Investment Rating - The report maintains a "Positive" investment rating for the pharmaceutical and biotechnology industry [1] Core Insights - The pharmaceutical industry is experiencing significant differentiation, with innovative drugs, raw materials, and CXO/research upstream sectors performing well, while overall domestic demand remains under pressure [2][3] - In 2024, 453 pharmaceutical companies achieved revenue of CNY 2.46 trillion, a year-on-year decline of 0.55%, and a net profit of CNY 148.65 billion, down 8.8% [2][3] - For the first three quarters of 2025, revenue reached CNY 1.80 trillion, a decrease of 2.9%, with net profit at CNY 143.7 billion, down 1.2% [2][3] Summary by Sections Overall Industry Performance - The pharmaceutical sector's performance is notably varied, with innovative drugs showing a positive trend, while traditional sectors face challenges [2][3] - The medical device sector showed a revenue of CNY 161.1 billion in Q3 2025, a year-on-year increase of 1.93%, although net profit decreased by 4.79% [3] Innovative Drugs - In Q1-Q3 2025, innovative drug companies reported revenue of CNY 16.144 billion, a growth of 4.24% year-on-year, indicating a shift towards profitability as core products enter a commercialization phase [2][3] Chemical Drugs - Chemical drug companies generated revenue of CNY 292.91 billion in Q1-Q3 2025, down 3.33%, with net profit declining by 1.67% [2][3] Medical Devices - The medical device sector's revenue in Q1-Q3 2025 was CNY 161.1 billion, a decline of 2.99%, with a net profit of CNY 250.36 billion, down 14.52% [3] Biological Products - Blood products revenue in 2024 was CNY 24.18 billion, down 1.4%, while net profit increased by 14.47% [3] Traditional Chinese Medicine - Traditional Chinese medicine companies reported revenue of CNY 252.84 billion in Q1-Q3 2025, a decrease of 3.46%, with net profit down 0.60% [3] Raw Materials - Raw materials achieved revenue of CNY 88.56 billion in Q1-Q3 2025, a decline of 4.64%, but net profit increased by 3.77% [3] Pharmaceutical Commerce - Pharmaceutical commerce companies reported revenue of CNY 777.67 billion in Q1-Q3 2025, a slight increase of 0.5%, with net profit rising by 4.7% [3] CXO & Research Services - The CXO and research service sector achieved revenue of CNY 78.58 billion in Q1-Q3 2025, a year-on-year increase of 12.6%, with net profit growing by 58.07% [3]

Core Viewpoint - 康龙化成 is experiencing a slight increase in stock price and has a significant market capitalization, benefiting from various industry trends including digital transformation and AI integration in clinical services [1][2]. Company Overview - 康龙化成 (Beijing) New Drug Technology Co., Ltd. specializes in integrated drug research, development, and production services, covering the entire process from drug discovery to development [2][7]. - The company's main revenue sources include laboratory services (60.43%), CMC (small molecule CDMO) services (21.58%), clinical research services (14.58%), and other services [7]. Financial Performance - For the period from January to September 2025, 康龙化成 achieved a revenue of 10.086 billion yuan, representing a year-on-year growth of 14.38%, while the net profit attributable to shareholders decreased by 19.76% to 1.141 billion yuan [8]. - The company has distributed a total of 1.794 billion yuan in dividends since its A-share listing, with 1.007 billion yuan distributed over the past three years [9]. Market Position and Trends - 康龙化成 is positioned as a leader in the CRO (Contract Research Organization) sector, particularly in small molecule drug research services, and ranks second in drug discovery in China [2][3]. - The company is benefiting from the depreciation of the RMB, with overseas revenue accounting for 84.95% of total revenue [3]. Digital Transformation and AI Integration - 康龙化成 has made significant progress in digital and intelligent construction within its clinical services, establishing a "Digital Innovation Technology Department" to enhance efficiency through automation and machine learning [3]. - The acquisition of Shanghai Jiying is expected to further promote the company's digital transformation in clinical services, although it may face integration and management challenges [2][3].

