Summary of Key Points from the Conference Call Companies Involved - **Innovent Biologics (1801 HK)** - **Akeso (9926 HK)** Core Insights and Arguments Innovent Biologics - Innovent is positioned as a significant player in the China biopharma sector, focusing on oncology and GLP-1 therapies [4][8] - The company has 16 drugs on the market and approximately 4,000 commercial staff, with expectations to achieve IFRS net-income break-even by 2025 [8] - Projected sales for 2027 could reach RMB 20 billion based on company guidance [8] - Key upcoming events include: - Approval of IBI112 (IL-23p19 inhibitor) for psoriasis in 2H25 [5] - Phase 3 data readout for IBI343 (CLDN18.2 ADC) in 2H25 [5] - Data readout for IBI362 (GLP-1/GCGR) in 2H25/1H26 [5] - IBI363 (PD-1/IL-2α-bias) has shown promising data, with peak sales forecasted at RMB 7 billion in China and RMB 10 billion ex-China [16][8] - The GLP-1 drug mazdutide (IBI362) is expected to capture approximately 11% of the China GLP-1 market, with potential peak sales of RMB 50 billion [8] - Risks include potential pricing cuts, pipeline development setbacks, and competition in the weight loss drug market [8] Akeso - Akeso is recognized as a leading bispecific antibody company in China, having launched the first bispecific drug, AK104 (PD-1/CTLA-4), in 2022 [33][36] - Forecasted peak sales for AK104 in China are around RMB 6 billion, with potential expansions into various cancer indications [36] - AK112 (PD-1/VEGF bispecific) has been out-licensed to Summit Therapeutics, with expected peak sales of over RMB 5 billion in China and over USD 2.5 billion in the US [36] - Upcoming key events for Akeso include: - Sales data for AK104 and AK112 in 1H25 [34] - Detailed data readout for AK112 in various trials in 2H25/1H26 [34] - Concerns exist regarding AK112's commercialization potential in the US due to previous trial results, but there is optimism for improved outcomes with longer follow-up [40] - AK104's efficacy in trials has not been fully appreciated by the market, and a global development plan announcement could enhance investor interest [41][44] Additional Important Content - Innovent's pipeline includes a diverse range of assets across oncology, cardiovascular, autoimmune, and ophthalmology, which supports its growth strategy [12] - Akeso's sales forecasts indicate a strong growth trajectory, with total product sales expected to reach RMB 16.1 billion by 2034 [45] - Both companies face risks related to pipeline development and market competition, which could impact their future performance [8][34]

Investment Rating - The investment rating for Innovent Biologics is "Buy" with a 12-month price target of HK$74.95, indicating a downside potential of 11.4% from the current price of HK$84.60 [9]. Core Insights - Innovent Biologics is focusing on a multi-channel strategy for the launch of mazdutide, targeting hospitals, offline healthcare providers, and online pharmacies to maximize market reach [5][6]. - The company aims to build a competitive barrier for mazdutide through its dual-target mechanism and plans for new indication expansions, including Type 2 Diabetes (T2D) approval expected in the second half of 2025 [6][8]. - Innovent is prioritizing the clinical development of IBI363, with plans to advance multiple indications into registrational trials and a preference for co-development with multinational corporations to enhance its global presence [8]. - The company's go-global strategy is viewed as a long-term process, with a commitment to invest in assets with global potential while maintaining profitability in the China market [8]. Summary by Sections Multi-Channel Coverage for Mazdutide - Innovent has initiated a multi-channel coverage strategy for mazdutide, with the first product batch shipped shortly after approval. The strategy includes targeting hospitals, offline healthcare providers, and online pharmacies [5]. - Management expressed confidence in market demand based on pre-launch feedback and sufficient supply preparation [5]. Competitive Landscape - The pricing strategy for mazdutide positions it at a premium compared to competitors, with a focus on dual-target differentiation and plans for expanding indications [6]. Maximizing Potential of IBI363 - IBI363 is a key focus for Innovent, with plans to advance three priority indications into registrational trials. The company emphasizes quick clinical progress and seeks co-development partnerships to maximize value [8]. Go-Global Strategy - Innovent's go-global strategy is a long-term approach, with plans to invest in assets with global potential while ensuring profitability in the domestic market [8].

