Summary of Conference Call Notes Industry Overview - The discussion revolves around the **healthcare industry**, specifically focusing on the implications of the **Biosecure Act** and related legislative amendments affecting Chinese Contract Development and Manufacturing Organizations (CDMOs) [1][3][5]. Key Points and Arguments 1. **Legislative Context**: - The **S.Amdt 3236** amendment is not specifically targeting Chinese CDMOs, unlike the previous **Biosecure Act** which highlighted several Chinese companies, including Wuxi [1][3]. - The **Biosecure Act** was the only anti-China legislation that did not pass in the US Senate in 2024, primarily due to resistance from the US pharmaceutical industry seeking cost flexibility amid pricing pressures and patent expirations [1][3]. 2. **Softening Political Stance**: - **Gary Peters**, a key sponsor of the Biosecure Act, has adopted a softer tone in the current amendment, leaving Wuxi companies out of the discussion this time [4][5]. 3. **Manufacturing Localization Goals**: - The ultimate goal of the amendment is to promote localized manufacturing and supply chains, aligning with previous proposals by the Trump administration [5]. - The use of Chinese CDMOs is seen as a cost-saving measure for US pharma, potentially reducing costs by **30-60%** [5]. 4. **Wuxi Bio's Competitive Advantage**: - Wuxi Bio is highlighted as a top pick due to its expected fundamental inflection in 2025 from three CMO projects debuting, and its high customer stickiness as US pharma companies prefer cost-effective solutions from China [6]. - Wuxi Bio's single-asset turnover is projected to be **2-4 times** that of global peers, with significant capacity expansion planned in New Jersey [5][6]. Additional Important Insights - The amendment is attached to the **2026 NDAA**, indicating a long-term strategic approach towards manufacturing and supply chain localization [5]. - The report emphasizes the light investor participation in Wuxi Bio's stock, suggesting that long-only investors may reduce their underweight positions to capitalize on the anticipated rally in the China biotech sector [6]. Conclusion - The healthcare industry, particularly companies like Wuxi Bio, is navigating a complex legislative landscape that could impact their operations and market positioning. The focus on cost efficiency and localized manufacturing presents both opportunities and challenges for investors and stakeholders in the sector [1][5][6].

Investment Rating - The industry view for mid-cap CRO/CDMOs is rated as Attractive [5] Core Insights - Direct tariff exposure for major China CRO/CDMO companies is estimated to be between 0%-10%, which is manageable for most leading firms in the sector [3][8] - Increasing macro uncertainties, including tariffs and funding dynamics, are expected to lead to softer funding beta and more cautious R&D budgets in 2025 [3][21] - The FDA's proposal to phase out animal testing is unlikely to have an immediate impact on most CROs, as alternatives are limited [8][14] Company-Level Picks - Pharmaron-H is highlighted as the most preferred pick due to its strong alpha from CMC and minimal tariff exposure [4] - GenScript is favored for its turnaround in non-cell business and robust contributions from its CGT investment [4] - Asymchem is noted for its growth in the GLP-1 area, though there are concerns about its overseas facility loss in 2025 [4] - Joinn Lab and Tigermed are viewed positively for their long-term prospects, despite expectations of a slower domestic funding recovery [4] Market Dynamics - The report indicates that the general outlook for CRO/CDMO companies is improving in 2025, but remains softer than earlier expectations due to disrupted global funding momentum [21] - Quality players with unique barriers and visionary overseas facility deployment are expected to outperform their peers [21] Financial Forecasts and Valuations - Tigermed's revenue growth forecasts for 2025-2027 have been adjusted to 3.1%, 8.1%, and 11.6% YoY, reflecting a cautious outlook [26] - The price target for Tigermed has been reduced from Rmb57.5 to Rmb37.7 due to updated earnings estimations [28]