[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2025, and 2024, detailing financial performance, position, and cash flows, alongside the company's redomiciliation Condensed Consolidated Statements of Operations Highlights (Q2 & H1 2025 vs 2024) | Financial Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | H1 2025 (in thousands) | H1 2024 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | $1,315,300 | $929,166 | $2,432,579 | $1,680,818 | | **Gross Profit** | $1,150,694 | $791,034 | $2,102,971 | $1,417,751 | | **Income (Loss) from Operations** | $87,885 | $(107,161) | $98,987 | $(368,509) | | **Net Income (Loss)** | $94,320 | $(120,405) | $95,590 | $(371,555) | | **Diluted EPS ($)** | $0.06 | $(0.09) | $0.07 | $(0.27) | | **Diluted EPS per ADS ($)** | $0.84 | $(1.15) | $0.85 | $(3.56) | Condensed Consolidated Balance Sheet Highlights | Balance Sheet Item | As of June 30, 2025 (in thousands) | As of Dec 31, 2024 (in thousands) | | :--- | :--- | :--- | | **Total Current Assets** | $4,310,221 | $3,991,593 | | **Total Assets** | $6,298,394 | $5,920,910 | | **Total Current Liabilities** | $2,209,837 | $2,214,899 | | **Total Liabilities** | $2,527,919 | $2,588,688 | | **Total Shareholders' Equity** | $3,770,475 | $3,332,222 | Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | Cash Flow Item | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | **Net Cash Provided by (Used in) Operating Activities** | $307,680 | $(404,160) | | **Net Cash Used in Investing Activities** | $(188,546) | $(320,863) | | **Net Cash Provided by Financing Activities** | $1,248 | $185,310 | | **Net Increase (Decrease) in Cash** | $147,339 | $(568,053) | - The company redomiciled from the Cayman Islands to Switzerland during the second quarter of 2025, which did not change the accounting basis under U.S. GAAP[22](index=22&type=chunk)[23](index=23&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes strong Q2 2025 performance to significant revenue growth, particularly from BRUKINSA, achieving GAAP profitability and improved operating leverage while maintaining strong liquidity - Key highlights for Q2 2025 include a **42%** increase in total revenues to **$1.3 billion**, a **49%** increase in global BRUKINSA revenues to **$950 million**, and a shift to profitability with GAAP diluted EPS per ADS of **$0.84**[97](index=97&type=chunk) Q2 2025 vs Q2 2024 Net Product Revenue Breakdown (in thousands) | Product | Q2 2025 Revenue | Q2 2024 Revenue | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | BRUKINSA® | $949,840 | $637,399 | $312,441 | 49.0% | | TEVIMBRA® | $193,524 | $158,410 | $35,114 | 22.2% | | XGEVA® | $81,318 | $55,054 | $26,264 | 47.7% | | BLINCYTO® | $25,587 | $19,131 | $6,456 | 33.7% | | KYPROLIS® | $19,416 | $15,936 | $3,480 | 21.8% | | **Total Product Revenue** | **$1,302,076** | **$921,146** | **$380,930** | **41.4%** | - R&D expenses increased **15.5%** to **$524.9 million** in Q2 2025, driven by advancing preclinical programs like Sonrotoclax (BCL2i) into later stages[110](index=110&type=chunk)[112](index=112&type=chunk) - SG&A expenses rose **21.2%** to **$537.9 million** due to global commercial expansion, but decreased as a percentage of product sales from **48.2%** to **41.3%**[115](index=115&type=chunk) Contractual Obligations as of June 30, 2025 (in thousands) | Obligation | Total | Short Term (<1 Year) | Long Term (>1 Year) | | :--- | :--- | :--- | :--- | | Operating lease commitments | $79,054 | $10,608 | $68,446 | | Purchase commitments | $130,087 | $105,910 | $24,177 | | Debt obligations | $954,485 | $808,394 | $146,091 | | Interest on debt | $39,869 | $28,533 | $11,336 | | Co-development funding commitment | $242,916 | $220,869 | $22,047 | | **Total** | **$1,515,180** | **$1,238,641** | **$276,539** | [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces interest rate risk on its floating-rate debt and significant foreign currency exchange risk, particularly from its RMB-denominated operations - The company is exposed to interest rate risk on **$615.4 million** of outstanding floating-rate debt, where a **100-basis point** increase in interest rates would increase annual pre-tax interest expense by approximately **$6.2 million**[159](index=159&type=chunk) - The company faces significant foreign currency exchange risk, particularly from its RMB-denominated operations and deposits, with a hypothetical **10%** appreciation in the U.S. dollar against the RMB resulting in an increased foreign exchange loss of approximately **$11.7 million** as of June 30, 2025[161](index=161&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[165](index=165&type=chunk) - There were no material changes in the company's internal control over financial reporting during the quarter ended June 30, 2025[166](index=166&type=chunk) [PART II. OTHER INFORMATION](index=40&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in two significant legal matters: a patent infringement