The 2025 pharmaceutical annual report releases positive signals, and the sector's development logic may be further solidified.

Based on Wind data, as of March 24, among the companies in the Shenwan Medical and Biological industry that have already disclosed their annual reports, more than 70% have turned a profit, showing signs of a certain recovery. Overall, according to institutional research reports, driven by multiple factors—including earnings realization, accelerated R&D, and the sector’s undervaluation—long-term attention value in the medical and biological sector, especially the innovative drug track, is or will continue to become more pronounced. (Source of data: Wind, as of 2026.3.24, Shenwan Level 1 industry classification)

I. Annual Report Snapshot: Data Validates the “Recovery Quality” of Medical and Biologicals

According to Wind statistics, as of March 24, 2026, among the Shenwan Medical and Biological industry companies across the entire market A-share universe, 169 companies have already disclosed their 2025 annual reports. Of these, 121 companies have positive net profit attributable to shareholders, accounting for more than 70%; 77 companies achieved year-over-year growth in net profit attributable to shareholders, and 20 companies had net profit year-over-year growth rates exceeding 100%, exhibiting the characteristics of both overall profit repair in the sector and structural differentiation. (Source of data: Wind, as of 2026.3.24, Shenwan Level 1 industry classification)

Some institutions have pointed out that March to April this year is the earnings disclosure window for innovative drug companies. Many pharma companies are expected to reduce losses or turn profitable, and it is expected that in 2026 more innovative drug companies will be able to release profits significantly. With the arrival of the breakeven/tipping-point for innovative drug companies, combined with a dense stream of catalysts from full-year clinical data, and smooth overseas clinical progress for BD-launched export pipelines, etc., the institution said it is optimistic about opportunities in the innovative drug sector. (Reference materials: Guojin Securities “Anchoring the ‘Emerging Pillar Industries’—Optimism About Investment Opportunities in the New Drug Sector,” 2026.3.8)

II. Dense R&D Innovation Comes to Fruition, and Commercialization Conversion Accelerates

Since 2026 began, the R&D innovation momentum in China’s domestic pharmaceutical industry has continued to release. A-share pharma companies have successively disclosed R&D progress announcements, stating that their products have achieved phased results in areas such as clinical trial approvals, acceptance of marketing authorization applications, and approval of drug registration certificates—covering multiple therapeutic areas including anti-infectives, high blood lipids, analgesia, inflammation, and autoimmune diseases.

Some analysis suggests that the successful commercialization of R&D outcomes by pharmaceutical companies has a significant multiplier effect on improving their own financial structure, and may become a core lever driving companies’ earnings quality enhancement and valuation re-rating. The core value of commercializing R&D outcomes is first reflected in direct incremental contributions on the revenue side, which can quickly open up market monetization channels and continuously optimize companies’ revenue structure. Institutions expect that in 2026 the rollout pace of R&D results in the pharmaceutical industry may show a dual-track parallel trend of “innovative drugs accelerating” and “generic drugs improving in quality.”

(Reference materials: Securities Daily “Listed Pharma Companies Continue to Push R&D, with Multiple Pharmaceutical Achievements Approved and Progressed,” 2026.3.19)

III. Innovative Drug Sector: Ample Funds and Strong R&D Sustainability

At present, BD income and post-listing fund-raising provide financial support for innovative drug companies’ R&D. On the one hand, according to Wind data, from January 1, 2024 to March 21, 2026, post-listing fund-raising in the HK and A-share biopharmaceutical sectors was about RMB 7 billion, supporting R&D investment in innovative drug pipelines. On the other hand, as of March 21, 2026, the total-package BD for China’s innovative drug overseas expansion already reached USD 57.1 billion, and BD income has become an important funding source for China’s innovative drug companies.

An institution stated that currently the sector has ample funding, and most companies still maintain R&D funding coverage for more than one year. This can effectively support the advancement of subsequent clinical trials, pipeline expansion, and technological innovation, laying a solid financial foundation for the industry’s long-term high-quality development. It also provides a sufficient time window for technological breakthroughs and commercialization conversion for innovative drug companies.

