Core Viewpoint - CICC maintains the earnings forecast for CSPC Pharmaceutical Group (01093) for 2025 and 2026 largely unchanged, with the current stock price corresponding to a P/E ratio of 20.5x for 2025 and 17.3x for 2026. The target price is raised by 51.2% to HKD 13.00, reflecting an upside potential of 23.7% from the current stock price [1]. Group 1 - The company's 1H25 performance is in line with expectations, reporting revenue of CNY 13.273 billion, a year-on-year decline of 18.5%, and a net profit attributable to shareholders of CNY 2.548 billion, down 15.6% [2]. - The prescription drug business continues to face pressure, with 2Q25 prescription drug revenue at CNY 4.747 billion, a year-on-year decrease of 20.7% and a quarter-on-quarter decrease of 13.7%. The company anticipates improvement in 2H25 [3]. Group 2 - The company has established eight innovative R&D platforms and is expected to continue monetizing external licensing agreements. Notable agreements include ROR1 ADC with a maximum potential milestone of USD 1.225 billion, and AZ strategic cooperation with a maximum potential milestone of USD 5.22 billion [4]. - R&D investment is increasing, with 2Q25 R&D expenses at CNY 1.38 billion, accounting for 29.1% of prescription drug revenue, which is a year-on-year increase of 6.2 percentage points. The company is making progress in clinical trials for its key product SYS6010 (EGFR ADC) [5].

Core Viewpoint - CICC maintains the earnings forecast for CSPC Pharmaceutical Group (01093) for 2025 and 2026, with a target price increase of 51.2% to HKD 13.00, indicating a potential upside of 23.7% from the current stock price [1] Financial Performance - The company's 1H25 performance is in line with expectations, reporting revenue of CNY 13.273 billion, a year-on-year decline of 18.5%, and a net profit attributable to shareholders of CNY 2.548 billion, down 15.6% [2] Business Segment Analysis - The traditional pharmaceutical business continues to face pressure, with 2Q25 revenue of CNY 4.747 billion, a year-on-year decrease of 20.7% and a quarter-on-quarter decline of 13.7%. The decline is attributed to medical insurance cost control and inventory management [3] - Specific revenue breakdown includes: - Neurology: CNY 1.847 billion (YoY -27.0%) - Oncology: CNY 0.498 billion (YoY -53.5%) - Anti-infection: CNY 0.735 billion (YoY -23.2%) - Cardiovascular: CNY 0.457 billion (YoY -10.2%) - Respiratory: CNY 0.250 billion (YoY -13.5%) - Metabolism: CNY 0.229 billion (YoY -31.3%) - Other: CNY 0.374 billion (YoY +25.1%) - Licensing revenue: CNY 0.357 billion [3] Innovation and R&D - The company has established eight innovative R&D platforms and is expected to continue monetizing external licensing agreements. Notable agreements include ROR1 ADC and irinotecan liposome, with potential milestone payments totaling up to USD 1.225 billion [4] - R&D expenditure in 2Q25 reached CNY 1.38 billion, accounting for 29.1% of traditional pharmaceutical revenue, indicating a year-on-year increase of 6.2 percentage points. The company anticipates continued innovation output [5] - The clinical progress of the key product SYS6010 (EGFR ADC) is on track, with multiple clinical trials ongoing and a BLA expected in 2026 [5]

