Statistics from the National Medical Products Administration indicate that in the first half of this year, China approved 38 Class 1 innovative drugs for market launch. Among these, 11 feature novel targets or mechanisms of action, and all are domestically developed and manufactured. The proportion of China's independent research and development has significantly increased, and both the quality and efficiency of domestic innovative drug development have seen marked improvement.

Key Areas Addressed by the 11 Novel Target/Mechanism Drugs

What constitutes a Class 1 innovative drug? In China, chemical drug registrations are primarily categorized into five classes. Class 1 refers to innovative drugs, Class 2 to improved new drugs, Classes 3 and 4 to generic drugs, and Class 5 to drugs already marketed overseas seeking approval for the domestic market. Among these, Class 1 innovative drugs are those that have not been marketed anywhere in the world. This means they are not only the most innovative within the classification but also unique globally.

What are novel target/mechanism innovative drugs? These are drugs developed and launched globally for a specific target or mechanism of action, representing the first successful therapeutic path of its kind. This category primarily includes drugs with entirely new action pathways, novel molecules or compounds for efficacy, those receiving global first approval, and those pioneering a completely new class of treatment.

It is noteworthy that the 11 domestically developed novel target/mechanism drugs approved in the first half of this year primarily involve six therapeutic areas: four in anti-tumor, two in anti-infective, two in medical imaging, one in endocrine system, one in surgery and others, and one in blood system diseases. Among them are China's first self-developed radioactive diagnostic agent, the world's first antibody-drug conjugate for treating nasopharyngeal carcinoma, and the world's first CAR-T therapy for solid tumors.

Breaking Through Bottlenecks: Quality and Efficiency in Domestic R&D Rise

For a long time, China lacked original radioactive diagnostic and therapeutic drugs with independent intellectual property, representing a significant shortfall in the field of original nuclear medicine pharmaceuticals.

The self-developed radioactive innovative drug approved this year has broken the bottleneck of China lacking original targeted radioactive diagnostic agents for nuclear medicine tumor imaging, a situation that persisted for nearly three decades.

Analysis suggests that China's recent reforms in drug review and approval processes, which support and guide R&D innovation oriented towards clinical value, have enhanced efficiency and product quality. This allows companies to more clearly forecast R&D return cycles, focus on foundational innovation, and create a virtuous cycle of increasing quantity and quality in innovative drug applications.

Innovative Drugs May Enter a Golden Period of Performance Realization

Analysis indicates that the current pipeline of domestic innovative drugs, including those in late-stage clinical trials, New Drug Applications (NDA), or recently approved, continues to expand. Coupled with accelerated pathways like priority review and conditional approval for new indications, the supply side may support sustained market growth for domestic innovative drugs.

For investors, within their own risk tolerance, utilizing related thematic ETF products could be an ideal way to gain exposure to the innovative drug sector.

A-Shares: Concentration of Global CXO Leaders and Domestic Pharma Pioneers

Investors may consider the Innovation Pharmaceutical ETF (159992) and its feeder funds (Class A: 012781; Class C: 012782). This ETF primarily tracks the CSI Innovation Pharmaceutical Index (931152.CSI), focusing on leading companies in the A-share innovative drug industry chain. It aggregates global CXO leaders and leading domestic pharmaceutical companies engaged in innovation and generic drugs, offering a consolidated approach to innovative drug investment opportunities. In Q1 this year, the net profit growth rate of the index constituents reached 24.10%, indicating signs of an industry recovery.

Hong Kong Shares: Focus on Downstream Innovative Biopharma, Potential for A/H Valuation Gap Correction

Investors may consider the Hong Kong Innovation Pharmaceutical ETF (159567) and its feeder funds (Class A: 023929, Class C: 023930). This product tracks the CNI Hong Kong Stock Connect Innovation Pharmaceutical Index (987018.CNI), focusing on the Hong Kong-listed innovative drug industry chain with a particular emphasis on downstream innovative biopharmaceutical companies. It aims to capture favorable trends such as AI-empowered drug R&D and the overseas expansion of domestic innovative drugs. Analysis suggests recent trading activity in the Hong Kong innovative drug sector has rebounded from lows, and the A/H share valuation gap presents room for correction. Quality companies with strong pipelines and commercialization barriers are expected to see opportunities.