(Reference materials: Soochow Securities “Weekly Report on Medical and Biologicals: BD Increase and Further Financing, Innovative Drug Leaders Enjoy Ample Cash Flow,” 2026.3.22)

IV. Attention to Innovative Drug Sector: Value-for-Money May Be Prominent

After a round of gains in 2025, the innovative drug sector has undergone an adjustment lasting more than half a year since the end of last year’s third quarter, and valuation risks have been fairly well released. Looking across a longer time horizon, according to Wind data, as of March 24, 2026, the current PE (TTM) for the CSI Innovative Drugs Industry Index and the CSI Hong Kong Innovative Drugs Index is 40x and 41x, respectively. They rank in the 38.05% and 39.84% percentiles from low to high over the past five years, respectively, indicating a certain level of value-for-money. (Source of data: Wind; the innovative drug sector’s upward range from 2025.1.1 to 2025.9.8, and the pullback range from 2025.9.9 to 2026.3.26; percentile statistics range for the current PE (TTM) of the CSI Innovative Drugs Industry Index and the CSI Hong Kong Innovative Drugs Index: 2021.3.25 to 2026.3.24; CSI Innovative Drugs Industry Index code 931152.CSI, CSI Hong Kong Innovative Drugs Index code 931787.CSI)

For investors who are bullish on the innovative drug track but find it difficult to capture individual stock volatility, they may consider tracking the sector through index-based tools, or other more efficient and transparent approaches. Investors may consider the HK-listed innovative drug ETF (159567) and its connection fund (Class A: 023929, Class C: 023930), the Innovative Drug ETF (159992) and its connection fund (Class A: 012781; Class C: 012782), aiming to share the long-term growth dividends of the innovative drug industry.

Risk Warning:

Fee situation of the HK-listed innovative drug ETF

1、Subscription fee / redemption fee:

When investors subscribe or redeem fund units, the subscription/redemption agent securities firms may charge commissions at a rate not exceeding 0.5%. These commissions include related fees charged by the securities exchange, registration institutions, and so on.

2、Management fee rate:

The management fee for this fund is accrued at an annual rate of 0.50% of the fund’s net asset value as of the previous day. The management fee is accrued daily, accumulated to the end of each month, and paid monthly. After the fund manager and the fund custodian have verified that the amounts are correct, the fund custodian shall, within 5 business days from the beginning of the next month, pay the management fee in a single payment from the fund property to the fund manager in accordance with the agreed method between the fund custodian and the fund manager. If payment cannot be made on time due to statutory holidays, rest days, force majeure, or other circumstances, payments shall be deferred to the most recent payable date.

3、Custody fee rate

The custody fee for this fund is accrued at an annual rate of 0.10% of the fund’s net asset value as of the previous day. The custody fee is accrued daily, accumulated to the end of each month, and paid monthly. After the fund manager and the fund custodian have verified that the amounts are correct, the fund custodian shall, within 5 business days from the beginning of the next month, withdraw the custody fee in a single payment from the fund property to the fund manager in accordance with the agreed method between the fund custodian and the fund manager. If payment cannot be made on time due to statutory holidays, rest days, force majeure, or other circumstances, payments shall be deferred to the most recent payable date.

4、Comprehensive fund operating expenses

If investors subscribe/subscribe for shares of this fund, during the holding period, investors need to pay the operating fee rate. The comprehensive fund operating fee rate (annualized) is 0.72%.

Note: The fund management fee rate, custody fee rate, and sales service fee rate (if any) are the current fee rates of the fund. Other operating expenses are calculated based on the relevant data disclosed in the most recent annual report of the fund.