Summary of CSPC Pharma Earnings Review and Industry Insights Company Overview - **Company**: CSPC Pharma (1093.HK) - **Market Cap**: HK$121.1 billion / $15.5 billion - **Industry**: China Pharma, Biotech & Medtech Key Financial Highlights - **2Q Revenue**: Rmb 6.3 billion, down 14% year-over-year (y/y) - **Finished Drug Sales**: Rmb 4.4 billion, down 27% y/y, below expectations (GSe Rmb 5.4 billion) [1] - **CNS Drug Sales**: Declined by 27% y/y due to stricter regulatory monitoring, particularly affecting capsule sales [1] - **Oncology Sales**: Decreased by 54% y/y, impacted by value-based pricing (VBP) for Duomeisu / Jinyouli [1] - **Earnings**: Rmb 1.1 billion, down 24% y/y or 46% y/y excluding business development (BD) [1] - **R&D Expenses**: Rmb 1.4 billion, up 1% y/y; SG&A savings of 26% y/y partially offset the earnings decline [1] Management Guidance - **Sales Growth Resumption**: Expected in 2H25, with finished drug sales projected to grow by over 5% half-on-half (h/h) [1] - **Collaboration Income**: Potential for higher collaboration income for dividend payouts [1] Business Development (BD) Insights - **BD Progress**: Company is on track with three major BD deals expected in 2025, with one already delivered (platform collaboration with AZ) [3] - **SYS6010 (EGFR ADC)**: Smooth overseas development progress, with FDA approval for including China patients in trials [3][7] Metabolism Franchise Opportunities - **Licensing Deals**: Recent licensing-out deal of oral GLP-1 to Madrigal highlights potential deal-making opportunities [2] - **Pipeline Assets**: Includes oral small molecules for weight loss and muscle enhancement, monthly-dose formulations, and siRNA drugs [2] Earnings Estimates and Price Target - **Revised Earnings Estimates**: Decreased by 5.1% for 2025, 1.8% for 2026, and 9.9% for 2027 to reflect lower expectations on finished drug sales [8] - **12-Month Price Target**: Increased to HK$11.28 from HK$10.55, indicating a potential upside of 7.4% from the current price of HK$10.51 [10] Valuation Methodology - **SOTP Valuation**: - DCF-based valuation for NBP: HK$7.2 billion - New product wave: HK$69.3 billion - Legacy portfolio and generics: HK$37.0 billion - API business: HK$4.0 billion [9] Risks and Considerations - **Key Downside Risks**: - Earlier-than-expected VBP for NBP - Slower-than-expected ramp-up of new products - Failure of major R&D projects - Greater-than-expected price cut impacts on generic drug sales [9] Conclusion CSPC Pharma is navigating a challenging environment with declining sales in key segments but is positioned for potential recovery in the latter half of 2025. The company’s focus on business development and innovative product pipelines may provide avenues for growth despite current headwinds.

Core Viewpoint - The company's 1H25 performance is in line with expectations, showing a decline in revenue and net profit compared to the previous year, but there are signs of potential improvement in the second half of the year [1] Financial Performance - 1H25 revenue was 13.273 billion yuan, a year-on-year decrease of 18.5% [1] - Net profit attributable to shareholders was 2.548 billion yuan, down 15.6% year-on-year, while adjusted net profit was 2.320 billion yuan, down 27.9% year-on-year [1] - In 2Q25, the revenue from the pharmaceutical business was 4.747 billion yuan, a year-on-year decline of 20.7% and a quarter-on-quarter decline of 13.7% [1] Business Segments - Revenue from the neurology segment was 1.847 billion yuan, down 27.0% year-on-year, attributed to medical insurance cost control and inventory management [1] - Oncology revenue was 0.498 billion yuan, down 53.5% year-on-year, while anti-infection revenue was 0.735 billion yuan, down 23.2% year-on-year [1] - Cardiovascular revenue was 0.457 billion yuan, down 10.2% year-on-year, and respiratory revenue was 0.250 billion yuan, down 13.5% year-on-year [1] - Digestive metabolism revenue was 0.229 billion yuan, down 31.3% year-on-year, while other fields generated 0.374 billion yuan, up 25.1% year-on-year [1] R&D and Innovation - The company has established eight innovative R&D platforms and is expected to continue monetizing external authorizations [2] - As of now, the company has completed several significant external authorizations with potential milestone payments totaling up to 1.225 billion USD [2] - R&D expenses in 2Q25 were 1.380 billion yuan, accounting for 29.1% of pharmaceutical revenue, indicating a year-on-year increase of 6.2 percentage points [3] - The company's key product, SYS6010 (EGFR ADC), has entered Phase III clinical trials, with expectations for a BLA in 2026 [3] Profit Forecast and Valuation - The profit forecast for 2025 and 2026 remains largely unchanged, with the current stock price corresponding to a P/E ratio of 20.5x for 2025 and 17.3x for 2026 [3] - The target price has been raised by 51.2% to 13.00 HKD, reflecting a potential upside of 23.7% from the current stock price [3]

