CITIC Securities: The new Regulations on the Implementation of the Drug Administration Law issued, focusing on people and accelerating innovation to promote high-quality development in the industry.

CITIC Securities research report states that the revised "Regulations on the Implementation of the Drug Administration Law of the People's Republic of China" has been officially released. The "Regulations" are the key to refining and implementing the "Drug Administration Law", demonstrating that China's drug activities are guided by laws and regulations oriented towards people's livelihood and innovation. By comparing the revised "Regulations" with the 2002 version, we believe that the pharmaceutical industry will focus on innovation as the core and compliance as the foundation, moving towards high-quality development. Continuing with the industrial investment strategy for 2026, we believe that the pharmaceutical industry is expected to remain an over-allocated sector. In terms of layout for 2026, we suggest focusing on the following main themes: 1) Innovation-driven and internationalization - under the domestic policy environment against internal competition, pay attention to the targets related to innovation-driven and internationalization going overseas; 2) Independent and controllable - we expect to continue facing risks brought by geopolitical disturbances in the future, so it is advisable to focus more on targets related to the acceleration of import substitution processes in core components, reagents, and upstream research under independent and controllable conditions; 3) New policies and new trends - benefiting from centralized procurement optimization, the three payment methods of medical insurance, policies stimulating consumption, and targets related to state-owned enterprise reforms.