Investment Rating - The report assigns an "Overweight" (OW) rating to Innovent, Akeso, and Kelun Biotech, indicating an expectation that these stocks will outperform the average total return of their coverage universe [4][7]. Core Insights - Innovent has shown strong investor interest, with a recent stock increase of approximately 3% following a share sale by Lilly Asia Ventures. The company achieved its first-ever non-IFRS positive profit and EBITDA in 2024, and this trend is expected to continue into 2025 and beyond. Innovent is anticipated to secure an outlicensing deal for IBI363, which holds significant value in the immuno-oncology therapy space [4]. - Akeso's share price rose by 10% on June 10, attributed to comments from its U.S. partner, Summit, regarding avoiding a cash raise and manufacturing Ivonescimab in-house. Summit plans to recruit participants for global trials from multiple regions, including China, the U.S., and the EU. The BLA filing strategy for HARMONi is still under discussion [4]. - Kelun Biotech completed an equity raise and does not require additional cash due to solid reserves. Promising ASCO data for Sac-TMT in treating triple-negative breast cancer and non-squamous non-small cell lung cancer indicates a higher probability of success in Phase 3 trials. The domestic Phase 3 trial is enrolling patients rapidly, with potential for an interim analysis this year [4][5]. Summary by Company Innovent - Innovent's stock increased by ~3% after a secondary share placement by Lilly Asia Ventures, which still holds a ~2% stake. The company achieved its first non-IFRS positive profit and EBITDA in 2024, with expectations for continued growth in 2025. Anticipated catalysts include an outlicensing deal for IBI363 [4][5]. Akeso - Akeso's share price increased by 10% following positive comments from Summit, its U.S. partner. Summit is working on in-house manufacturing of Ivonescimab and plans to recruit trial participants from various regions. The BLA filing strategy for HARMONi is still being evaluated [4][5]. Kelun Biotech - Kelun Biotech completed an equity raise and has solid cash reserves. Promising data for Sac-TMT in treating specific cancers suggests a high probability of success in upcoming trials. The company is rapidly enrolling patients for a domestic Phase 3 trial, with potential for an interim analysis this year [4][5].

Investment Rating - The report maintains an "Overweight" (OW) rating for the healthcare sector, particularly favoring innovative drug-related companies such as Akeso and Innovent Biologics [17][20]. Core Insights - The Hang Seng Healthcare Index (HSHCI) has shown resilience, recovering 32% from its lows after the announcement of tariffs, outperforming the Hang Seng Index (HSI) which only recovered 19% [3]. - The report highlights the increasing confidence of investors in China's innovative drug R&D capabilities, supported by significant out-licensing deals to developed countries [3][4]. - The HSHCI is expected to potentially reach or exceed its 2023 and 2022 highs in the coming years, driven by strong sales growth and ongoing out-licensing deals [4][8]. Summary by Sections Historical Context - Recent news, including a ruling against President Trump's tariff authority, positively impacted the HSHCI, which rose by 4.2% on May 29, 2025 [2]. - The HSHCI has surpassed its highest point in 2024 but remains below its 2023 peak of approximately 4,400 and 2022 peak of around 4,600 [2]. Market Performance - The HSHCI's performance has been bolstered by key deals, such as the 3Sbio-Pfizer agreement worth US$1.25 billion, and clinical data presentations from China at ASCO'25 [3]. - The report notes that the number and value of out-licensing deals have reached record levels in 2023 and 2024, continuing into 2025 [4]. Future Outlook - The report anticipates that the current momentum in the China healthcare sector will drive the HSHCI higher, with expectations of reaching its highest point from 2023 [8]. - Concerns about potential corrections post-ASCO are downplayed, as there is strong interest from overseas investors in China's innovative drug companies [9].

Investment Rating - The report maintains an "Overweight" (OW) rating for several companies including Genscript Biotech, Innovent Biologics, Kingdee International, and Zhongsheng Group Holdings [32][46][50][53]. Core Insights - The A-share SMid indices, particularly the micro-cap CSI2000, have outperformed the CSI300 year-to-date (YTD), with CSI2000 rising by 12.9% compared to CSI300's 0.2% [2][3]. - High-beta micro-caps have benefited from robust trading volumes and less national team ownership, leading to increased retail trading interest [3][4]. - The outlook for 2Q25 suggests a range-bound trading environment for MXCN, with potential upside driven by trade negotiations and possible reforms in China [4][8]. Summary by Sections Market Performance - The micro-cap CSI2000 has outperformed other indices, with H shares rising by 15% to 18% in USD terms compared to the flat performance of onshore indices [2][3]. - The consensus EPS for SMids has faced significant downgrades, with declines of 13% and 17% for CSI500 and CSI1000 respectively [8][16]. Sector Analysis - Defensive sectors such as Healthcare, Utilities, and Consumer Staples have performed well, while Real Estate and IT lagged behind [8][25]. - Healthcare and IT remain preferred themes, with expectations for biotech shares to benefit from improved policy outlooks and AI adoption in IT [8][25]. Company-Specific Insights - Kingdee International has seen a 51% increase in shares YTD, supported by AI adoption [10]. - Innovent's shares have surged by 98% YTD, driven by strong product sales and potential for significant revenue growth from new drugs [10]. - Genscript is expected to achieve a 45% CAGR from 2024 to 2026, with profitability anticipated in 2026 [10].