Summary of CSPC Pharmaceutical Group Conference Call Company Overview - **Company**: CSPC Pharmaceutical Group (1093.HK) - **Industry**: China Healthcare - **Current Stock Price**: HK$10.51 (as of August 22, 2025) - **Market Capitalization**: HK$125,653 million - **Price Target**: HK$9.60, indicating a downside of 9% from the current price [6][8] Key Financial Highlights - **2Q Revenue**: Decreased by 14% YoY, with finished drug sales down 27% YoY and 8% QoQ, which was 15% below estimates [8] - **Gross Profit Margin (GPM)**: Declined by 6.7 percentage points [8] - **Operating Expenses Ratio**: Increased by 8.7 percentage points YoY [8] - **Underlying Profit**: Fell by 39% YoY and 36% QoQ in 2Q; without business development (BD) income, the decline would have been 59% YoY and 24% QoQ [8] - **Fiscal Year Ending**: Expected EPS for 2025 is Rmb0.45, with revenue projected at Rmb29,036 million [6] Growth and Strategic Initiatives - **Revised Guidance**: CSPC recalibrated its target to achieve 5% half-on-half growth in 2H25, anticipating growth acceleration from 2026 [8] - **Sales Target for Mingfule**: On track to reach Rmb1 billion in sales in 2025 [2] - **Business Development (BD) Strategy**: Aims to complete two more BD deals, each exceeding US$5 billion by year-end 2025 [8] - **Focus on Retail Channels**: Plans to strengthen out-of-pocket retail channels to sustain Rmb2 billion in sales post-patent expiry [2] Clinical and Product Development - **EGFR ADC Updates**: Global Phase 3 trials for 3L+ EGFRm NSCLC and 2L+ EGFRwt NSCLC are set to begin in 2H25, with conditional approval based on Overall Response Rate (ORR) [3] - **Competitive Positioning**: Early data in China shows competitive Progression-Free Survival (PFS) and Overall Survival (OS) trends in 2L EGFRwt NSCLC compared to TROP2 ADCs [3] Technology and Pipeline - **Diverse Technology Platforms**: CSPC is nurturing eight technology platforms to support BD candidates across various therapeutic areas [4] - **Metabolic Portfolio**: Includes monthly-dosing semaglutide (Phase 1), GLP-1/GIP, and other innovative therapies [9] Risks and Challenges - **Market Risks**: Stricter reimbursement controls and Value-Based Pricing (VBP) headwinds are impacting legacy drug sales [8] - **Potential Downside Risks**: Include pipeline failures, rising operating costs, and further government price cuts [14] Analyst Ratings and Market Sentiment - **Stock Rating**: Overweight, indicating a positive outlook compared to the industry average [6] - **Industry View**: Attractive, suggesting favorable conditions for growth in the China healthcare sector [6] Conclusion CSPC Pharmaceutical Group is navigating a challenging market environment with a focus on strategic growth through business development and innovative product pipelines. The company is positioned for potential recovery and growth in the coming years, despite current financial setbacks and market pressures.

Investment Rating - The report maintains an investment rating of "Outperform" [5] Core Insights - The new drug sector has shown significant price movements, with notable gains from companies such as Beihai Kangcheng (+35.52%) and Jiahua Biological (+24.66%) during the week of August 18 to August 22, 2025 [1][16] - Upcoming academic conferences, including WCLC and ESMO, are expected to be key catalysts for the innovative drug sector, with numerous data disclosures anticipated from domestic companies [2][3][20] Summary by Sections Weekly New Drug Market Review - The new drug sector experienced substantial fluctuations, with the top five gainers being Beihai Kangcheng (+35.52%), Jiahua Biological (+24.66%), and others, while the top five losers included Geely Pharmaceutical (-16.29%) and Weichip Bio (-10.40%) [1][16] Recommended Stocks - The report suggests focusing on several potential catalysts, including overseas licensing opportunities for differentiated GLP-1 assets and upgraded PD-1 products, as well as drugs likely to benefit from medical insurance negotiations and innovative drug directories [2][20] Key Industry Analysis - Academic conferences are highlighted as crucial catalysts for the innovative drug sector, with WCLC and ESMO being particularly significant for Chinese pharmaceutical companies [20][21] New Drug Approval and Acceptance Status - No new drug approvals were reported for the week, but five new drug applications were accepted, including those from Janssen and AstraZeneca [27][28] Clinical Application Approval and Acceptance Status - A total of 47 new drug clinical applications were approved, and 28 new drug clinical applications were accepted during the week [29][30]