Looking ahead, with a pipeline of drugs potentially launching in a concentrated manner and supportive policy tailwinds, the innovative drug industry may enter a golden period of performance realization. Investors, within their risk tolerance, could utilize the aforementioned innovative drug thematic ETFs to potentially capture long-term industry opportunities.

Risk Disclosure

Note: For details on fee structures, please refer to the fund product summary. As of 2026.6.17, information is subject to the latest fund announcements and legal documents.

Investing involves risk. Funds are long-term investment instruments primarily designed to diversify investments and reduce specific risks associated with investing in a single security. Unlike bank savings or other financial instruments that offer fixed income expectations, when you purchase a fund product, you may share in the investment returns generated by the fund based on your holdings, but you may also bear the losses from the fund's investments.

Before making any investment decisions, please carefully read the fund contract, prospectus, product summary, and other legal documents, as well as this risk disclosure. Fully understand the fund's risk-return characteristics and product features, carefully consider all risk factors associated with the fund, and assess your own risk tolerance based on your investment objectives, time horizon, experience, and financial situation. Based on your understanding of the product and suitability advice, make rational and prudent investment decisions.

In accordance with relevant laws and regulations, the fund management company provides the following risk disclosures:

1. Based on different investment objectives, funds are categorized into equity funds, hybrid funds, bond funds, money market funds, fund of funds, commodity funds, etc. Investing in different types of funds yields different return expectations and involves varying degrees of risk. Generally, the higher the expected return of a fund, the greater the risk you assume.

2. Funds may face various risks during investment operations, including market risk, as well as the fund's own management risk, technical risk, and compliance risk. Large-scale redemption risk is a specific risk of open-end funds, meaning when net redemption requests on a single open day exceed a certain proportion of the fund's total shares (10% for open-end funds, 20% for regular open-end funds, except for special products specified by the CSRC), you may not be able to redeem all requested shares in a timely manner, or redemption payments may be delayed.

3. You should fully understand the difference between regular fixed-amount fund investment and savings methods like installment savings. Regular fixed-amount investment is a simple method to guide long-term investment and average investment costs, but it does not avoid the inherent risks of fund investment, cannot guarantee investors will make a profit, and is not an equivalent substitute for savings.

4. Special Product Risk Disclosures:

a. Investors should be aware of the risks associated with underlying index volatility and the specific risks of ETF (Exchange Traded Fund) investments. Feeder funds invest in the target ETF; investors should pay attention to specific risks such as tracking deviation, performance differences from the target ETF, other risks related to investing in the target ETF, and the risk of failing to meet agreed tracking error targets.

b. The Hong Kong Innovation Pharmaceutical ETF and its feeder funds may invest in stocks eligible for the Stock Connect program. They will face specific risks arising from differences in the investment environment, targets, market systems, and trading rules under the Stock Connect mechanism.

5. The fund manager commits to managing and utilizing fund assets with honesty, credit, diligence, and responsibility, but does not guarantee the fund will be profitable or promise a minimum return. The fund's past performance and net asset value do not predict its future performance. The performance of other funds managed by the fund manager does not guarantee the performance of this fund. The fund management company reminds investors of the "buyer beware" principle in fund investment. After making an investment decision, you bear the investment risks arising from the fund's operational status and changes in net asset value. The fund manager, custodian, sales agency, and related institutions do not make any promises or guarantees regarding fund investment returns.

6. This fund was established by the fund management company in accordance with relevant laws and regulations and has been registered with the permission of the China Securities Regulatory Commission (CSRC). The fund contract, prospectus, and product summary have been publicly disclosed on the CSRC's fund electronic disclosure website and the fund manager's website. The CSRC's registration of this fund does not indicate a substantive judgment or guarantee of its investment value, market prospects, or returns, nor does it indicate that investing in this fund is risk-free.