Core Viewpoint - The term "DeepSeek moment" is emerging as a topic in global stock markets, symbolizing the disruption of global industry structures and mainstream technologies by innovations originating from China, particularly in the AI and biopharmaceutical sectors [1][3]. Group 1: AI Industry - In January, the Chinese emerging enterprise DeepSeek launched a low-cost generative AI, challenging the United States' dominance in the AI sector [1]. - The "DeepSeek moment" reflects a significant shift in technological leadership from the U.S. to China, indicating a potential change in global power dynamics [1]. Group 2: Biopharmaceutical Industry - Following the AI sector, the biopharmaceutical industry is experiencing its own "DeepSeek moment," highlighted by Pfizer's exclusive licensing agreement with China's 3SBio for cancer treatment drug development and production [3]. - After the announcement, 3SBio's stock surged by 70% compared to the end of April, showcasing investor confidence in Chinese biopharmaceutical companies [3]. - Since the end of 2024, the stock index of biotechnology companies listed in Hong Kong has increased by 51%, significantly outperforming the Hang Seng Index (17%) and the S&P 500 Index (1%), indicating high investor expectations for Chinese biotech firms [3].

Investment Rating - The report maintains a "Positive" investment rating for the pharmaceutical industry [4] Core Views - The pharmaceutical sector is experiencing a correction, particularly in the innovative drug segment, but core innovative drug stocks with strong fundamentals are showing resilience. The report continues to favor the innovative drug industry trend and suggests focusing on companies with significant breakthroughs or international expansion [5][33] - The upcoming ADA 2025 conference is expected to showcase numerous advancements in the GLP-1 weight loss sector, highlighting the industry's robust development trajectory. Key areas of focus include muscle gain, oral small molecules, and new targets like Amylin [9][33] Summary by Sections 1. ADA 2025: Anticipating Muscle Gain Validation and New Target Exploration - The global sales of Semaglutide are projected to reach $25.9 billion in 2024, making the GLP-1 sector highly competitive [9] - The report identifies a growing demand for weight loss solutions that also promote muscle gain, particularly among elderly populations suffering from obesity [10] 1.1. Muscle Gain/Non-Weight Loss: New Demand in Weight Loss - Muscle loss is a significant challenge for GLP-1 treatments, with up to 40% of weight loss attributed to muscle loss in patients. The report emphasizes the need for weight loss solutions that preserve muscle mass [10] 1.2. Oral Small Molecules: Orforglipron Expected to be First Approved - Orforglipron is anticipated to be the first approved oral GLP-1 small molecule, with significant upstream benefits expected for companies like Kelun Pharmaceutical and WuXi AppTec [15] 1.3. Amylin: Next-Generation Target with Potential Advantages - The report discusses the potential of Amylin as a complementary treatment to GLP-1, with improved safety profiles and efficacy in weight loss [20] 1.4. Long-Acting Formulations: Improved Patient Compliance - Long-acting formulations are expected to enhance patient adherence to treatment regimens, with several promising candidates in development [21] 1.5. GLP-1 Weight Loss Efficacy: Updated Insights - The report provides an updated overview of the efficacy of GLP-1 treatments in weight loss, highlighting their effectiveness and safety [22] 1.6. Domestic Investment Opportunities from ADA - The report suggests focusing on companies like LaiKai Pharmaceutical and Gree Pharmaceutical, which are well-positioned in the weight loss and muscle gain sectors [25][28][31] 2. Industry Perspective: Innovation, International Expansion, and Aging Population - The report emphasizes the importance of innovation, international expansion, and the aging population as key drivers for the pharmaceutical industry. It notes that the industry has completed a transition from old to new growth drivers [33] - The pharmaceutical index has shown a decline of 4.35% recently, but the long-term outlook remains positive due to ongoing innovation and market expansion [33][44]

