The biopharmaceutical industry is upgraded to an emerging pillar industry! Focus on Hang Seng Innovation Drug ETF (520500), Hang Seng Biotechnology ETF Huatai-PineBridge (513930) investment opportunities

In the 2026 Government Work Report, not only is the biopharmaceutical industry’s positioning elevated to the status of a “new pillar industry” on par with integrated circuits and aerospace, but the importance of commercial health insurance is further emphasized as well. The industry’s strategic standing in biopharmaceuticals has achieved a historic leap; going forward, it is expected to receive more development resources and provide long-term momentum for the growth of the innovative drugs segment.

Recently, the innovative drugs segment has shown signs of recovery, driving increased attention to products such as the Hang Seng Innovation Pharmaceuticals ETF by Huatai-PineBridge (520500) and the Hang Seng Biotechnology ETF by Huatai-PineBridge (513930). There are likely two main reasons. First, since 2026, the process of innovative drug firms going global has continued to develop rapidly. According to MedPharmCube data, in January–February 2026, Chinese innovative drugs have already completed 44 BD deals, with a total deal value of $5.3276 billion, which is more than one-third of the total amount for 2025.

Second, from the perspective of fundamentals, innovative drug companies are gradually shifting from the R&D spending phase to the phase of performance realization. Many leading pharmaceutical companies are expected to deliver significant growth or return to profitability. With the annual report season approaching and clinical data from major global academic conferences such as AACR and ASCO being集中 released, the industry is being pushed to move from sentiment-driven dynamics to fundamental verification; the performance confirmation of high-quality companies is expected to further strengthen the segment’s rebound foundation.

Meanwhile, the CXO segment—an important “water-seller” link within the innovative drug industry chain—is also seeing an improvement in fundamentals. On the demand side, increased activity in financing and BD transactions among innovative drug companies could provide CXO with tangible order support. On the supply side, the industry’s capital expenditures have gone through a contraction phase, and the pace of capacity expansion has slowed. Under the dual effect of “demand recovering and supply tightening,” the CXO industry’s supply-demand landscape may be gradually optimizing, and sentiment toward the sector could move out of the bottoming-out stage.

After experiencing a pullback earlier on, the valuation level of Hong Kong-listed innovative drugs today may already be at a relatively reasonable level. According to Wind data, the latest price-earnings ratio of the Hang Seng Biotechnology Index is 38.31 times. It is in the 41.03% lower-to-mid percentile range since listing (2019/12/16). For those considering a sector allocation, related products may be worth considering:

Hang Seng Innovation Pharmaceuticals ETF by Huatai-PineBridge (520500): Closely tracks the Hang Seng Innovation Pharmaceuticals Index. It selects listed companies in the Hong Kong market whose businesses are related to research, development, and manufacturing of innovative drugs. It brings together a group of innovative drug industry leaders with strong R&D capabilities and development potential. At the same time, the index’s compilation rules emphasize excluding companies whose main businesses are in the CXO industry, resulting in a higher “purity” of innovative drugs.

Hang Seng Biotechnology ETF by Huatai-PineBridge (513930): Closely tracks the Hang Seng Biotechnology Index and is currently the only healthcare index in the Hong Kong market that is equipped with stock index futures. It mainly reflects the overall performance of biotechnology companies listed in Hong Kong that also meet the eligibility requirements for the Stock Connect program. It is highly focused on two core tracks: innovative drugs and CXO, with combined weights of roughly 90%. It also includes frontier areas such as AI + healthcare.

The fund manager of the Hang Seng Innovation Pharmaceuticals ETF by Huatai-PineBridge (520500) and the Hang Seng Biotechnology ETF by Huatai-PineBridge (513930), Huatai-PineBridge Fund, is among the first batch of ETF managers in China. It has more than 19 years of index investing experience and achieved, in December 2025, its eighth time winning the China Securities Journal’s “Passive Investment Gold Bull Fund Company.” It is worth noting that starting March 18, 2026, all ETF products under Huatai-PineBridge will complete standardized naming, and the “Huatai-PineBridge ETF” brand matrix will be fully established.

In the pharmaceutical sector, Huatai-PineBridge has extensive experience and has already built an “all-in-one toolbox” of pharmaceutical index tools covering key industry links. It has successively launched several high-quality products, including the Hang Seng Innovation Pharmaceuticals ETF by Huatai-PineBridge (517120), the Healthcare ETF by Huatai-PineBridge (516790), the Traditional Chinese Medicine ETF by Huatai-PineBridge (561510), and the Hang Seng Innovation Pharmaceuticals ETF by Huatai-PineBridge (520500).

Risk warning: Funds carry risk; invest cautiously.