lawsuit from Pharmacyclics regarding BRUKINSA and a trade secret misappropriation lawsuit from AbbVie - In the Pharmacyclics litigation concerning BRUKINSA, the U.S. Patent and Trademark Office (USPTO) issued a Final Written Decision on April 29, 2025, invalidating all challenged claims of the patent in question, with Pharmacyclics' request for review subsequently denied[170](index=170&type=chunk)[171](index=171&type=chunk) - The company is vigorously defending against a lawsuit filed by AbbVie Inc. in September 2024, which alleges misappropriation of trade secrets related to the company's BTK degrader program, including BGB-16673[172](index=172&type=chunk) [Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section details comprehensive risks including commercialization, clinical development, regulatory hurdles, financial stability, intellectual property, third-party reliance, operational challenges, and specific risks related to China operations and Swiss redomiciliation - Commercial risks include potential failure of medicines to gain market acceptance, substantial competition from major pharmaceutical companies, and unfavorable pricing or reimbursement regulations from payors like Medicare or China's NRDL[177](index=177&type=chunk)[181](index=181&type=chunk)[186](index=186&type=chunk) - The company faces significant regulatory risks, including the lengthy and unpredictable approval processes of the FDA, NMPA, and EMA, and the potential for clinical trials to fail to demonstrate safety and efficacy[197](index=197&type=chunk)[212](index=212&type=chunk) - Financial risks include a history of significant net losses (**$8.5 billion** accumulated deficit as of June 30, 2025) and the potential need for additional financing to fund operations and development programs[234](index=234&type=chunk)[236](index=236&type=chunk) - Risks related to doing business in China are substantial, including potential intervention by the PRC government, uncertainties in the interpretation and enforcement of Chinese laws (e.g., data security, overseas listings), and limitations on repatriating funds[345](index=345&type=chunk)[346](index=346&type=chunk)[355](index=355&type=chunk) - The recent redomiciliation to Switzerland introduces new risks, including changes in shareholder rights, less flexibility in capital management due to stricter shareholder voting requirements, and potential Swiss withholding taxes on dividends[426](index=426&type=chunk)[427](index=427&type=chunk)[431](index=431&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=98&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company reported no unregistered sales of equity securities, no specific use of proceeds, and no issuer purchases of its equity securities for the period - None reported for the period[433](index=433&type=chunk) [Defaults Upon Senior Securities](index=98&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the period - None reported for the period[434](index=434&type=chunk) [Mine Safety Disclosures](index=98&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not applicable[435](index=435&type=chunk) [Other Information](index=98&type=section&id=Item%205.%20Other%20Information) This section discloses the adoption and modification of Rule 10b5-1 trading arrangements by two executive officers during the quarter Director and Officer Trading Arrangements (Rule 10b5-1) | Name (Title) | Action (Date) | Nature of Arrangement | Duration | Aggregate Securities | | :--- | :--- | :--- | :--- | :--- | | Chan Lee (SVP, General Counsel) | Adoption (May 14, 2025) | Sale | August 13, 2026 | Up to 36,671 ADSs plus net ADSs from RSU vestings | | Dr. Xiaobin Wu (President, COO) | Modification (May 14, 2025) | Sale | August 13, 2026 | Up to 89,794 ADSs | [Exhibits](index=99&type=section&id=Item%206.%20Exhibits) This section provides an index of all exhibits filed with the 10-Q, including corporate governance documents, executive agreements, and required certifications - Key exhibits filed include: - 3.1: Articles of Association of BeOne Medicines Ltd - 10.1-10.5: Executive Employment Agreements for key officers - 10.18: Fifth Amended and Restated 2018 Employee Share Purchase Plan - 31.1 & 31.2: Certifications of Principal Executive Officer and Principal Financial Officer[441](index=441&type=chunk)[442](index=442&type=chunk)[443](index=443&type=chunk)

