Investment Rating - The report maintains a "Recommended" rating for the pharmaceutical industry [5] Core Insights - The underlying logic of the current pharmaceutical industry era is innovation and international expansion, with a focus on innovative drugs and technology-driven sectors [2][3] - The report highlights the strong performance of the CRO market and suggests a dual investment strategy focusing on both "0 to 1" technology innovation and low-position stocks [2][3] - The report emphasizes the ongoing trend of BD (Business Development) transactions in innovative drugs, with significant growth expected in 2026 [4][15] Summary by Sections 1. Key Events in the Pharmaceutical Industry During the Spring Festival - Innovative drug BD transactions have seen a strong start, with significant overseas development and registration progress for key products [13][14] - The total amount of BD transactions for innovative drugs in China for 2026 has already surpassed one-third of the total for 2025 [15] - The revision of the National Essential Medicines List Management Measures may signal changes in the essential medicines directory [28] 2. Pharmaceutical Market Review and Hotspot Tracking - The pharmaceutical sector's performance was relatively weak, with a weekly decline of 0.81%, ranking 20th among all industries [34][38] - The total trading volume for pharmaceuticals was 401.12 billion yuan, accounting for 3.83% of the total market, below the historical average of 7.09% [55] - The report notes a rising valuation level for the pharmaceutical industry, with a PE ratio of 29.25, which is below the historical average [52] 3. Stock Performance Review - The report lists the top-performing stocks, including Dongyangguang and Zhendemedical, while highlighting the underperformers like Huayuan Biology and *ST Sailong [58][59]

Core Viewpoint - The Chinese innovative pharmaceutical sector is entering a golden development period, presenting a once-in-a-century investment opportunity due to unmet global medical needs and significant advancements in the industry [4][9]. Group 1: Market Growth and Trends - In 2025, the total value of out-licensing (BD) transactions for Chinese innovative drugs reached $135.7 billion, a significant increase from $51.9 billion in 2024, with upfront payments rising to $7 billion from $4.1 billion [4][9]. - In January 2026 alone, the transaction volume reached $30 billion, with upfront payments of $3 billion, indicating a strong start to the year [4][9]. - The proportion of external procurement pipelines from China for multinational pharmaceutical companies surged from 10% in 2020 to 42% in 2025, highlighting China's growing importance in the global pharmaceutical landscape [4][9]. Group 2: Clinical Milestones and Innovations - 2026 is identified as a critical year for validating major drugs, with several key clinical milestones expected to emerge, potentially leading to a re-evaluation of industry value [5][9]. - Notable clinical trials include Kangfang Biotech's AK112 for non-small cell lung cancer, which is anticipated to redefine first-line treatment standards [5][9]. - The ADC sector is also poised for significant developments, with Kelong Botai's SKB264 and Baili Tianheng's BL-B01D1 expected to release important phase III clinical data [5][9]. Group 3: Impact on Related Industries - The CXO (Contract Research Organization) sector, closely tied to innovative pharmaceuticals, is expected to benefit from the technological advancements in drug development, leading to a recovery in industry sentiment [5][10]. - Companies within the "WuXi" ecosystem, such as WuXi Biologics and WuXi AppTec, are experiencing a resurgence in orders and performance, reaching historical highs despite previous unfavorable U.S. policies [10].

