Pharmaceutical Sector Weekly — October 12-16: Funds flow into pharmaceutical sector, overseas investment in China and AI drug discovery continues

The Japanese pharmaceutical sector rose 6.1% WoW, outperforming TOPIX (−0.9% WoW) and ranking as the best-performing sector, as funds rotated from AI and semiconductor-related stocks into relatively defensive pharmaceutical names. We believe the recent gains were driven largely by macro-related fund flows; the key question is whether valuations remain supported by fundamentals, including company earnings and pipelines. Overseas drug-discovery activity remained active: on October 13, China's Rona Therapeutics out-licensed an ALK7-targeting RNAi obesity candidate to Roche for up to $1.16bn, and on October 15 AstraZeneca signed a drug-discovery collaboration with AI company insitro worth up to $1.5bn to identify novel targets for MASH by analyzing human genetic and cellular data. On the regulatory front, the FDA announced its Rare Disease Framework Initiative on October 14 to reconsider development and review approaches for rare-disease drugs. Johnson & Johnson's 3Q FY2026 results highlig