Group 1 - Norges Bank increased its stake in 康龙化成 (03759.HK) by purchasing 518,200 shares at an average price of HKD 25.7617 per share, amounting to approximately HKD 13.35 million [1] - Following the acquisition, Norges Bank's total shareholding rose to 14,730,424 shares, increasing its ownership percentage from 4.83% to 5.01% [1]

股份發行人及根據《上市規則》第十九B章上市的香港預託證券發行人的證券變動月報表 截至月份: 2025年10月31日 狀態: 新提交 致：香港交易及結算所有限公司 公司名稱: 康龍化成（北京）新藥技術股份有限公司 (於中華人民共和國註冊成立的股份有限公司） 呈交日期: 2025年11月5日 I. 法定/註冊股本變動 | 1. 股份分類 | 普通股 | 股份類別 | H | | 於香港聯交所上市 (註1) | | 是 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 證券代號 (如上市) | 03759 | 說明 | H股 | | | | | | | | | 法定/註冊股份數目 | | | 面值 | | 法定/註冊股本 | | | 上月底結存 | | | 301,537,125 | RMB | | 1 RMB | | 301,537,125 | | 增加 / 減少 (-) | | | 0 | | | RMB | | 0 | | 本月底結存 | | | 301,537,125 | RMB | | 1 RMB | | 301,537,125 | ...

Core Insights - Norges Bank increased its stake in Kanglong Chemical (300759) by 518,200 shares at a price of HKD 25.7617 per share, totaling approximately HKD 13.3497 million [1] - Following this transaction, Norges Bank's total shareholding in Kanglong Chemical is approximately 14.7304 million shares, representing a holding percentage of 5.01% [1]

Core Viewpoint - Norges Bank increased its stake in Kanglong Chemical (03759) by purchasing 518,200 shares at a price of HKD 25.7617 per share, totaling approximately HKD 13.3497 million, bringing its total holdings to about 14.7304 million shares, which represents a 5.01% ownership stake [1] Summary by Category - **Share Purchase Details** - Norges Bank acquired 518,200 shares of Kanglong Chemical at HKD 25.7617 per share [1] - The total investment amounted to approximately HKD 13.3497 million [1] - **Post-Investment Holdings** - Following the purchase, Norges Bank's total shareholding in Kanglong Chemical reached approximately 14.7304 million shares [1] - The updated ownership percentage stands at 5.01% [1]

股份發行人及根據《上市規則》第十九B章上市的香港預託證券發行人的證券變動月報表 截至月份: 2025年10月31日 狀態: 新提交 致：香港交易及結算所有限公司 公司名稱: 康龍化成（北京）新藥技術股份有限公司 (於中華人民共和國註冊成立的股份有限公司） 呈交日期: 2025年11月5日 I. 法定/註冊股本變動 | 1. 股份分類 | 普通股 | 股份類別 | H | | 於香港聯交所上市 (註1) | | 是 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 證券代號 (如上市) | 03759 | 說明 | H股 | | | | | | | | | 法定/註冊股份數目 | | | 面值 | | 法定/註冊股本 | | | 上月底結存 | | | 301,537,125 | RMB | | 1 RMB | | 301,537,125 | | 增加 / 減少 (-) | | | 0 | | | RMB | | 0 | | 本月底結存 | | | 301,537,125 | RMB | | 1 RMB | | 301,537,125 | ...

Summary of CRO Industry Conference Call Industry Overview - The CRO (Contract Research Organization) industry is experiencing significant growth, with a 7% increase in revenue and over 40% increase in net profit for 25 CRO companies in the first three quarters of 2025, indicating a recovery in demand and accelerated growth in the industry [1][2][3] - The global and domestic CRO markets saw a remarkable recovery in September, with domestic growth reaching 300%, close to historical highs, reflecting strong market demand [1][5] Key Financial Metrics - In the first three quarters of 2025, the overall revenue growth for the CRO industry was nearly 11%, while profit growth approached 53%, with a 34% increase in non-GAAP profit, driven primarily by order demand [2][8] - The total BD (Business Development) transaction amount globally reached approximately $100 billion, with domestic transactions matching international levels and growing rapidly, indicating increased R&D investment that will benefit CRO order conversion [1][6] Company Performances - WuXi AppTec reported an order backlog of nearly $60 billion, with growth rates accelerating from 37% in the first half to 41% in the third quarter, and raised its full-year revenue guidance to 17-18% [1][10] - Kanglong Chemical achieved a 14% revenue growth and nearly 11% non-GAAP profit growth in the first three quarters, with laboratory services and CMC (Chemistry, Manufacturing, and Controls) segments growing by 15% and 16% respectively [1][10] Investment and Capacity Expansion - The CRO industry is entering an accelerated phase of fixed asset investment, with companies like WuXi AppTec and Kelaiying increasing capital expenditures to enhance future order acquisition and conversion efficiency [1][7] - WuXi AppTec's capital expenditure is expected to increase to $5.5-6 billion for the year, a growth of 30%-50% compared to last year [7] Market Dynamics and Future Outlook - The CRO industry is expected to continue its recovery, with a positive outlook for the next 12-18 months, driven by increased order inquiries and a gradual recovery from previous price wars [9][11] - The overall performance of the CRO industry is anticipated to improve further in 2026, supported by the digestion of historical projects and an increase in demand [9][11] Additional Insights - The CRO industry is benefiting from structural changes in the market, including institutional support, clinical trial approvals, and the growing global influence of China's innovative drug industry [3][11] - Companies are also focusing on enhancing employee retention and productivity, with some firms announcing salary increases to attract talent [7] This summary encapsulates the key points from the CRO industry conference call, highlighting the robust growth, financial performance, and future prospects of the sector.