Market Performance - Kolunbotai Biotech-B (06990.HK) experienced a decline of 3.33% on February 12, 2026, closing at HKD 423.40 with a trading volume of HKD 208 million, influenced by a general market downturn [1] - The Hang Seng Index fell by 0.86%, and the Hang Seng Tech Index dropped by 1.65%, with the biotechnology sector down by 0.84%, reflecting a decrease in market risk appetite affecting high-valuation biotech stocks [1] Institutional Insights - Bank of America Securities raised the target price for the company from HKD 470 to HKD 479 but maintained a "Neutral" rating, adjusting the annual treatment cost assumption for Sac-TMT (Lukangshatu Zhunzai) downwards, leading to a 5% and 6% reduction in revenue forecasts for 2026 and 2027 respectively, which may raise concerns about the product's commercialization profitability [2] Financial and Technical Analysis - Technical indicators show weakness, with the stock price falling below the 5-day moving average of HKD 428.2, and the MACD divergence value at -2.862, indicating insufficient bullish momentum [3] - There was a net outflow of HKD 11.09 million from major funds, while retail investors saw a net inflow of HKD 1.96 million, suggesting a cautious attitude from larger investors [3] Company Valuation - The company's price-to-earnings ratio (TTM) stands at -124.68, and the price-to-book ratio is 17.96, significantly higher than traditional pharmaceutical companies [4] - Despite the approval of the fourth indication for Sac-TMT (HR+/HER2- breast cancer) and its inclusion in the medical insurance list, increased competition in the TROP2 ADC space (e.g., AstraZeneca/Daiichi Sankyo's Enhertu) raises concerns about its long-term pricing advantage [4] Recent Company Status - CICC maintains an "Outperform" rating with a target price of HKD 550, but key catalysts for 2026, such as the FDA application for Sac-TMT and new clinical data, have yet to materialize, resulting in a lack of significant positive drivers for the stock price in the short term [5]

Group 1 - The core viewpoint of the article is that the drug sac-TMT (TROP-2 ADC) from Kolun Botai Biopharmaceutical has received approval from the National Medical Products Administration for the treatment of HR-positive/HER2-negative breast cancer in the second line and above, marking the fourth indication approved for this drug in mainland China [1] - The drug has also been included in the national medical insurance catalog for the treatment of triple-negative breast cancer in the third line and EGFR mutation non-small cell lung cancer since January of this year [1] - Due to adjustments in the national medical insurance catalog pricing, the company has lowered its annual treatment cost assumptions for sac-TMT [1] Group 2 - The revenue forecasts for 2026 and 2027 have been reduced by 5% and 6% respectively [1] - The target price for the stock has been raised from HKD 470 to HKD 479, maintaining a "neutral" rating [1] - The business progress is in line with expectations but is offset by increasingly fierce competition [1]

Group 1 - The Hong Kong innovative drug concept stocks have declined, with companies such as 3SBio, Kelun-Botai Biopharmaceuticals falling over 3%, and CSPC Pharmaceutical Group, China Biologic Products, and Hansoh Pharmaceutical dropping over 2% [1] - The Hong Kong innovative drug-related ETFs have also seen a decline of over 2% [1] Group 2 - Current analysis indicates that the healthcare sector presents multiple investment opportunities, with the CXO industry experiencing sustained improvement due to a recovery in overseas orders and domestic capacity reduction, while still having room for valuation recovery [2] - The medical device sector is benefiting from domestic equipment upgrade policies and overseas market expansion, with continuous catalysts in cutting-edge areas such as brain-computer interfaces and AI imaging [2] - Internet healthcare is seeing improved operational efficiency in the context of deepening medical insurance payment reforms, leading to a clearer profit growth trajectory [2]