Group 1 - The Shanghai Stock Exchange Sci-Tech Innovation Board Biopharmaceutical Index increased by 0.85%, with notable stock performances including Boryung Pharmaceutical up by 15.37% and Junshi Biosciences up by 6.49% [1] - The market activity for the Jiashi Sci-Tech Medicine ETF was robust, with a turnover rate of 18.13% and a transaction volume of 42.47 million yuan, leading in comparable funds [3] - As of August 5, the Jiashi Sci-Tech Medicine ETF achieved a net inflow of 11.73 million yuan, totaling 14.69 million yuan over the last five trading days [3] Group 2 - The top ten weighted stocks in the Sci-Tech Innovation Board Biopharmaceutical Index accounted for 49.14% of the index, with leading stocks including United Imaging Healthcare and Boryung Pharmaceutical [3][5] - A significant business development deal was announced by Crystal Technology Holdings, with a total order size of approximately 47 billion HKD (5.99 billion USD), marking it as one of the largest BD transactions in China's AI pharmaceutical sector for 2025 [5] - According to research from Everbright Securities, the mid-year reporting period in July may lead to positive changes in the performance of some innovative drug companies, potentially catalyzing a new market trend [6]

Core Insights - The article highlights the significant progress of Chinese innovative pharmaceuticals, particularly focusing on the outbound licensing strategy and business development (BD) as key drivers for growth in the global market [1][2][3] Group 1: Company Developments - Heng Rui Pharmaceutical has completed 13 outbound licensing deals from 2018 to 2024, involving 16 molecular entities with a potential total transaction value of approximately $14 billion and upfront payments totaling around $600 million [1] - In 2025, Heng Rui's momentum continues with a $19.7 billion deal with Merck for its Lp(a) oral small molecule project and a partnership with GSK that brings in $5 billion upfront and a potential future revenue of $12 billion [1] - The company reported a revenue of 27.985 billion yuan in 2024, a year-on-year increase of 22.63%, and a net profit of 6.337 billion yuan, up 47.28% [9] Group 2: Industry Trends - The Chinese innovative pharmaceutical sector is experiencing a surge in outbound licensing deals, with the total value of BD transactions reaching $64.08 billion in 2024, marking a historical high [4][5] - The global pharmaceutical industry is facing a "patent cliff" with a total risk exposure of $354 billion due to patent expirations, creating a heightened demand for quality innovative assets from China [3][4] - The number of active innovative drug R&D pipelines in China reached 3,575 in 2024, surpassing the U.S. for the first time, with a significant increase in the number of first-in-class (FIC) drugs [8] Group 3: Strategic Shifts - The BD model has evolved from a tactical choice to a core pillar of globalization strategy for Chinese pharmaceutical companies, enabling them to secure immediate funding and share risks [5][6] - Companies like Bai Li Tian Heng and Kang Ning Jie Rui have achieved remarkable revenue growth through strategic partnerships, with Bai Li Tian Heng reporting a staggering 1,685.19% year-on-year increase in revenue following a major licensing deal [5][6] - The article emphasizes the importance of building strong commercialization capabilities as a foundation for long-term competitiveness, moving beyond reliance on BD for survival [9][10] Group 4: Policy and Capital Support - The growth of BD transactions is supported by a decade of favorable policies and capital influx, including reforms in drug approval processes and financing mechanisms for biotech companies [7][8] - The Chinese pharmaceutical industry has seen a significant increase in the number of companies going public, with over 56 firms raising more than 110 billion HKD since the introduction of new listing rules [7] - The article notes that the combination of policy support and capital investment has led to a qualitative leap in innovative drug development in China [8][9] Group 5: Future Outlook - The future of Chinese innovative pharmaceuticals is characterized by a focus on global clinical trials, tighter international collaborations, and the emergence of differentiated products [15] - The industry is moving towards a more collaborative ecosystem, aiming for a balance between individual company growth and collective industry advancement [15] - The article concludes that the ongoing transformation in the Chinese pharmaceutical sector is paving the way for a historic leap from "global follower" to "global leader" in innovation [10][15]

Group 1 - The core viewpoint of the article emphasizes that under the pressure of medical insurance policies, going overseas has become an inevitable choice for China's innovative pharmaceutical industry due to increasing aging population and limited domestic market space for innovative drugs [3][8] - The pressure on medical insurance balance is growing, with the elderly population reaching 217 million in 2023, accounting for 15.4% of the total population, leading to increased medical demand and expenditure [9][11] - The proportion of commercial insurance in medical expenses is only 6.5%, significantly lower than in countries like the US and Japan, making it difficult to support innovative drug payments in the short term [12][15] Group 2 - Despite financing pressures in the primary and secondary markets, the enthusiasm for domestic innovative drug