-year 2024 total of $52.2 billion. Chinese companies occupied 8 out of the top 10 spots in global pharmaceutical transactions. With the BD boom continuing, the global competitiveness of Chinese innovative drug companies is expected to accelerate its realization.
About the Investment Instrument
It is reported that the Huatai Bairui Hang Seng Innovation Drug ETF (520500), which supports intraday T+0 trading, tracks the Hang Seng Innovation Drug Index. Through the QDII mechanism, it invests in 40 leading Hong Kong-listed innovative drug companies, primarily focusing on mid-to-upstream innovative drug fields such as biopharmaceuticals, chemical pharmaceuticals, and active pharmaceutical ingredients, bringing together a group of R&D-driven enterprises with strong research capabilities and development potential.
The fund's manager, Huatai Bairui Fund, as one of China's first ETF managers, has been deeply involved in the index investment field for over 19 years. It has created index tool products for investors such as the Huatai Bairui CSI 300 ETF (510300) and the Huatai Bairui A500 ETF (563360), known for their transparent investment objectives, convenient trading, and low fees. As of the end of March 2026, the company's ETFs had cumulatively generated profits exceeding 223.4 billion yuan for holders over the previous two years, making it one of only three public fund companies in the A-share market to achieve cumulative profits over 200 billion yuan during the same period.