Market Overview - The Hong Kong stock market showed initial gains but narrowed its increase, with the Hang Seng Index closing up 0.58% above 27,000 points, while the Hang Seng China Enterprises Index and Hang Seng Tech Index rose by 0.81% and 0.62% respectively [1][2]. Sector Performance - Technology stocks rebounded, driven by AI application stocks, with the stock of Reading Group surging over 15%. The film and entertainment sector remained active, and the biopharmaceutical sector saw widespread gains, led by Fuhong Hanlin [3][4]. - New consumption concept stocks, paper industry stocks, home appliance stocks, shipping stocks, and automotive stocks mostly increased. Conversely, education stocks faced declines, with gaming stocks collectively sluggish, and real estate, gas, electric, and telecom stocks also underperformed [3][4]. Notable Stocks - AI application stocks saw significant gains, with Reading Group rising 15.41%, and Zhiyun up 14.81%, reaching a new historical high during the session. Other stocks like Fubo Group and Yidu Technology also experienced increases [6][8]. - In the film sector, Orange Sky Entertainment rose over 7%, with other companies like Damai Entertainment and Ningmeng Film also following suit [10]. - The biopharmaceutical sector was buoyed by Fuhong Hanlin's increase of over 7%, with other companies like WuXi Biologics and WuXi AppTec also seeing gains [12]. Industry Insights - The real estate sector faced pressure, with Shimao Group dropping over 6% amid ongoing sales challenges in the industry. Major real estate companies are reportedly initiating organizational restructuring [13][14]. - Education stocks struggled, with Guangzheng Education falling over 5%, alongside declines in New Oriental and other educational institutions [15]. Investment Outlook - According to Everbright Securities, the current liquidity environment in the Hong Kong stock market is entering an observation period, with limited space for further tightening. Positive catalysts could lead to a recovery in market sentiment and capital inflow [22].

Core Viewpoint - The strong trend in the mainland healthcare sector from last year is expected to continue into this year, with investors considering the value of more R&D pipelines when evaluating valuations [1] Group 1: CDMO Sector - The company has a constructive outlook on CDMO enterprises due to accelerated growth, strong product cycles, limited geopolitical risks, and reasonable valuations [1] - Ratings for WuXi AppTec (02359, 603259.SH) and WuXi Biologics (02268) have been upgraded to "Buy" [1] Group 2: Biotech and Pharmaceutical Companies - A selective strategy is adopted for biotech and pharmaceutical companies, favoring those with key data releases and early data showing potential, along with actual transaction expectations [1] - Companies such as Kelun-Biotech (06990), Innovent Biologics (02696), and Hansoh Pharmaceutical (03692) are viewed positively [1] Group 3: Medical Devices Sector - The company maintains a neutral view on the medical devices sector, noting that while the industry has bottomed out, recovery will take time [1] - Recommendations include buying Angelalign Technology (06699) and Weigao Group (01066) [1] Group 4: Medical Services Sector - A relatively cautious stance is held regarding the medical services sector due to ongoing cost control measures and a weak consumer cycle [1] - The rating for Haijia Medical (06078) has been downgraded to "Neutral" [1]

Core Viewpoint - The strong trend in the mainland healthcare sector from last year is expected to continue into this year, with investors needing to consider the value of more R&D pipelines when evaluating valuations [1] Group 1: Investment Strategy - Companies are now trading based on actual execution capabilities rather than solely on licensing deal expectations [1] - Achieving returns that exceed the industry will rely more on key data releases, actual transactions, and visibility on earnings realization or turning points [1] Group 2: Sector Insights - The outlook for CDMO companies is becoming more constructive due to accelerated growth, strong product cycles, limited geopolitical risks, and reasonable valuations [1] - The ratings for WuXi AppTec and WuXi AppTec Holdings have been upgraded to "Buy" [1] Group 3: Selective Strategy in Biotech and Pharma - A selective strategy is adopted for biotech and pharmaceutical companies, favoring those with key data releases and early data showing potential, along with actual transaction expectations [1] - Companies such as Kelun-Biotech, Junshi Biosciences, and Hansoh Pharmaceutical are viewed positively [1] Group 4: Medical Devices Sector - The medical devices sector is maintained with a neutral outlook, indicating that while the industry has bottomed out, recovery will take time [1] - Recommended stocks include Angelalign Technology and Weigao Group [1]