research and development remains high, with a 11.2% year-on-year increase in clinical approvals for innovative drugs in 2024 [31][32] - In 2024, a record 39 domestic innovative drugs were approved for market launch, indicating a significant growth in the innovative drug pipeline [33][34] - The number of clinical trials for innovative drugs in China has surpassed that of the US, ranking first globally, with 1,903 trials registered in 2024 [45][49] Group 3 - The overseas market offers higher pricing and larger market space for innovative drugs, with the price of innovative drug Zebutini in China being only about 3% of its price in the US and Europe [23][25] - Japan's experience shows that innovation and going overseas are essential paths to break domestic pressures, as seen in the historical context of Japan's pharmaceutical industry [27][28] - The case of Takeda Pharmaceutical illustrates that innovation and international expansion are crucial for growth, with its revenue from the US market reaching 51.5% by 2024 [28][29] Group 4 - License out transactions are rapidly increasing, with 2024 seeing a total transaction amount exceeding $10 billion, accounting for 31.9% of heavy transactions globally [5][77] - The types of license out transactions are becoming more diverse, with emerging technologies like ADC and dual antibodies gaining traction [81][82] - The research and development stage of license out projects is shifting earlier, with 64% of products in the preclinical stage in 2024 [83][84] Group 5 - Foreign investments are gradually expanding from purchasing innovative drug products to acquiring domestic innovative pharmaceutical companies, as seen in recent acquisitions by AstraZeneca and Genmab [89][90] - The NewCo model is emerging as a new financing method, allowing domestic innovative pharmaceutical companies to split off parts of their product pipelines to attract investment [92][93]

Core Insights - The healthcare ETF, Taikang (159760), has shown a slight increase of 0.46%, tracking the National Public Health and Healthcare Index (980016), which rose by 0.48% [1] - A new pricing mechanism for newly launched drugs has been established by the National Healthcare Security Administration, allowing high-level innovative drugs a five-year price stability period, which is expected to reverse the trend of price drops upon market entry [1] - Innovative drugs like Zebutinib from BeiGene and the dual-antibody drug from Baillie Tianheng are anticipated to drive significant revenue growth in the coming years [1][2] Industry Developments - The index constituents are experiencing a technological breakthrough, with companies like Kangfang Bio and Eli Lilly making significant advancements in drug development [2] - The AI+mRNA platform developed by CloudTop has achieved full-chain coverage from antigen design to industrial production, indicating a shift in innovative drug development paradigms [3] - The index includes companies that are directly benefiting from healthcare payment reforms and supportive policies for innovative drugs, with over 80% of the constituents poised to gain from these changes [4] Financial Performance - As of June 30, 2025, the top ten weighted stocks in the National Public Health and Healthcare Index accounted for 51.67% of the index, with companies like WuXi AppTec and Hengrui Medicine leading the way [5] - Hengrui Medicine's R&D investment ratio reached 28% in the first half of 2025, with a 50% year-on-year increase in the number of new drug approvals, indicating strong growth potential [4] Market Outlook - The healthcare ETF is expected to continue leading in the structural market of the healthcare industry, driven by the expansion of commercial insurance innovative drug catalogs and accelerated approvals for AI medical devices [4] - The index reflects the performance of listed companies in the public health and healthcare sector, focusing on prevention, testing, and treatment areas with significant potential for AI technology applications [4]

Group 1 - The core viewpoint highlights the strong performance and growth of the Kexin Pharmaceutical ETF managed by Jiashi, with significant trading activity and inflows [2] - As of August 4, the Kexin Pharmaceutical ETF Jiashi has seen a weekly average trading volume of 58.54 million yuan, ranking first among comparable funds [2] - The fund's scale increased by 12.30 million yuan over the past two weeks, also leading among comparable funds [2] - The fund's net asset value has risen by 50.01% over the past year, placing it in the top 15.64% of index equity funds [2] Group 2 - The top ten weighted stocks in the Shanghai Stock Exchange Science and Technology Innovation Board Biopharmaceutical Index account for 49.14% of the index, with leading companies including United Imaging Healthcare and BeiGene [2][4] - The biopharmaceutical industry is expected to stabilize and grow throughout 2025, supported by favorable policies for innovative drug development and medical equipment updates [5] - The transition to the 2.0 era of innovative drugs in China is marked by a qualitative improvement, with domestic new drugs expected to participate deeply in the global market over the next decade [4]