Investment Rating - The industry investment rating is "Positive" (maintained) [1] Core Insights - The report highlights recent positive developments in the high-quality weight loss sector, particularly focusing on myostatin pathway clinical trial results from Regeneron and Scholar Rock, which demonstrate significant reductions in lean body mass loss when combined with GLP-1 medications [4][12] - The pharmaceutical and biotechnology sector experienced a decline of 4.35% in the third week of June 2025, underperforming the CSI 300 index by 3.9 percentage points, ranking 29th among 31 sub-industries [5][16] - The report emphasizes the potential of Activin receptor drugs, such as Eli Lilly's Bimagrumab and Lai Kai's LAE-102, to retain lean body mass and even promote muscle gain, with promising safety and pharmacokinetic data [4][12] Summary by Sections 1. Recent Developments in Weight Loss Sector - Regeneron's myostatin antibody Trevogrumab combined with semaglutide showed a 50.8% reduction in lean body mass loss over 24 weeks, compared to a 7.9 lbs loss with semaglutide alone [4][12] - Scholar Rock's myostatin antibody Apitegromab combined with Tirzepatide demonstrated a 54.9% reduction in lean body mass loss [4][12] 2. Market Performance - The pharmaceutical and biotechnology sector's decline of 4.35% in June's third week was the largest among all sectors, with the vaccine sector experiencing the smallest drop of 0.4% [5][21] - Other sub-sectors, such as blood products and medical consumables, also faced declines, with the largest drop seen in other biological products at 6.7% [5][21] 3. Recommended Stocks - Recommended stocks include major pharmaceutical and biotechnology companies such as Heng Rui Medicine, East China Medicine, and Innovent Biologics, among others [6]

Group 1 - The core product Tevaz is expected to continue outperforming sales expectations due to its unique position as the only approved drug for CIT indications globally, with significant market share growth potential [1] - The competitive landscape for Tevaz is favorable, with limited likelihood of generic drug entry in the short to medium term, and pricing pressure remains low [1] - The market underestimates the growth potential of Tevaz, with projected sales CAGR of 11% from 2024 to 2026, leading to a long-term sales peak of 7 billion RMB [1] Group 2 - Mandi's sales are expected to grow significantly, reaching a peak of 2.5 billion RMB, driven by a large and increasingly younger population suffering from hair loss [2] - The dual-channel marketing strategy (online and offline) is enhancing brand recognition for Mandi, with new formulations and products expanding market reach [2] - The company is diversifying its consumer healthcare product line with new products like Winlevi and semaglutide expected to launch in the next 2-3 years, leveraging Mandi's established brand and distribution channels [2] Group 3 - The company is on the verge of a product innovation phase, with 30 products in the pipeline, 12 of which are expected to be approved in mainland China by 2025-2027 [3] - A significant licensing agreement with Pfizer for the self-developed PD-1/VEGF dual antibody SSGJ-707 could yield up to 6.05 billion USD, validating the company's drug development capabilities [3] - The company is transitioning from reliance on traditional blockbuster products to a model driven by new product iterations and international expansion, with projected revenue and net profit CAGR of 10% and 15% respectively from 2024 to 2026 [3]

Core Viewpoint - Company is expected to achieve a revenue and net profit CAGR of 10% and 15% respectively from 2024 to 2026, driven by the sustained growth of existing major products like Tebiou and Mandi, as well as the rapid market entry of new products [1] Group 1: Existing Core Products - The competitive landscape for the core product Tebiou is favorable, with expectations for continued sales performance exceeding forecasts [2] - Tebiou is the only drug approved for the CIT indication globally, with potential to replace IL-11 class competitors and increase market share [2] - The sales CAGR for Tebiou is projected to reach 11% from 2024 to 2026, with a long-term sales peak expected to reach 7 billion RMB [2] Group 2: Mandi's Growth Potential - Mandi is anticipated to maintain sales growth over a long period, with a peak expected to reach 2.5 billion RMB [3] - The growth is driven by a large and increasingly younger population suffering from hair loss, as well as a dual-channel marketing strategy enhancing brand recognition [3] - The introduction of new products like Winlevi® and semaglutide is expected to leverage Mandi's established brand and commercialization channels for rapid market entry [3] Group 3: Innovation Pipeline - The company is on the verge of a product innovation phase, with 30 products in the pipeline as of Q1 2025, 12 of which are expected to be approved in China by 2025-2027 [4] - The focus is on rapid iteration in key therapeutic areas such as hematology, oncology, autoimmune diseases, and metabolic disorders [4] - A significant licensing agreement with Pfizer for the self-developed PD-1/VEGF dual antibody SSGJ-707, with a total transaction value of up to 6.05 billion USD, underscores the company's drug development capabilities [4]