Reference materials: Fund Product Information Summary, as of 2025.12.5

Yinhe Fund’s (Yin Hua) HK Stock Connect Innovative Drug ETF—fee situation

1、Subscription fee

For investors subscribing to Class A units of this fund through other sales institutions, the specific applicable subscription fee rates are as follows: when the subscription amount M < RMB 1 million, the subscription fee rate is 1.00%; when RMB 1 million ≤ M < RMB 2 million, the subscription fee rate is 0.80%; when RMB 2 million ≤ M < RMB 5 million, the subscription fee rate is 0.50%; when M ≥ RMB 5 million, a fixed fee is charged per transaction, RMB 1,000 per transaction.

2、Subscription fee

This fund’s Class A units charge a fund subscription fee upon subscription; Class C units do not charge a subscription fee. This fund’s subscription fee is charged when investors subscribe for Class A units. The subscription fees for Class A units are borne by the investors subscribing for Class A units of this fund and are mainly used for various costs such as marketing, sales, registration, etc. of this fund, and are not included in fund property. If there are multiple subscription transactions within a single day, the applicable fee rate is calculated separately for each transaction. The specific情况 is as follows: when the subscription amount M < RMB 1 million, the subscription fee rate is 1.20%; when RMB 1 million ≤ M < RMB 2 million, the subscription fee rate is 0.90%; when RMB 2 million ≤ M < RMB 5 million, the subscription fee rate is 0.60%; when M ≥ RMB 5 million, a fixed fee is charged per transaction, RMB 1,000 per transaction.

3、Redemption fee

The redemption fee of this fund is borne by the unit holders of each class who redeem this fund. The redemption fee is charged when unit holders redeem the corresponding class of units of this fund. The portion of redemption fees not included in fund property is used to pay registration fees and other necessary transaction-related fees.

(1) Redemption fee rate for Class A fund units

For investors who continuously hold Class A fund units for less than 30 days, this fund charges a redemption fee, which will be fully included in fund property. The redemption fee rate for Class A fund units is tiered according to the length of the holding period, as follows: when the holding period Y < 7 days, the redemption fee rate is 1.50%; when 7 days ≤ Y < 30 days, the redemption fee rate is 0.50%; when Y ≥ 30 days, the redemption fee rate is 0.

(2) Redemption fee rate for Class C fund units

For investors who continuously hold Class C fund units for less than 7 days, this fund charges a redemption fee rate of 1.50%, and the redemption fees will be fully included in fund property. The redemption fee rate for Class C fund units is tiered according to the length of the holding period, as follows: when the holding period Y < 7 days, the redemption fee rate is 1.50%; when Y ≥ 7 days, the redemption fee rate is 0.

4、Management fee

The portion of this fund’s property invested in the target ETF is not charged a management fee. This fund’s management fee is accrued at an annual rate of 0.50% based on the balance after deducting from the fund’s net asset value as of the previous day the fund asset value of the portion held in the target ETF fund units (if negative, take 0).

5、Custody fee

The portion of this fund’s property invested in the target ETF is not charged a custody fee. This fund’s custody fee is accrued at an annual rate of 0.10% based on the balance after deducting from the fund’s net asset value as of the previous day the fund asset value of the portion held in the target ETF fund units (if negative, take 0).

6、Sales service fee

Class A units of this fund do not charge a sales service fee; for Class C units, the sales service fee is accrued at an annual rate of 0.20% of the asset net value of Class C units as of the previous day.

For details of other fees, please refer to the section “Fund Fees and Taxes” in the fund prospectus.

Reference materials: Fund Product Information Summary, as of 2025.4.9

Innovative Drug ETF—fee situation

1、Subscription fee / redemption fee:

When investors subscribe or redeem fund units, the subscription/redemption agent securities firms may charge commissions at a rate not exceeding 0.5%. These commissions include related fees charged by the securities exchange, registration institutions, and so on.