Group 1 - The Shanghai Stock Exchange Sci-Tech Innovation Board 100 Index (000698) has shown a slight increase of 0.28% as of August 5, 2025, with notable gains from individual stocks such as Borui Pharmaceutical (688166) up by 6.56% and Huaheng Biological (688639) up by 5.88% [3][4] - The Sci-Tech 100 Index ETF (588030) has reported a 1.74% increase over the past week, with a current price of 1.11 yuan and a trading volume of 1.14 billion yuan [3][4] - The ETF has experienced a significant growth in scale, increasing by 13.55 million yuan over the past year, ranking first among comparable funds [4] Group 2 - The Shanghai Municipal Government has issued measures to support enterprises in enhancing basic research, particularly in critical fields such as integrated circuits, biomedicine, and artificial intelligence [4] - According to CITIC Securities, mainstream and niche storage prices are expected to rise in Q3 2025, with a focus on recommending leading storage chip design companies [4] - The latest financing buy-in amount for the Sci-Tech 100 Index ETF reached 11.4961 million yuan, with a financing balance of 177 million yuan [4] Group 3 - The Sci-Tech 100 Index ETF has achieved a net value increase of 22.98% over the past six months, ranking in the top 9.90% among equity funds [5] - The ETF has a management fee rate of 0.15% and a custody fee rate of 0.05%, which are among the lowest in comparable funds [5] - The ETF closely tracks the Sci-Tech Innovation Board 100 Index, which consists of 100 securities selected for their market capitalization and liquidity [6]

Group 1: Breakthroughs in Innovative Drugs - The innovative drug sector has achieved significant breakthroughs, with Guangshantang's hepatitis B new drug Phase I data endorsed by The Lancet, targeting low-viral-load patients unresponsive to existing therapies, indicating a broad commercialization prospect [1] - Hanyu Pharmaceutical is exploring drug revenue rights tokenization, pioneering a new financing model in the biopharmaceutical sector [1] Group 2: Future Trends in Innovative Drugs - Dongwu Securities highlights four key points regarding the future of innovative drugs: 1) The fundamentals of two major leaders have changed, with BeiGene's revenue and profit expected to turn around by 2025, and Heng Rui's innovative drug proportion expected to exceed 50% in 2024 [2] - 2) The logic behind the two innovative drug bull markets differs, with the 2021 and 2025 markets driven by domestic commercialization and strategic overseas expansion, respectively [2] - 3) China is the second-largest source of quality innovative drug pipelines globally, holding 22% of global FIC pipelines, with a potential market share of $275 billion if the global market reaches $1.1 trillion by 2024 [2] - 4) The market capitalization of the healthcare sector in A-shares, Hong Kong, and U.S. markets is lower than that of the U.S., indicating structural growth opportunities for domestic innovative drug companies [2] Group 3: Performance of Biopharmaceutical Index - The STAR Market Biopharmaceutical Index (000683) includes 50 large-cap companies from various sectors, reflecting the overall performance of representative biopharmaceutical companies in the STAR Market [3] - As of July 31, 2025, the top ten weighted stocks in the STAR Market Biopharmaceutical Index accounted for 49.14% of the index, indicating a concentration of market value among leading companies [3]

Core Viewpoint - Since July, the A-share market has rebounded, leading to a continuous increase in financing balance, reaching a record high in over 10 years by July 31 [1][3]. Financing Balance Overview - As of August 1, the A-share market financing balance was reported at 1,966.27 billion yuan, with a margin trading balance of 135.83 billion yuan. The financing balance increased by 128.13 billion yuan since July [1][3]. - In July, there were 24 trading days, with financing balance increases on 21 days, accounting for nearly 90%. Notably, on July 21, 22, 28, and 29, the financing balance increased by over 15 billion yuan each day [3]. Industry Performance - Among the 31 primary industries, 30 saw an increase in financing balance since July. The pharmaceutical and biological industry led with a net buying amount of 15.63 billion yuan, followed by electronics at 13.75 billion yuan and electric power equipment at 10.80 billion yuan [3][5]. - The only industry to experience net selling was the oil and petrochemical sector, with a net selling amount of 1.19 billion yuan [3]. Individual Stock Performance - The top ten stocks with the highest net buying amounts since July include: - Xinyi Technology: 