Investment Rating - The report initiates coverage with a "Buy" rating for the company [4][17]. Core Views - The company has significant long-term potential for its core products, with innovative research and development outcomes expected to materialize soon [4][8]. - The report highlights the strong competitive landscape for the core product, Teibiao, which is the only approved drug for CIT indications globally, and anticipates continued market share growth [8][11]. - The company is transitioning from a reliance on traditional blockbuster products to a diversified product matrix driven by new product launches and international expansion [12][13]. Financial Overview - Revenue projections for the company show a substantial increase, with expected revenues of RMB 19,236 million in 2025, reflecting a year-on-year growth of 111.2% [7]. - Net profit is projected to reach RMB 8,631 million in 2025, with a significant growth rate of 317.4% [7]. - The company’s market capitalization is approximately HKD 50.58 billion, with a year-to-date stock price increase of 252.8% [6]. Product Insights - Teibiao is expected to achieve sales of RMB 51 billion in 2024, with a compound annual growth rate (CAGR) of 16% since 2020 [11][25]. - The product's market share in the platelet-stimulating drug category is projected to reach 34.3% by 2024, surpassing IL-11 class drugs [11][25]. - The company’s consumer healthcare product, Mandi, is anticipated to reach sales of RMB 13.4 billion in 2024, driven by a growing market for hair loss treatments [12]. Pipeline and Collaborations - The company has a robust pipeline with 30 products under development, including 12 expected to be approved in mainland China between 2025 and 2027 [13]. - A significant licensing agreement with Pfizer for the PD-1/VEGF dual antibody SSGJ-707 is expected to yield up to USD 60.5 billion, showcasing the company's drug development capabilities [13][16]. Valuation and Price Target - The report sets a target price of HKD 27.0, corresponding to a price-to-earnings ratio of 20.7 for 2025, indicating a potential upside of 26% from the current stock price [17].

Group 1 - The Hong Kong innovative drug sector is experiencing a significant revaluation opportunity after over three years of downturn, with over 30 companies seeing their stock prices double since early 2025 [1] - Notable companies like Sihuan Pharmaceutical and Innovent Biologics have market capitalizations exceeding HKD 50 billion and HKD 120 billion respectively [1] - More than ten innovative drug companies have submitted listing applications to the Hong Kong Stock Exchange this year, with a record seven applications in the first half of June alone [1] Group 2 - The recent rise in the Hong Kong biopharmaceutical sector is primarily a valuation correction after previous significant declines, with some companies experiencing over 90% drop from historical highs [2] - Key players driving the market include companies like BeiGene and Innovent Biologics, which have achieved overseas commercialization through business development partnerships [2] - The investment cycle in the primary market is expected to take time to recover, as many institutions face tight funding and only a few top-tier institutions can sustain investments [2] Group 3 - The investment landscape is shifting, with early-stage projects attracting significant funding, while clinical and later-stage projects struggle to secure adequate financing [2] - The Hong Kong market's acceptance of companies in phase II clinical trials provides an important exit channel for the primary market [3] - Collaborations between multinational pharmaceutical companies and private equity firms to establish investment funds in the innovative drug sector are becoming more common [4] Group 4 - The core factor influencing the commercial value of innovative drugs is the healthcare payment policy, with recent trends in pricing negotiations becoming more favorable for companies [4] - Concerns exist regarding the potential negative impact of excessive cost control on research and development motivation within the industry [5] - There is a consensus among investors on the need for long-term capital support, with hopes for increased participation from insurance and social security funds [5] Group 5 - The investment trend for the second half of the year and into 2026 is expected to see a concentration of funds towards truly innovative companies, while projects lacking differentiation may be eliminated [5] - The global competitiveness of Chinese innovative drugs is improving, with a shift from imitation to original innovation, particularly in areas like bispecific antibodies and cell therapies [5]

Investment Highlights - Financial performance shows commercial expansion and profit improvement, with 2024 sales revenue for 17 commercialized innovative drug companies reaching 91.3 billion yuan, a year-on-year growth of 35% [4][25] - R&D investment for 32 sample innovative drug companies is projected to be 67.2 billion yuan in 2024, reflecting a year-on-year increase of 7.23%, indicating a sustained trend of local innovation investment [4][13] - The sales expense ratio and R&D expense ratio for 22 sample innovative drug companies have been continuously declining from 2021 to 2024, which is expected to drive profit improvement for companies like BeiGene and Innovent [4][15] MNC Strategies - The report highlights the prominent "Chinaization" of IO+ADC strategies, with multinational corporations (MNCs) having strong first-generation IO pipeline layouts, but second-generation IO has not seen significant breakthroughs [4][27] - MNCs are increasingly relying on local innovative drugs as key pipeline assets, with many future potential products being sourced from Chinese companies [4][30] - MNCs are well-capitalized, with ample cash flow supporting the continued enrichment of their pipelines, particularly in the context of the evolving IO+ADC landscape [4][39] Domestic Market Dynamics - The report emphasizes the global innovation and valuation reshaping of Chinese drugs, driven by supportive domestic policies and increasing international competitiveness [4][45] - The value of BD transactions continues to validate the competitiveness of Chinese innovative drugs, with 2024 projected BD transaction income reaching 5.7 billion USD, accounting for 20% of global cooperation authorization total upfront payments [4][45][47] - The commercialization of major products is accelerating, with a rich NDA reserve expected to drive further growth in domestic commercialization [4][50]