Investment Rating - The report maintains a positive outlook on the pharmaceutical sector, particularly recommending a focus on innovative drugs and sectors with improving performance such as medical devices and CXO [1][10]. Core Insights - The pharmaceutical sector in Q3 2025 showed signs of recovery with a year-on-year revenue growth of 0.6% in Q3, marking the first positive growth in four quarters [1][10]. - Innovative drugs demonstrated a remarkable revenue growth of 36% in Q3 2025, with a turnaround in net profit from a loss of 500 million to a profit of 1.5 billion [10]. - The CXO sector also showed strong performance with a revenue growth of 10.9% and a net profit increase of 47.7% year-on-year, indicating a trend reversal [10]. Summary by Sections Q3 2025 Performance - The A-share pharmaceutical sector, excluding certain companies, achieved total revenue of 1,806.4 billion with a year-on-year decline of 1.9% and a net profit of 139.2 billion, down 5.1% year-on-year [2][11]. - In Q3 2025, total revenue reached 600.4 billion, reflecting a year-on-year increase of 0.6% but a quarter-on-quarter decrease of 0.4% [2][11]. Profitability and Margins - The gross profit for the pharmaceutical sector in Q3 2025 was 189.1 billion, with a gross margin of 31.5%, slightly down from the previous year [5][8]. - The overall net profit margin for Q3 2025 was 6.8%, showing a slight decline compared to the previous year [8]. Cash Flow - The sector reported a net cash inflow from operating activities of 59.1 billion in Q3 2025, representing a year-on-year growth of 17.9% [7][13]. Subsector Performance - The innovative drug sector's revenue growth of 36% and the CXO sector's revenue growth of 10.9% highlight the strong recovery and growth potential within these subsectors [10][11]. - The report emphasizes the importance of focusing on companies such as 恒瑞医药, 长春高新, and 药明康德, which are expected to perform well in the current market environment [1][10].

Core Insights - The CXO (Contract Research Organization) sector in A-shares has shown strong growth, with 20 out of 29 listed companies reporting year-on-year revenue increases in the first three quarters [1] - The third quarter alone saw 21 companies achieving revenue growth compared to the same period last year, driven by international demand for innovative drugs [1] - The sector is benefiting from both policy support and a surge in demand, which is enhancing new drug development needs and positively impacting the CXO industry [1] Policy Support - The National Healthcare Security Administration and the National Health Commission issued measures on July 1 to support the high-quality development of innovative drugs, outlining 16 policies to enhance the entire chain of support for innovative drug development [1] Demand Growth - Several CXO companies reported robust order backlogs for the first three quarters. For instance, WuXi AppTec reported a backlog of 59.88 billion yuan, a 41.2% increase year-on-year [1] - Kanglong Chemical indicated a more than 13% year-on-year growth in new orders, with acceleration in growth compared to the first half of the year [1] - Yino Science reported a nearly 20% increase in order amounts compared to the end of 2024 [2] - Haoyuan Pharmaceutical noted a 50% year-on-year increase in its small molecule business orders, marking four consecutive quarters of growth [2] Internationalization and Market Trends - The first half of the year saw a significant increase in the internationalization of Chinese innovative drugs, with total external authorization transactions reaching 60 billion USD, accounting for 99% of global related transactions [2] - Morgan Stanley's healthcare research head for Greater China anticipates stable long-term growth in external authorization transactions, with multinational companies likely to be more active in acquiring Chinese innovative drug assets [2] - The CXO industry is transitioning from a "scale dividend" to a "technology premium," with technological iteration and process innovation becoming the core of industry competition [2]