2、Management fee rate:

The management fee for this fund is accrued at an annual rate of 0.50% of the fund’s net asset value as of the previous day. The management fee is accrued daily, accumulated to the end of each month, and paid monthly. After the fund manager and the fund custodian have verified that the amounts are correct, the fund custodian shall, within 5 business days from the beginning of the next month, pay the management fee in a single payment from the fund property to the fund manager in accordance with the agreed method between the fund custodian and the fund manager. If payment cannot be made on time due to statutory holidays, rest days, force majeure, or other circumstances, payments shall be deferred to the most recent payable date.

3、Custody fee rate:

The custody fee for this fund is accrued at an annual rate of 0.05% of the fund’s net asset value as of the previous day. The custody fee is accrued daily, accumulated to the end of each month, and paid monthly. After the fund manager and the fund custodian have verified that the amounts are correct, the fund custodian shall, within 5 business days from the beginning of the next month, withdraw the custody fee in a single payment from the fund property in accordance with the agreed method between the fund custodian and the fund manager. If payment cannot be made on time due to statutory holidays, rest days, force majeure, or other circumstances, payments shall be deferred to the most recent payable date.

Reference materials: Fund Product Information Summary, as of 2026.2.13

Yinhe Fund’s (Yin Hua) CSI Innovative Drug Industry ETF—fee situation for the starter-connected fund

1、Subscription fee

This fund charges a subscription fee upon subscription for Class A fund units; Class C fund units do not charge a subscription fee. The subscription fee rates applicable to investors subscribing to this fund’s Class A units are shown as follows: when the subscription amount M < RMB 1 million, the subscription fee rate is 1.20%; when RMB 1 million ≤ M < RMB 3 million, the subscription fee rate is 1.00%; when RMB 3 million ≤ M < RMB 5 million, the subscription fee rate is 0.60%; when M ≥ RMB 5 million, a fixed fee is charged per transaction, RMB 1,000 per transaction.

2、Redemption fee

The redemption fee of this fund is borne by the unit holders of the fund units being redeemed. The redemption fee is charged when unit holders redeem the fund units of this fund. The portion of redemption fees not included in fund property is used to pay registration fees and other necessary transaction-related fees.

(1) Redemption fee rate for Class A fund units

For investors who continuously hold Class A fund units for less than 30 days, this fund charges a redemption fee, which will be fully included in fund property. The redemption fee rate for Class A fund units is tiered according to the length of the holding period, as follows: when the holding period Y < 7 days, the redemption fee rate is 1.50%; when 7 days ≤ Y < 30 days, the redemption fee rate is 0.75%; when 30 days ≤ Y < 365 days, the redemption fee rate is 0.50%; when 365 days ≤ Y < 730 days, the redemption fee rate is 0.30%; when Y ≥ 730 days, the redemption fee rate is 0.

(2) Redemption fee rate for Class C fund units

For investors who continuously hold Class C fund units for less than 7 days, this fund charges a redemption fee rate of 1.50%, and the redemption fees will be fully included in fund property. The redemption fee rate for Class C fund units is tiered according to the length of the holding period, as follows: when the holding period Y < 7 days, the redemption fee rate is 1.50%; when Y ≥ 7 days, the redemption fee rate is 0.

3、Management fee

The portion of this fund’s property invested in the target ETF is not charged a management fee. This fund’s management fee is accrued at an annual rate of 0.50% based on the balance after deducting from the fund’s net asset value as of the previous day the fund asset value of the portion held in the target ETF fund units.

4、Custody fee

The portion of this fund’s property invested in the target ETF is not charged a custody fee. This fund’s custody fee is accrued at an annual rate of 0.05% based on the balance after deducting from the fund’s net asset value as of the previous day the fund asset value of the portion held in the target ETF fund units.

6、Sales service fee

Class A units of this fund do not charge a sales service fee; for Class C units, the sales service fee is accrued at an annual rate of 0.10% of the asset net value of Class C units as of the previous day.

For details of other fees, please refer to the section “Fund Fees and Taxes” in the fund prospectus.

Reference materials: Fund Product Information Summary, as of 2025.12.19

Investing involves risks. Be cautious.