Investment Rating - The report assigns a "Buy" rating to Innovent Biologics with a revised 12-month price target of HK$74.95, reflecting an upside potential of 15.2% from the current price of HK$65.05 [15][9]. Core Insights - Innovent Biologics has shown encouraging survival benefits for its drug IBI363 in various cancer indications, particularly in IO-treated squamous and adeno NSCLC, with improved overall response rate (ORR) and progression-free survival (PFS) data compared to previous reports [1][2][12]. - The risk-adjusted sales forecast for IBI363 has been raised to US$3.2 billion by 2035, up from US$1.4 billion, due to the addition of 2L adeno NSCLC and an increase in the probability of success (POS) for other indications [1][9]. - The report highlights the importance of randomized controlled trials (RCT) to further validate the long-term benefits of IBI363, especially in the context of its mechanism of action that enhances the immune environment [7][12]. Summary by Sections Clinical Data - The updated phase 1 data for IBI363 indicates a median PFS of 9.3 months for the high-dose cohort, an increase from 7.3 months previously reported, and a median overall survival (mOS) of 15.3 months, suggesting a strong conversion from PFS to OS [2][7]. - In adeno NSCLC, the median PFS was shorter at 5.6 months, but the overall survival data remains competitive, indicating potential lasting benefits post-disease progression [3][7]. Market Position and Valuation - Innovent Biologics is positioned as a leading biopharma company in China with a robust pipeline of over 30 assets, including the leading PD-1 inhibitor sintilimab [12]. - The report emphasizes that Innovent is undervalued at current levels, with a high market-implied weighted average cost of capital (WACC) that does not fully reflect its strong revenue potential and pipeline [12]. Future Outlook - The ongoing phase 1b/2 trial for IBI363 in combination with chemotherapy in the first-line setting is expected to generate further discussions regarding its competitive safety profile and efficacy [8][12]. - The report anticipates that the company will maintain its leading position in the biotech sector in China, supported by strong commercialization capabilities and collaborations with global partners [12].

Investment Rating - The report does not explicitly provide an investment rating for the China drug industry but discusses potential impacts of US drug pricing changes on the sector [5]. Core Insights - The report highlights significant uncertainty regarding the Trump administration's plans for US drug pricing, which could affect the Chinese drug industry in various ways [5]. - Changes in US drug pricing could hinder the Chinese drug industry's international expansion due to a perceived smaller US market, but may also create opportunities for Chinese innovative drugs to be licensed out due to R&D cost advantages [5]. - The report notes that Chinese CRO/CDMO companies may face mixed impacts; reduced R&D expenses from US clients could negatively affect them, while increased outsourcing demand could arise as companies seek cost-saving measures [5]. Summary by Sections Impact of US Drug Pricing Changes - The report discusses the uncertainty surrounding the implementation of a "most favored nation" pricing model and its potential opposition in the US [5]. - It emphasizes that the actual impact on the Chinese drug industry remains unclear due to various factors, including whether Medicare or Medicaid pricing will be affected [5]. Opportunities and Challenges for Chinese Companies - If US drug prices decrease, it could limit the Chinese drug industry's ability to expand internationally [5]. - Conversely, innovative drugs from China may have better licensing opportunities due to their potential R&D cost and speed advantages [5]. - For Chinese CRO/CDMO companies, the report suggests that while some clients may cut R&D expenses, the overall demand for outsourcing could increase [5].