Core Viewpoint - The strong trend in the mainland healthcare sector from last year is expected to continue into this year, with investors considering the value of more R&D pipelines when evaluating valuations [1] Group 1: Investment Strategy - Companies are now trading based more on actual execution capabilities rather than solely on licensing deal expectations [1] - Achieving returns that exceed the industry average this year will rely more on key data releases, actual transactions, and visibility on profit realization or turning points [1] Group 2: Sector Analysis - The outlook for CDMO companies is becoming more constructive due to accelerated growth, strong product cycles, limited geopolitical risks, and reasonable valuations [1] - The ratings for WuXi AppTec and WuXi AppTec Holdings have been upgraded to "Buy" [1] Group 3: Selective Strategy in Biotech and Pharma - A selective strategy is adopted for biotech and pharmaceutical companies, favoring those with key data releases and early data showing some promise, along with actual transaction expectations [1] - Companies such as Kelun-Biotech, Innovent Biologics, and Hansoh Pharmaceutical are viewed positively [1] Group 4: Medical Devices Sector - The medical devices sector maintains a neutral outlook, as the industry has bottomed out but requires time for gradual recovery [1] - Recommendations include buying Angelalign Technology and Weigao Group [1]

Company News - Beijing Capital International Airport Co., Ltd. (00694.HK) expects a net loss of approximately RMB 6.0 billion to RMB 7.6 billion in 2025, a year-on-year reduction of about 45.3% to 56.8%, benefiting from the recovery in aviation market demand and enhanced cost control [1] - Times Electric (03898.HK) anticipates total operating revenue of approximately RMB 28.761 billion in 2025, a year-on-year increase of 15.46%, with a net profit of about RMB 4.105 billion, up 10.88% year-on-year [1] - Hong Kong Tong Holdings (00032.HK) issued a profit warning, expecting a year-on-year increase in profit attributable to shareholders to approximately HKD 660 million for the fiscal year 2025 [1] - Datang Environment Industry Group (01272.HK) issued a profit warning, expecting pre-tax profit to rise to approximately RMB 700 million to RMB 710 million in 2025 [1] Power Generation - Datang New Energy (01798.HK) completed power generation of 3.272 million MWh in January, a year-on-year increase of 6.69% [2] - Longyuan Power (00916.HK) achieved power generation of 7.1627 million MWh in January, a year-on-year growth of 12.05%, with wind power generation increasing by 8.11% and solar power generation rising by 42.25% [2] - Jiangshan Holdings (00295.HK) reported total power generation of approximately 18.3 thousand MWh in January, a year-on-year decrease of 22.13% [4] Real Estate - Yuexiu Property (00123.HK) reported contract sales of approximately RMB 4.201 billion in January, a year-on-year decline of about 36.4% [2] - Poly Real Estate (01238.HK) recorded total contract sales of approximately RMB 470 million in January, a year-on-year decrease of 31.98% [2] - Greenland Hong Kong (00337.HK) reported contract sales of approximately RMB 508 million in January, a year-on-year increase of about 287.79% [3] Other Developments - CloudTop New Drug (01952) received approval for the new drug application of Vedolizumab for treating moderate to severe ulcerative colitis in adults in China [4] - Zhonghang Science and Technology (02357.HK) plans to invest RMB 58 million to acquire a 10% stake in Zhonghang Jierui [4] - Kelun-Biotech (06990.HK) received approval for the fourth indication of its core product TROP2ADC for treating 2L+ HR+/HER2- breast cancer [4] Financing and Buyback Activities - Kingsoft Corporation (03888.HK) repurchased approximately 1.1142 million shares for about HKD 29.9994 million, with repurchase prices ranging from HKD 26.8 to HKD 27 [7] - Geely Automobile (00175.HK) repurchased approximately 1.665 million shares for about HKD 27.1612 million, with repurchase prices between HKD 15.94 and HKD 16.44 [7] - October Rice Field (09676.HK) repurchased 780,000 shares for approximately HKD 7.3357 million, with repurchase prices between HKD 9.3 and HKD 9.46 [7] - China Galaxy (06881.HK) completed the issuance of corporate bonds totaling RMB 6 billion [7]