WuXi XDC Cayman (SEHK:02268) H2 2025 Earnings call March 24, 2026 08:30 AM ET Company ParticipantsChris Fang - Head of Investor RelationsJimmy Li - CEOMichael Xi - CFOConference Call ParticipantsNone - AnalystNone - AnalystNone - AnalystNone - AnalystChris FangGood evening everyone, investors and analysts, and welcome to WuXi XDC 2025 Full-Year Earnings Conference Call. This is Chris Fang, Head of company IR, and I will be the facilitator for today's call. Our earnings presentation material has been uploade ...

Core Viewpoint - The report emphasizes the importance of capturing structural opportunities in the pharmaceutical sector, particularly focusing on medical/healthcare AI and stocks with positive fundamental changes [1] Market Performance - The Shanghai and Shenzhen 300 index rose by 0.36%, while the pharmaceutical and biological sector declined by 0.81%, ranking 21st among 31 primary sub-industries this week [1] - The medical services sector increased by 0.22%, while the chemical pharmaceuticals, biological products, medical devices, traditional Chinese medicine, and pharmaceutical commerce sectors fell by 0.54%, 0.89%, 1.07%, 1.75%, and 2.68% respectively [1] Investment Opportunities - The pharmaceutical market is showing clear segmentation, with AI healthcare, small nucleic acid-related stocks that have recently corrected, and stocks with marginal fundamental changes and lighter institutional holdings performing well [1] - The pharmaceutical sector, combining technology and consumer attributes, is expected to continue exhibiting structural trends amid market rotations [1] - The innovative drug sector has experienced a significant rise followed by a correction over the past year, with valuations generally considered reasonable compared to early 2025 levels [1] Recommended Focus Areas - It is advised to pay attention to specific sub-sectors such as small nucleic acids, in vivo CAR, ADC, second-generation IO, and PROTAC, as well as companies with marginal fundamental changes that are likely to realize sustained performance [1] - The medical/healthcare AI+ sector is highlighted as a recently popular direction, suggesting a focus on leading companies in this field, as well as those with non-pharmaceutical/healthcare AI+ core businesses that are actively embracing related technologies and expected to realize valuation flexibility in the short to medium term [1] - In the consumer aspect, with 2025 performance forecasts largely reflected in current stock prices, attention is recommended on traditional Chinese medicine and medical beauty sectors that are actively expanding their product offerings, as well as the medical services sector that has undergone long-term adjustments [1]

Core Viewpoint - Haitong International reports that the main business revenue and profit of CSPC Pharmaceutical Group (01093) have bottomed out, with expectations to return to an upward cycle by 2026 and benefit from the launch of innovative oncology and metabolic products starting in 2027 [1] Group 1: Revenue and Profit Outlook - The potential milestone revenue for CSPC Pharmaceutical Group is estimated at $5.8 billion (approximately RMB 40.6 billion), which is expected to gradually enhance the company's profits over the next 3-5 years [1] - The firm believes that upfront payments and milestone revenues will provide sustainable recurring income for the company, leading to an upward revision of the revenue forecast for authorized products post-2027 [1] Group 2: R&D and Collaboration - CSPC Pharmaceutical Group has achieved seven external collaboration deals in the past two years, with total upfront payments of $1.71 billion and potential milestone revenues exceeding $30 billion [2] - The company has partnered with AstraZeneca three times, highlighting its R&D platform's global influence and value [2] - The firm is optimistic about CSPC's ability to generate regular income through milestone sales and net revenue sharing throughout the drug lifecycle [2] Group 3: Pipeline and Technology - CSPC's small nucleic acid platform has a broad layout, targeting popular liver delivery points such as PCSK9, AGT, and ANGPTL3, and is ahead of domestic peers in development [3] - The company has applied for patents related to lipid delivery and specific siRNA treatments, indicating potential advancements in neurological and ocular delivery technologies [3] - The SYS6010 (EGFR-ADC) has accumulated clinical data from over a thousand patients, showing potential for best-in-class efficacy and safety [4] Group 4: Clinical Developments - The company has initiated a Phase III clinical trial for SYS6010 in China for first-line treatment of non-small cell lung cancer (NSCLC) and plans to advance global Phase III trials [4] - CSPC's in vivo CAR-T product, SYS6055, has received clinical approval in China, representing the first in vivo CAR-T product approved domestically, with potential advantages in cost and accessibility [4] Group 5: Financial Projections - The firm has adjusted revenue forecasts for FY25, FY26, and FY27 to RMB 26.7 billion, 28.9 billion, and 30.6 billion respectively, reflecting changes in the recognition of upfront payments [5] - The net profit forecasts for FY25, FY26, and FY27 have been revised to RMB 4.4 billion, 4.6 billion, and 5.3 billion respectively [6]