Investment Rating - The report raises the Southbound flow forecast from US$75 billion to US$110 billion for 2025, indicating a positive outlook for Southbound investments [7][35][41]. Core Insights - Emerging markets in Asia, excluding China, experienced strong foreign institutional investor (FII) inflows of US$2.8 billion week-over-week, primarily driven by Taiwan [6][44]. - In April, Korea led the regional foreign selling, while domestic institutional flows in India remained robust [7][8]. - Global equity mutual funds saw inflows of US$8 billion week-over-week, with significant outflows from US funds [6][10]. Summary by Sections Foreign Institutional Investor (FII) Flows - EM Asia ex-China markets saw FII buying of US$2.8 billion week-over-week, led by Taiwan (+US$1.7 billion) [6][44]. - Southbound flows recorded US$0.2 billion this week, totaling US$78 billion year-to-date [6][35]. - In April, Korea experienced significant FII selling, while India saw strong domestic institutional inflows [7][8]. Mutual Fund Performance - The largest 350 EM and Asian mutual funds rebounded, posting average returns of 1-4% year-to-date, with EM funds outperforming Asia funds by 3 percentage points [7][8]. - Only 20-40% of the largest Asian/EM funds outperformed their benchmarks in April, below the 10-year average of 55-65% [11][12]. Southbound Flows - Southbound flows have made the strongest start of a year in history, with US$78 billion year-to-date [7][35]. - The report highlights a significant increase in Southbound ownership in the Hong Kong market, indicating growing interest from mainland investors [37][41]. - The top buying stocks in Southbound flows included Meituan Dianping and Akeso, while Tencent and Alibaba saw significant selling [67][71].

Investment Rating - The report maintains a "BUY" rating for Innovent Biologics, indicating a potential return of over 15% over the next 12 months [16]. Core Insights - Innovent Biologics is entering a phase of sustainable profitability, having achieved a full-year non-IFRS net profit of RMB332 million in FY24, driven by strong product revenue growth and one-off license fee income [8]. - The target price has been revised upwards from HK$57.67 to HK$61.71, reflecting a 33.6% upside potential from the current price of HK$46.20 [3][8]. - The company is advancing its next-generation immuno-oncology (IO) therapies and antibody-drug conjugates (ADCs), with significant clinical programs underway [8]. Financial Summary - Revenue is projected to grow from RMB6,206 million in FY23 to RMB11,356 million in FY25, representing a year-on-year growth of 51.8% [2][13]. - Net profit is expected to turn positive in FY25, reaching RMB445.7 million, with EPS projected at RMB0.27 [2][11]. - R&D expenses are forecasted to remain stable, while gross profit margin is expected to expand to 84.9% in FY24 from 82.8% in FY23 [2][8]. Share Performance - The market capitalization of Innovent Biologics is approximately HK$75.68 billion, with a 52-week high of HK$51.15 and a low of HK$30.00 [3][4]. - The stock has shown strong performance, with a 1-month absolute return of 14.2% and a 3-month return of 29.8% [5]. Pipeline and Growth Potential - Innovent has a robust pipeline with over 10 ADC clinical programs and is focusing on combination trials with its next-generation IO therapy, IBI363 [8]. - The company aims to initiate multiple Phase 3 trials by 2030, targeting global markets with its innovative therapies [8].

Core Insights - Innovent achieved historic milestones in 2024, with Non-IFRS net profit of RMB 331.6 million and Non-IFRS EBITDA of RMB 411.6 million, marking the first positive results in these metrics [5] - Total revenue reached RMB 9,421.9 million, a year-over-year growth of 51.8%, with product sales revenue growing by 43.6% to RMB 8,227.9 million [5] - The company aims for RMB 20 billion in product revenue by 2027 and plans to advance five pipeline assets to global MRCT Phase 3 by 2030 [2][9] Financial Performance - Non-IFRS profit and EBITDA turned positive for the first time, indicating improved financial health [5] - Gross profit margin increased to 84.9%, up by 2.1 percentage points year-over-year [5] - Selling, General and Administrative (S,G&A) expenses ratio decreased to 50.9%, down by 7.1 percentage points year-over-year [5] Product Development and Pipeline - Innovent expanded its product portfolio to 15 approved products and plans six new product launches in 2025 [5][9] - Key pipeline assets include Dovbleron®, Limertinib, and Jaypirca®, targeting oncology and chronic diseases [5] - The company is advancing multiple next-generation programs in oncology and autoimmune diseases, with promising Phase 1 results reported [9] Strategic Goals and Partnerships - Innovent is focused on becoming a premier global biopharmaceutical company, emphasizing sustainable growth and innovation [2][9] - The company has established partnerships with over 30 global healthcare companies, enhancing its research and development capabilities [10] - Innovent's commitment to ESG practices is reflected in its 'AAA' rating in MSCI ESG rankings and various community support initiatives [9][10]