Investment Rating - The report maintains a "Buy" rating for multiple companies in the pharmaceutical and biotech industry, indicating a positive outlook on their growth potential and market performance [6]. Core Insights - The ASCO conference showcased significant advancements in domestic innovative drugs, highlighting the competitive edge of Chinese pharmaceutical companies in the global market [4][12]. - The report emphasizes the clinical value and market potential of several key drugs presented at ASCO, including promising results from various companies [4][12]. Summary by Relevant Sections Domestic Key Research Overview - BaiLi Tianheng's BL-B01D1 demonstrated a 35.3% confirmed overall response rate (cORR) in patients with non-small cell lung cancer (NSCLC) and small cell lung cancer (SCLC) [18]. - DiZhe Pharmaceutical's DZD6008 achieved over 80% overall response rate (ORR) in heavily treated chronic lymphocytic leukemia (CLL) patients, indicating its potential as a new treatment option [4][12]. - FuHong HanLin's PD-L1 ADC showed excellent performance in immune-resistant squamous NSCLC patients, while HLX22 is expected to redefine first-line treatment for advanced gastric cancer [4][12]. - KeLun BoTai's sac-TMT data confirmed long-term survival benefits in third-line EGFR-mutant NSCLC and first-line triple-negative breast cancer (TNBC) [4][12]. - KangNing JieRui's HER2 bispecific ADC demonstrated comparable efficacy and better safety than existing treatments [4][12]. - MaiWei Biotech's 9MW2821 combined with toripalimab is anticipated to be a strong contender in first-line urothelial carcinoma treatment [4][12]. - SanSheng Pharmaceutical updated data on SSGJ-707 for first-line treatment of wild-type NSCLC, with a significant partnership with Pfizer [4][12]. - XinDa Biotech's IBI363 showed potential in activating "cold" tumors, aiming to become a cornerstone drug in immunotherapy [4][12]. - YaSheng Pharmaceutical's Lisaftoclax achieved positive results in patients resistant to venetoclax, filling a treatment gap in myeloid malignancies [4][12]. - ZhengDa TianQing's "DeFu combination" was selected for LBA, potentially offering a new first-line treatment for PD-L1 positive NSCLC [4][12]. - ZeJing Pharmaceutical and ZaiDing Pharmaceutical presented excellent data on ZG006 and ZL-1310 for late-line SCLC treatment, showcasing the global competitiveness of domestic drugs [4][12].

Core Viewpoint - The Hong Kong stock market for innovative pharmaceuticals is experiencing a resurgence, with significant increases in stock prices and a record number of companies filing for IPOs, indicating a potential value reassessment after a prolonged downturn [2][4][12]. Group 1: Market Activity - As of mid-June, 18 innovative pharmaceutical companies have submitted applications to list on the Hong Kong Stock Exchange, with 7 of these occurring in just the first half of June, setting a historical record [1][3]. - The Hang Seng Innovative Pharmaceutical Index has rebounded to 51% of its historical high from July 2021, reflecting a recovery in market sentiment [5][12]. - Over 80% of the 18 newly listed pharmaceutical companies in Hong Kong have seen their stock prices rise since the beginning of 2025 [12]. Group 2: Investment Trends - The market is witnessing a shift in investor sentiment, with many previously cautious investors now eager to engage in the sector, driven by increased capital flow and favorable policy changes [4][16]. - The trend of License-out transactions has gained momentum, with the first quarter of 2025 seeing 41 such deals totaling $36.93 billion, indicating a significant increase in market activity compared to previous years [19][20]. - The proportion of mainland Chinese capital invested in the Hang Seng Innovative Pharmaceutical Index has risen from 18% at the beginning of the year to 22.6% [31]. Group 3: Company Performance - Notable companies like 3SBio and Innovent Biologics have seen their market capitalizations soar, with 3SBio's value tripling to over HKD 50 billion and Innovent's market cap exceeding HKD 100 billion [2][12]. - New listings are performing well, with companies like InnoCare Pharma seeing significant gains on their debut, indicating a shift in market dynamics [13]. Group 4: Future Outlook - The industry is optimistic about the future, with discussions among company founders shifting from survival strategies to expansion and acquisition plans [11][16]. - However, there are concerns about the sustainability of this growth, as the reliance on License-out deals may not provide a long-term solution without systemic support from the healthcare payment system [34][36].