Core Viewpoint - Haitong International reports that the main business revenue and profit of CSPC Pharmaceutical Group (01093) have bottomed out, with expectations of returning to an upward cycle by 2026 and benefiting from the launch of oncology and metabolic innovative products starting in 2027 [1] Group 1: Financial Projections - The potential milestone revenue for CSPC Pharmaceutical Group is estimated at $5.8 billion (approximately RMB 40.6 billion), which is expected to enhance the company's profits over the next 3-5 years [1] - Haitong International has adjusted the revenue forecasts for FY25, FY26, and FY27 to RMB 26.7 billion, RMB 28.9 billion, and RMB 30.6 billion respectively [5] - The net profit forecasts for FY25, FY26, and FY27 have been adjusted to RMB 4.4 billion, RMB 4.6 billion, and RMB 5.3 billion respectively [6] Group 2: Research and Development Capabilities - CSPC Pharmaceutical Group has completed seven external cooperation transactions in the past two years, with total upfront payments of $1.71 billion and potential milestone amounts exceeding $30 billion [1] - The company has established a strong research and development platform, evidenced by collaborations with AstraZeneca, indicating its global influence and value [1] - The company is recognized for its small nucleic acid platform, which covers popular liver delivery targets and is ahead of domestic peers in development [2] Group 3: Product Pipeline and Market Potential - The SYS6010 (EGFR-ADC) has accumulated clinical data from over a thousand patients, showing potential as a best-in-class product [3] - The company has initiated a Phase III clinical trial for SYS6010 in China and plans to advance global Phase III trials within the year [3] - CSPC has received the first clinical approval in China for its in vivo CAR-T product, SYS6055, which is expected to have advantages in cost, accessibility, and immediacy compared to traditional CAR-T products [4]

Core Insights - The Chinese biopharmaceutical industry is accelerating its development, transitioning from a "rapid expansion" phase (1.0 era) to a focus on "value and global competitiveness" (2.0 era) [1] - China has become the second-largest market for new drug launches globally and has established a leading position in disruptive technologies such as targeted protein degradation (TPD) [1] - The rapid growth of outbound licensing transactions reflects the industry's global competitiveness, with transaction volumes exceeding $50 billion from January to August 2025 [1] Industry Trends - The industry is experiencing a theme of differentiation and rational return, with China ranking among the top tier globally in areas like antibody-drug conjugates (ADC) and bispecific antibodies [1] - There is an increase in internal homogenization competition, prompting a shift in focus from storytelling to hard capabilities among companies [1] - The capital market is returning to rationality, with funding increasingly directed towards mid-to-late-stage projects and leading companies in validated sectors [1] Market Performance - The vaccine ETF (159643) rose by 1.2% on February 3, with over 100 million yuan net inflow in the past 10 days [1] - The vaccine ETF tracks the vaccine biotechnology index (980015), which includes listed companies involved in vaccine research, production, and related biotechnologies [1]

Group 1 - The core viewpoint of the article highlights ongoing investment opportunities in the pharmaceutical sector, particularly in thematic areas such as brain-computer interfaces, AI healthcare, and small nucleic acids, with a strategic focus on the raw materials pharmaceutical sector [1] - The biopharmaceutical ETF (512290) has seen a continuous net inflow of over 460 million yuan for 10 consecutive days, indicating strong market interest [1] - The raw materials pharmaceutical sector is currently at a price bottom, with expectations of recovery driven by rising chemical prices and the introduction of new business lines such as small nucleic acids and peptides, which may lead to a mid-term positive cycle [1] Group 2 - The CS Biomedicine Index (930726), which the biopharmaceutical ETF tracks, selects listed companies involved in biotechnology, pharmaceuticals, and related life sciences from the Shanghai and Shenzhen markets to reflect the overall performance of the biopharmaceutical sector [1] - The rising prices of chemical products are expected to create cost pressures that will benefit integrated leading companies with cost advantages along the industry chain [1] - Innovative therapies such as GLP-1, small nucleic acid chronic disease drugs, and ADCs are generating significant global demand for APIs and intermediates, providing a second growth curve for raw material pharmaceutical companies [1]

Group 1 - The pharmaceutical sector experienced a pullback, with the pharmaceutical ETF (159929) declining by 1.53% and a trading volume exceeding 1.3 billion yuan, indicating a net inflow of over 45 million yuan during the day, marking 11 consecutive days of capital inflow totaling over 360 million yuan [1][3] - Major stocks within the pharmaceutical ETF saw most decline, including Meien Health and Pianzaihuang dropping over 3%, WuXi AppTec and Aier Eye Hospital falling over 2%, while Tigermed rose over 7% [3][4] - Tigermed is projected to see a net profit growth of 105% to 204% by 2025, indicating strong future performance [3] Group 2 - The JPM 2026 conference highlighted a shift in the global pharmaceutical industry's focus towards the effective allocation and long-term value realization of innovations amidst rising uncertainties [5] - Chinese innovation is gaining global recognition, with increased participation from Chinese companies at the JPM 2026, reflecting a growing acknowledgment from international capital and multinational pharmaceutical companies [5][6] - The evaluation logic of multinational pharmaceutical companies regarding Chinese innovative assets is evolving, focusing on their efficacy, differentiation, and competitive positioning for inclusion in global product portfolios [6][10] Group 3 - Multinational pharmaceutical companies are entering a critical patent cliff period, necessitating diversification in their pipelines to mitigate risks associated with single products and treatment areas [10][12] - The integration of AI into core strategies is becoming mainstream, with AI being utilized to enhance R&D efficiency and optimize operational systems, thus addressing challenges posed by the patent cliff [12][13] - The oncology sector remains a core area for pharmaceutical innovation, with a focus on antibody-drug conjugates (ADCs) and cell therapies, indicating a robust pipeline and commercial potential [13][15]