Major Events - Xianjian Technology (01302) has entered the special review process for innovative medical devices for its nickel-titanium alloy arterial duct occluder [1] - Sunny Optical Technology (02382) signed a memorandum of understanding with GoerTek (002241.SZ) and GoerTek Optical to promote complementary advantages [1] - Fuhong Hanlin (02696) completed the first patient dosing in the U.S. for its HLX43 (targeted PD-L1 antibody conjugate) in an international multi-center Phase II clinical study for advanced non-small cell lung cancer [1] - Shanghai Pharmaceuticals (02607) received drug registration certificates for oxytocin injection and octreotide acetate injection in the Philippines [1] - CSPC Pharmaceutical Group (01093) received clinical trial approval for SYS 6036 injection in China [1] - Kaisa Group (01638) reached a strategic cooperation with CITIC City Construction for the Shenzhen Futian Jiayuan project [1] - Conant Optical (02276) has been included in the Hang Seng Composite Index [1] - China Railway (00390) is investigating the cause of the Qianzhazhuang Yellow River Bridge accident, which has resulted in 12 fatalities and 4 missing persons [1] - Dongfeng Motor Group (00489) plans to be privatized at a premium, while Lantu Automobile has applied for a listing introduction [1] - Baize Medical (02609) has been included in the Hang Seng Index series [1] - Zhongmiao Holdings (01471) plans to acquire 55% of Beijing Kechuang Rongxin Technology Co., Ltd. for 165 million yuan [1] - Huaxing Capital Holdings (01911) intends to establish a strategic cooperation framework with YZi Labs to support the application of Binance Coin and the BNB Chain ecosystem [1] - Sihuan Pharmaceutical (00460) received approval from the National Medical Products Administration for its self-developed innovative drug, Dirocitin [1] - China Tongru (01763) successfully obtained a radiation safety license for its radiation source R&D and production base [1] Operating Performance - Cathay Pacific (00293) and Hong Kong Express carried approximately 3.2 million passengers in July, setting a new monthly record for the year [2] - CSPC Pharmaceutical Group (01093) reported a mid-year profit attributable to shareholders of 2.548 billion yuan, a decrease of 15.64% year-on-year [2] - TCL Electronics (01070) reported a mid-year net profit of 1.09 billion HKD, an increase of 67.78% year-on-year [2] - Chongqing Bank (01963) reported a mid-year net profit of 3.19 billion yuan, a year-on-year increase of 5.39%, indicating stable profitability [2] - Shenwan Hongyuan Hong Kong (00218) reported a mid-year profit attributable to ordinary shareholders of 60.134 million HKD, turning from loss to profit [2] - Times Electric (03898) reported a mid-year net profit of 1.6715 billion yuan, a year-on-year increase of 12.93% [2] - CIFI Holdings Group (00884) reported mid-year revenue of 12.281 billion yuan, delivering approximately 15,000 property units in the first half of the year [2] - CRRC (01766) reported a mid-year net profit of 7.246 billion yuan, a year-on-year increase of 72.48% [2] - China Tobacco Hong Kong (06055) reported a mid-year profit attributable to shareholders of 706 million HKD, an increase of 9.79% year-on-year [2] - Vanke Enterprises (02202) reported mid-year revenue of 105.323 billion yuan, maintaining operational efficiency among industry peers [2] - Greentown Management Holdings (09979) reported a mid-year profit attributable to shareholders of 256 million yuan [2] Additional Operating Performance - Goldwind Technology (02208) reported a mid-year profit attributable to shareholders of 1.488 billion yuan, an increase of 7.26% year-on-year [3] - Zhouliufu (06168) reported a mid-year net profit of 415 million yuan, an increase of approximately 11.9%, with a mid-year dividend of 0.45 yuan per share [3] - Zhejiang Huhangyong (00576) reported a mid-year profit attributable to shareholders of 2.787 billion yuan, a year-on-year increase of 4% [3] - Dongfeng Motor Group (00489) reported a mid-year profit attributable to shareholders of 55 million yuan, a decrease of 91.96% year-on-year [3] - Zhaojin Mining (01818) reported a mid-year profit attributable to shareholders of approximately 1.44 billion yuan, a year-on-year increase of approximately 160.44% [3]

