ZHONGTAI SECURITIES·2025-09-01 10:48Investment Rating - The report maintains an "Overweight" rating for the pharmaceutical and biotechnology sector [5] Core Views - The pharmaceutical sector is expected to continue its recovery, with a focus on innovative drugs as the main investment theme. The report highlights a gradual improvement in the industry, with Q2 showing a significant reduction in the decline of revenue and profits compared to Q1 [7][21][19] - The report emphasizes the potential for a turnaround in the industry, driven by policy improvements, demand recovery, and the performance of the CRO/CDMO segments [10][16] Summary by Sections Market Performance - In August 2025, the pharmaceutical and biotechnology sector rose by 2.6%, underperforming the Shanghai and Shenzhen 300 index, which increased by 10.3%. The sector ranked 24th among 31 sub-industries [7][15] - The report notes a mixed performance among sub-sectors, with medical devices and services showing gains, while the pharmaceutical commercial sector declined [15] Financial Performance - In the first half of 2025, the cumulative revenue of pharmaceutical companies decreased by 2.6%, with total profits down by 4.0%. However, Q2 showed a narrowing of declines, with revenue down by only 1.1% and total profits down by 2.9% [21][19] - The report indicates that the CRO/CDMO segments performed well, with significant revenue and profit growth, particularly in Q2 [21][19] Investment Opportunities - The report suggests focusing on innovative drugs, which are seen as having strong growth potential and clear industry trends. It recommends several companies across different categories, including biotech firms transitioning to biopharma and large pharmaceutical companies involved in innovative drug development [9][10][11] - The report also highlights the potential for recovery in the CRO/CDMO segments and suggests that companies in these areas are likely to benefit from improving demand and order recovery [10][16] Key Recommendations - The report lists key companies to watch, including WuXi AppTec, WuXi Biologics, and others, indicating a positive outlook for these firms based on their performance and market position [17][18]