Investment Rating - The report maintains a "Positive" outlook for the pharmaceutical and biotechnology industry in China [6] Core Insights - The focus remains on the combination of IO (Immuno-Oncology) and ADC (Antibody-Drug Conjugates), with significant advancements expected in their joint application [10][11] - The year 2026 is identified as a critical year for the combination of IO and ADC, with expectations for increased demand for ADCs, particularly in the context of various cancer treatments [11][41] Summary by Sections Section 1: Focus on Second-Generation IO and ADC - Merck's sac-TMT is a strategic focus, with 16 ongoing Phase III clinical trials, particularly in gynecological cancers [14][15] - AstraZeneca has 8 ADCs in clinical stages, with significant data readouts expected in 2026 [19][20] - Pfizer is advancing 4 Phase III clinical trials for its PD-1/VEGF dual antibody SSGJ-707, highlighting its strategic importance in oncology [26][27] - Johnson & Johnson aims to become the leading oncology company by 2030, focusing on multiple myeloma and various cancers [30] - Bristol-Myers Squibb (BMS) is advancing its PD-L1/VEGF dual antibody and oral CELMoD therapies, with significant data catalysts expected in 2026 [32][33] - Roche is focusing on breast cancer, with its oral SERD Giredestrant expected to be approved soon [37][38] Section 2: The Year of IO+ADC Combination - The combination of IO and ADC is seen as a key development direction, with various clinical trials underway [41] - The first-generation IO+ADC combinations are competitive, with sac-TMT emerging as a significant player [42] - The second-generation IO combined with chemotherapy is led by AK112, with multiple milestones expected in the coming years [47] - The second-generation IO combined with ADC is still in early exploration, with AstraZeneca leading the way [49] Section 3: Investment Recommendations and Targets - The report identifies several investment targets, including Kangfang Biotech, 3SBio, and others, highlighting their potential in the oncology sector [11][56]

Group 1 - The A-share medical sector weakened on January 26, with AI medical and brain-computer interface concepts leading the decline, as Meien Health dropped by 6% and Weining Health and Sanbo Brain Science fell over 5% [1] - The largest medical ETF in the market (512170) declined by more than 1.6%, losing its half-year line, with real-time transactions exceeding 600 million yuan [1] - Despite the overall decline, the medical ETF (512170) showed high-frequency premiums in the market, indicating active buying interest, with a weekly increase in positions exceeding 813 million yuan [1] Group 2 - CITIC Securities recently published a weekly review of the pharmaceutical industry, indicating that policy impacts will eventually clear, and companies will gradually recover after strategic adjustments, with the medical device sector undergoing dual recovery in valuation and performance [3] - The report suggests increasing allocation to the medical device sector by 2026, with major investment opportunities arising from performance recovery, overseas expansion, brain-computer interfaces, and AI medical technologies, potentially leading to multi-bagger stocks in a tech bull market [3] - The CXO sector is experiencing rapid growth due to advancements in ADC and peptide drugs, with increasing demand for related CXO services, and segments like small nucleic acids and CGT are expected to develop quickly [3] Group 3 - The largest medical ETF (512170) has a fund size of 26.8 billion yuan, making it the largest in the market among medical ETFs [3] - The medical ETF and its linked fund (012323) cover 12 AI medical and brain-computer interface concept stocks, with over 50% weight in medical devices and nearly 25% in CXO [3] - For those interested in Hong Kong stock medical opportunities, the Hong Kong Stock Connect Medical ETF (159137) focuses on medical innovation, gathering core leaders in various pharmaceutical fields, including medical devices, AI medical, CXO, and innovative drugs [3]

Group 1 - The core viewpoint of the news highlights the strong performance of the pharmaceutical and medical services sectors, with the Shanghai Stock Exchange Sci-Tech Innovation Board Biomedicine Index rising by 1.52% as of 11:05 AM on January 23, 2026, driven by significant gains in stocks such as Chengdu Xian Dao (+5.48%) and BGI Genomics (+4.25%) [1] - The Ministry of Commerce and eight other departments have issued opinions to promote high-quality development in the drug retail industry, encouraging retail enterprises to participate in centralized drug procurement and to enhance their bargaining power through joint purchasing [1] - The Chinese pharmaceutical industry is at a pivotal point for global value reassessment, with 2026 being a critical year to validate transformation outcomes, as highlighted by CITIC Securities [1] Group 2 - As of December 31, 2025, the top ten weighted stocks in the Shanghai Stock Exchange Sci-Tech Innovation Board Biomedicine Index include companies like United Imaging Healthcare and BeiGene, collectively accounting for 48.85% of the index [2] - The CSI Innovation Medicine ETF closely tracks the Shanghai Stock Exchange Sci-Tech Innovation Board Biomedicine Index, providing an easy investment option for those without stock accounts through the linked fund [3]