Previously, we analyzed the distribution of the healthcare industry chain indices, mentioning four medical indices: the CSI 300 Healthcare Index, CSI Innovative Pharma Industry Index, CSI Hong Kong Stock Connect Healthcare Composite Index, and CSI Medical Devices Index.

The CSI 300 Healthcare Index and CSI Innovative Pharma Industry Index focus on pharmaceutical companies listed in the A-share market, while the CSI Hong Kong Stock Connect Healthcare Composite Index covers healthcare-related companies listed in Hong Kong.

Notably, on April 30, 2018, the Hong Kong Stock Exchange added Chapter 18A, "Biotech Companies," to its Main Board Listing Rules, allowing biotech firms without revenue or profits to apply for listing. This rule lowered the barrier for innovative pharmaceutical companies to list in Hong Kong. As a result, the CSI Hong Kong Stock Connect Healthcare Composite Index includes many domestic innovative pharmaceutical companies.

Due to the high-risk, high-investment nature of innovative drug R&D, companies in this sector typically have high R&D expenses and longer profit cycles. According to 2023 annual reports, among the three pharmaceutical indices analyzed, the CSI Innovative Pharma Industry Index and CSI Hong Kong Stock Connect Healthcare Composite Index have lower ROE (both below 9%) compared to the CSI 300 Healthcare Index. However, these two indices have higher R&D expenses as a percentage of revenue, at 8.7% and 7.2%, respectively.