3.18 billion yuan - Northern Rare Earth: 2.18 billion yuan - Shenghong Technology: 1.49 billion yuan - Feilihua: 1.46 billion yuan - Jianghuai Automobile: 1.41 billion yuan - WuXi AppTec: 1.37 billion yuan - CATL: 1.31 billion yuan - China Power Construction: 1.17 billion yuan - Kweichow Moutai: 1.08 billion yuan - Changjiang Electric Power: 1.07 billion yuan [7][8]. - The majority of these stocks have seen significant price increases, with Feilihua rising nearly 60% [7]. Net Selling Overview - Since July, 83 stocks experienced net selling exceeding 100 million yuan, with the top ten being: - CITIC Securities: -1.11 billion yuan - Sunshine Power: -767 million yuan - Wuliangye: -627 million yuan - Sifang Jingchuang: -569 million yuan - BOE Technology: -489 million yuan - BeiGene: -425 million yuan - Ningbo Bank: -395 million yuan - Muyuan Foods: -386 million yuan - GF Securities: -382 million yuan - Hengli Petrochemical: -367 million yuan [10][11]. Margin Trading Overview - As of August 1, the A-share market's margin trading balance was 135.83 billion yuan, with an increase of 1.28 billion yuan since July [13]. - The stocks with the highest margin trading balances included Kweichow Moutai, China Merchants Bank, and Ping An Insurance [13]. Conclusion - The A-share market has shown a robust increase in financing activities, particularly in the pharmaceutical and electronics sectors, indicating strong investor confidence and potential growth opportunities in these industries [1][3][5].

Summary of China Pharma and Biotech Sector Conference Call Industry Overview - The Chinese pharmaceutical and biotech sector is experiencing a significant rally, with the Hang Seng Biotech and MSCI China Healthcare indices showing year-to-date (YTD) returns of 57% and 38%, respectively, outperforming broader market indices which are at 16-20% [1][10][26] - Public financing has increased fourfold in the first half of 2025 compared to the same period in 2024, driving IPO activity on the Hong Kong Stock Exchange, particularly in biotech [1][40] - Despite the rally, valuations have sharply re-rated, with China's biotech price-to-sales multiples now aligning with global peers, suggesting limited further upside compared to the peaks of 2020-2021 [1][11] Key Growth Drivers - Oncology and metabolic diseases are identified as primary growth drivers, with significant market potential in PD-1-based bispecific antibodies and GLP-1 drug classes [3][4] - The global market for PD-1-based bispecific antibodies could reach US$70-80 billion, while the domestic GLP-1 market is projected to hit CNY87 billion by 2035 [3] - Chinese companies are competitive in clinical results, particularly in lung cancer treatments, and domestic GLP-1 drugs are matching international efficacy [3][4] Company Highlights - **Akeso**: Leading in PD-1/VEGF bispecific antibodies with multiple phase 3 trials; however, overall survival results remain uncertain [4] - **Innovent**: Offers a diversified portfolio across various disease areas and leads in advanced antibody modalities [4] - **Hansoh**: Transitioning to innovation-driven growth with strong sales in its 3rd-generation EGFR inhibitor and significant GLP-1 business development deals [4] R&D and Innovation - The sector is shifting from me-too drugs to best-in-class and first-in-class assets, focusing on novel targets and drug combinations [2][38] - Clinical trial activity is robust, with Chinese assets comprising over 50% of new global trials in 2025 [2][42] - The number of new clinical trials has shown stable growth, with a notable increase in innovative drug approvals [42][65] Policy Environment - Government policies have fluctuated but are currently favorable, balancing innovation stimulation with price control [2][43] - Recent supportive policies include initiatives to cover innovative drugs under commercial insurance, indicating a long-term positive outlook for the sector [43] Out-Licensing Trends - Out-licensing activity has surged in 2025, with total deal value reaching US$59 billion, surpassing the previous year's total [72] - The focus has shifted from PD-1 drugs to PD-1/VEGF and GLP-1 assets, with significant deal values and upfront payments [75][72] - Despite the increase in total deal value, upfront payments in China still lag behind developed markets, indicating a need for caution regarding the sustainability of this growth [73][81] Investment Implications - Companies such as Akeso, Hansoh, Innovent, and Hengrui are rated as Outperform, while BeiGene, CSPC, Sino Biopharm, and Zai Lab are rated as Market-Perform [7] - The current rally may require new catalysts beyond existing out-licensing deals to sustain momentum, as valuation headroom appears limited [5][22] Conclusion - The Chinese pharma and biotech sector is evolving into a mature, innovation-driven industry with growing global competitiveness, tempered by valuation caution and sector uncertainties [5][11]