Since the beginning of 2026, the innovative drug sector has staged a robust recovery, with market attention significantly increasing. On one hand, 2026 has witnessed a wave of small nucleic acid drug approvals, injecting fresh capital into the sector; on the other hand, continuous explosive growth in outbound business development deals for innovative drugs highlights global market recognition of China's pharmaceutical innovation. Looking ahead, how will the innovative drug market trend evolve? We turn to the analysis of Liang Furui, Portfolio Manager of Great Wall Healthcare Industry Select Fund.
As the Portfolio Manager of Great Wall Healthcare Industry Select Fund, you have achieved remarkable results through precise investments in the innovative drug sector. When did you identify the investment opportunity in innovative drugs, and what considerations guided your portfolio positioning?
Liang Furui: Great Wall Healthcare Industry Select Fund was established in October 2024, a period following a strong pre-National Day rebound in the secondary market. Initial portfolio construction faced pressure from market volatility, leading to short-term performance challenges. As a new fund manager, I deeply contemplated how to build a distinct style and core competitive edge for the product. Based on my analysis of the long-term development trends in the healthcare industry, I concluded that only innovation could break the industry's current negative spiral, with the innovative drug赛道 possessing substantial long-term growth potential and value realization prospects. Shortly thereafter, the innovative drug sector experienced a significant policy shift, markedly improving the industry's development environment.
Before positioning the portfolio towards the innovative drug sector, what key factors did you primarily consider? Regarding individual stock selection, what specific criteria did you apply?
Liang Furui: For sector allocation and stock selection, I generally prioritize two overarching principles. First, the inherent growth potential and development space of the industry itself, which must be supported by clear industrial logic and growth drivers. Second, identifying listed companies within this industry capable of capitalizing on its dividends, verifying whether they possess core advantages to seize developmental opportunities. Building on these prerequisites, I further conduct in-depth analysis of individual stocks using a "Three-Cycle Framework," evaluating them across supply-demand cycles, fundamental business cycles, and capital market cycles to determine their appropriate weightings in the portfolio. Specifically, my investment strategy primarily employs a "Three-Cycle Resonance" approach, seeking companies where industry cycles, corporate growth cycles, and capital market cycles align favorably. At the industry cycle level, analysis focuses on structural changes and competitive landscapes based on industry trends, identifying pricing power within the global competitive arena. The corporate growth cycle analysis centers on financial statements, identifying potential for earnings improvement. For the capital market cycle, positions are established when market consensus is not yet unified, at reasonable or undervalued levels, while also emphasizing valuation expansion during platform-type breakthroughs in products or business scaling from 1 to N. In summary, my aim is to capture returns from rapid corporate profit growth (the high-growth thesis), and from valuation expansion driven by differential recognition of a company's growth logic, particularly companies with potential "blockbuster" product prospects.
What do you believe are the reasons leading innovative drug stocks are favored by the market? From a financial indicator perspective, what potential risk factors might lie behind this high growth?
Liang Furui: Following a beta-driven rebound, the overall valuation of the innovative drug industry has returned to a relatively reasonable range, further highlighting the investment value of leading stocks. Leading stocks generally benefit from broader innovative platform layouts, higher authenticity of innovation, and greater probability of innovation realization. Of course, not all leading stocks are equal and careful selection remains crucial. Given that most innovative drug biotech companies are not yet profitable, future risks during their growth phase include the competitiveness of their drug pipeline data, whether available cash flow can fully support clinical R&D in the coming years, and the management bandwidth required for the commercialization of core products.
Looking ahead to 2026, what market performance can the innovative drug sector expect?
Liang Furui: Yes, I believe the innovative drug sector will continue its strong performance in 2026, with particularly promising results likely in the first half. However, compared to 2025, navigating the market rhythm and selecting the right stocks will be significantly more challenging. Currently, I maintain a high level of focus on innovative drugs, and over the next 1-2 years, I anticipate gradually realizing gains as certain individual stocks reach their target market valuations. Disclaimer: The information contained in this communication is derived from sources believed to be reliable and the personal judgment of researchers, but no direct or implied representation or warranty is made regarding its accuracy or completeness. This communication is not a complete representation or summary of the relevant securities or markets, and any opinions expressed are subject to change without notice. This communication should not be used by recipients as a substitute for their independent judgment or as a basis for investment decisions. The company, its related entities, employees, or agents shall not be liable for any actions taken based on the whole or part of this content or any losses incurred therefrom. Without prior written permission from Great Wall Fund Management Co., Ltd., no one may distribute, reproduce, republish, or release this report or any part thereof in any form, nor may they make any alterations or modifications to this communication that distort its original intent. The fund manager reminds that every citizen has the obligation and right to report money laundering crimes. Every citizen should strictly comply with relevant anti-money laundering laws and regulations. Funds carry risks; investment requires caution.
