Investment Rating - The investment rating for the healthcare industry is "Positive" and maintained [14] Core Insights - The funding levels for Chinese innovative pharmaceutical companies are increasing, leading to a gradual improvement in the research and development (R&D) investment sentiment within the industry. This is expected to usher in a new cycle of prosperity for the innovative drug industry chain [5][12] - The trend of external business development (BD) is likely to benefit the domestic early-stage research industry significantly, as new business models allow early-stage projects to become tradable and monetizable assets, enhancing R&D investment returns [13] Summary by Sections Innovative Chain Development Review - Before 2020, multiple factors converged to initiate a significant rise in China's innovative drug sector, leading to the rapid development of the innovative chain, including CXO and life sciences services [10][30] - From 2020 to the first half of 2022, the global public health crisis accelerated capital inflow into the biopharmaceutical sector, resulting in high demand and a leap in the innovative chain segment, which also triggered a wave of IPOs and substantial supply-side expansion [10][39] - The second half of 2022 to 2024 saw a transition from a heated to a cooling phase, with a significant shift in supply-demand dynamics leading to industry internal competition and pressure on revenues and profit margins [10][54][57] Improvement in R&D Investment Sentiment - Starting from 2025, the R&D investment sentiment in China's innovative drug sector is expected to improve, with companies experiencing increased funding levels. The total amount raised through IPOs and additional offerings in 2025 is projected to reach 201.5 billion yuan, a 145% year-on-year increase [11][62] - The potential milestone payments from external BD are expected to reach 880.5 billion yuan in 2025, marking a 185.9% year-on-year increase, indicating a robust funding environment for innovative drug companies [11] Benefits to Early-stage Research Industry - The new external BD business model enhances the R&D investment return rates for Chinese innovative drug companies, thereby increasing their willingness to invest in R&D [11][13] - The early-stage research industry, including drug discovery CROs and clinical trial services, is expected to benefit significantly from the external BD trend, with leading companies in these segments poised for rapid growth [13]

Group 1 - The global oncology conference in 2025 showcased a Chinese dual-antibody ADC drug, highlighting China's innovative drugs gaining global recognition [1] - In the first half of 2025, Chinese pharmaceutical companies signed over 70 external licensing agreements for research pipelines, totaling over $60 billion, setting historical records [1] - The record-breaking licensing deal of $6 billion for a PD-1/VEGF dual-antibody by 3SBio to Pfizer signifies a shift in China's innovative drug licensing landscape [1] Group 2 - The dual-antibody and dual-antibody ADC technologies are expected to be the next major focus in the pharmaceutical industry, potentially overcoming resistance issues and enhancing efficacy [3] - The global pharmaceutical market is facing a "patent cliff," with over $100 billion worth of blockbuster drugs losing patent protection in the next five years, creating a strategic need for new pipelines [2] - Morgan Stanley predicts that by 2040, annual sales of innovative drugs from China could reach $220 billion, with 35% of new drugs approved by the FDA originating from Chinese pipelines [2] Group 3 - Baiaosuatu's unique positioning as a "molecular source" through a comprehensive technology platform allows for a significant reduction in drug development timelines and costs [4] - The "Thousand Mice, Ten Thousand Antibodies" initiative enables pharmaceutical companies to select from a vast library of antibody candidates, streamlining the drug discovery process [4] - Baiaosuatu's business model focuses on molecular discovery with a clear emphasis on business development (BD), differentiating it from other innovative drug companies [5] Group 4 - In the first half of 2025, Baiaosuatu signed 80 new agreements, a nearly 60% year-on-year increase, establishing partnerships with around 280 collaborators, including major global players [6] - The high "repurchase rate" of Baiaosuatu's collaborations indicates strong demand and efficiency in project advancement, exemplified by multiple partnerships with Merck [6] - Baiaosuatu is transforming drug discovery from a high-risk process into a shared, high-probability system, enhancing the overall success rate of drug development [7] Group 5 - The dual-antibody and dual-antibody ADC wave is reshaping the landscape of Chinese innovative drugs, with Baiaosuatu positioned as a critical player in this transformation [8] - Baiaosuatu's systematic technology platform and forward-looking business model allow it to occupy a pivotal role in the value chain of the pharmaceutical industry [8] - The company is redefining the BD landscape in China's innovative drug sector, potentially becoming an indispensable infrastructure entity in global drug development [9]