Financial Performance - The company's revenue decreased by 18.5% from RMB 16,284 million in 2024H1 to RMB 13,273 million in 2025H1[35] - Gross profit decreased by 25.3% from RMB 11,655 million in 2024H1 to RMB 8,710 million in 2025H1[35] - Gross profit margin decreased by 6.0 percentage points from 71.6% in 2024H1 to 65.6% in 2025H1[35] - Reported profit attributable to shareholders of the Company decreased by 15.6% from RMB 3,020 million in 2024H1 to RMB 2,548 million in 2025H1[35] - Underlying profit attributable to shareholders of the Company decreased by 27.9% from RMB 3,217 million in 2024H1 to RMB 2,320 million in 2025H1[35] - Revenue from finished drugs decreased by 24.4% from RMB 13,549 million in 2024H1 to RMB 10,248 million in 2025H1[36] - Revenue from bulk vitamin C increased by 21.6% from RMB 984 million in 2024H1 to RMB 1,196 million in 2025H1[36] - Revenue from nervous system therapeutics decreased by 28.3% from RMB 5,236 million in 2024H1 to RMB 3,755 million in 2025H1[37] - Revenue from oncology therapeutics decreased significantly by 60.8% from RMB 2,683 million in 2024H1 to RMB 1,051 million in 2025H1[37] R&D and Pipeline - The company has 5 R&D centers located in China & the U S [6,99] - The company has approximately 200 innovative drugs and new formulations [6,99] - R&D expenses increased by 5.5% from RMB 2,542 million in 2024H1 to RMB 2,683 million in 2025H1[35] Business Development - The company has license-out agreements including a potential milestone payment of $105 billion for GLP-1, $522 billion for ROR1 ADC, $1955 billion for Irinotecan Liposome Injection, and $1225 billion for strategic collaboration [116]

Core Viewpoint - The approval of SYS6036 injection by the National Medical Products Administration of China marks a significant advancement for the company in the field of tumor immunotherapy [1] Group 1: Product Development - SYS6036 is a humanized monoclonal antibody drug aimed at tumor immunotherapy, specifically targeting melanoma, non-small cell lung cancer, esophageal cancer, and head and neck squamous cell carcinoma [1] - The product has been submitted under the category of biological products for therapeutic use, specifically Class 3.3 [1] - The development of SYS6036 adheres to the research guidelines for biosimilars, indicating a structured approach to its clinical development [1] Group 2: Research Findings - Pharmaceutical and non-clinical research results demonstrate that SYS6036 shows high similarity in quality, safety, and efficacy compared to the reference drug, supporting the initiation of subsequent clinical studies [1]

Core Viewpoint - The approval of SYS6036 injection by the National Medical Products Administration of China marks a significant advancement for the company in the field of tumor immunotherapy, potentially expanding its product portfolio in oncology treatments [1] Group 1: Product Development - SYS6036 is a humanized monoclonal antibody drug aimed at tumor immunotherapy, approved for clinical trials in China [1] - The drug is classified under Category 3.3 of therapeutic biological products and is expected to be used for treating various cancers, including melanoma, non-small cell lung cancer, esophageal cancer, and head and neck squamous cell carcinoma [1] - The development of SYS6036 adheres to the research guidelines for biosimilars, indicating a strategic alignment with regulatory standards [1] Group 2: Research Findings - Pharmaceutical and non-clinical research results demonstrate that SYS6036 shows high similarity in quality, safety, and efficacy compared to the reference drug, supporting the initiation of subsequent clinical studies [1]