Policies continue to play a key role in 2H21. We expect policies that have a sector impact to continue to roll out in 2H21, but we do not see heightened risks. We see the main policy themes in 2H21 being the continuation of prior cost-control measures, including NRDL negotiation and orthopedic device GPO. In addition, we would keep an eye on potential domestic or global catalysts currently under the radar, such as DRG/DIP, the US-China relationship and COVID-19 variants. As for the CDE guidance on cancer drug development, we believe it could optimise the pharma/biotech industry’s resource allocation in the long run.

 Fundamentals on innovation and globalisation are still major sector themes. We expect sector fundamentals to remain strong in 2H21 as innovation and globalisation trends continue. We believe globalisation will continue to be a key theme to watch in 2H21 and beyond for Chinese pharma/biotech companies. We estimate the compound annual growth rate of the innovative drug market to be ~18% in China for the next three years.