A fund is a long-term investment tool. Its main function is to diversify investments, thereby reducing the individual risks associated with investing in a single security. A fund is different from financial instruments such as bank savings that can provide fixed-income expectations. When you purchase a fund product, you may share in gains generated from the fund’s investments proportionate to the units you hold, but you may also bear losses brought by the fund’s investments.

Before making an investment decision, please carefully read the product legal documents and this risk disclosure statement, such as the fund contract, the fund prospectus, and the fund product information summary, to fully understand the risk-return profile and product characteristics of this fund. Consider carefully all potential risks of this fund, and based on factors such as your investment objectives, investment horizon, investment experience, and asset conditions, fully assess your own risk tolerance. On the basis of understanding the product details and sales appropriateness opinions, make rational judgments and make investment decisions prudently.

In accordance with relevant laws and regulations, Yinhe Fund Management Co., Ltd. makes the following risk disclosure:

I. Based on differences in investment targets, funds are divided into different types such as equity funds, hybrid funds, bond funds, money market funds, fund-of-funds, commodity funds, etc. If you invest in different types of funds, you will have different expected returns and will also bear different degrees of risk. In general, the higher the expected return of a fund, the higher the risk you bear.

II. During the course of fund investment and operation, various risks may arise. These include not only market risk, but also the fund’s own management risk, technical risk, and compliance risk. The risk of large-scale redemptions is a risk specific to open-ended funds. That is, when the net redemption requests of a single open day exceed a certain proportion of the total fund units (open-ended funds are 10 percent, interval/open funds are 20 percent; excluding special products as required by the China Securities Regulatory Commission), you may be unable to redeem all of your fund units in a timely manner, or the redeemed funds may be delayed in payment.

III. You should fully understand the differences between savings methods such as periodic regular investment and zero-sum installment savings. Periodic regular investment is a simple and practical way to guide investors to make long-term investments and average investment costs. However, it cannot avoid the inherent risks of fund investing, cannot guarantee that investors will earn returns, and is not an equivalent financial product replacing savings.

IV. Risk disclosure for special types of products:

1. Please pay attention to the risk of fluctuations in the underlying index and the unique risks of investing in ETFs (exchange-traded open-ended funds). For connection funds investing in the underlying ETF, please pay attention to the unique risks of connection funds, including tracking deviation risk, risk of performance differences from the target ETF, risk of other investments in the target ETF, and the risk that tracking error control does not meet the agreed target, among other connection-fund-specific risks.

2. The HK-listed innovative drug ETF and its connection fund may invest in stocks that are eligible under the HK Stock Connect scheme. They will face unique risks arising from differences in investment environment, investment targets, market institutions, trading rules, and so on under the HK Stock Connect mechanism.

V. The fund manager undertakes to manage and use fund assets on the principles of honesty and credibility and diligence and responsibility. However, it does not guarantee that this fund will certainly be profitable, nor does it guarantee a minimum level of returns. Past performance of this fund and the level of its net asset value do not predict its future performance. The performance of other funds managed by the fund manager does not constitute a guarantee of this fund’s performance. Yinhe Fund Management Co., Ltd. reminds you of the “buyer bears responsibility” principle for fund investments. After making an investment decision, investment risks arising from changes in the fund’s operating conditions and changes in the fund’s net asset value are borne by you yourself. The fund manager, the fund custodian, the fund sales institutions, and related institutions make no commitments or guarantees regarding fund investment returns.

VI. This fund is募集される (launched) by Yinhe Fund Management Co., Ltd. in accordance with relevant laws and regulations and the agreed arrangements, and is permitted for registration after approval by the China Securities Regulatory Commission (hereinafter referred to as the “CSRC”). The fund contract, the fund prospectus, and the fund product information summary of this fund have been disclosed through the CSRC’s fund electronic disclosure website.

This article is enterprise-submitted content | Financial management involves risk. Invest prudently.

(Editor: Xu Nannan)

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