Summary of Hansoh Pharma Earnings Review Company Overview - **Company**: Hansoh Pharma (3692.HK) - **Industry**: Pharmaceuticals, specifically focusing on innovative drugs and collaborations Key Financial Highlights - **1H Sales**: Rmb7.4 billion, representing a **14.3% year-over-year increase** compared to the expected Rmb6.5 billion [1] - **Product Sales Growth**: Grew by **13.2% year-over-year**, driven by innovative drugs, particularly Ameile, which saw a **21% year-over-year increase** [1] - **Collaboration Income**: Exceeded expectations with Rmb853 million from Merck GLP-1 deal and Rmb804 million milestone payment from GSK [1] - **Earnings**: Rmb3.1 billion, up **15% year-over-year**, surpassing the expected Rmb2.1 billion [1] - **Core Earnings Growth**: Increased by **13% year-over-year**, slower than product sales due to a **20% year-over-year rise in R&D expenses** [1] Future Guidance - **Sales Guidance for 2025**: Management has raised the product sales growth forecast to **high-double-digit growth**, up from previous double-digit growth expectations [1] - **Ameile Sales Target**: Expected to achieve over Rmb8 billion by 2030, with a target of Rmb10 billion+ in 2025, driven by new indications and extended product life cycle strategies [2] Pipeline Developments - **Key Pipeline Assets**: - **HS-20093 (B7H3 ADC)**: Two phase 3 trials initiated in China for SCLC and osteosarcoma, with plans for pivotal stage advancement in 2025 [3] - **HS-20089 (B7H4 ADC)**: Pivotal study for ovarian cancer initiated in China, with global phase 3 trials expected by 2026 [3] - **HS-10535 (oral GLP-1)**: Global phase 1 studies to start by Merck in 2025 [3] - **HS-20094 (GLP-1/GIP)**: Moving to phase 3 stage by Regeneron in 2026 [3] Strategic Focus - **Collaboration Strategy**: Continues to be a key global expansion strategy, with efforts to self-run global phase 1 studies for selected oncology and immunology assets [8] - **Earnings Estimates Revision**: Earnings estimates for 2025, 2026, and 2027 have been revised up by **10.4%**, **8.9%**, and **6.3%** respectively, reflecting higher collaboration income and innovative drug sales [8] Valuation and Risks - **Price Target**: Increased to HK$39.93 from HK$34.83, based on a sum-of-the-parts (SOTP) valuation [9] - **Risks Identified**: - Generics sales may fall below expectations post VBP - Slower ramp-up of novel drugs - R&D risks in the innovative drug pipeline - Below-expected collaboration income from global expansion [10] Conclusion Hansoh Pharma shows strong financial performance in the first half of the year, with positive sales guidance and a robust pipeline of innovative drugs. The company's strategic focus on collaborations and self-running studies positions it well for future growth, despite identified risks in the generics market and R&D.

Summary of Key Points from the Conference Call on China's Biotech Industry Industry Overview - **Industry**: China's Biotech Sector - **Context**: The call discusses the evolution and future potential of China's biotech industry, emphasizing its role as a global player in drug development and innovation [1][3][51]. Core Insights and Arguments 1. **Recognition and Growth**: China's biotech sector experienced a boom from 2018 to 2020 due to repatriation of scientists and increased R&D investments, but faced corrections due to an oversupply of undifferentiated products [3][14]. 2. **Innovation Gap**: The gap in drug innovation between China and global leaders has narrowed to 3.7 years, enabling China to develop competitive follow-on pipelines, particularly in complex modalities like antibody-drug conjugates (ADC) [4][20]. 3. **Market Potential**: The domestic innovative drug market in China is projected to reach approximately US$200 billion by 2030, driven by addressing rural healthcare disparities and health-related productivity losses [5][26]. 4. **Out-licensing Activities**: Out-licensing activities in China exceeded US$50 billion in 2024, indicating a strong resurgence in global interest in Chinese biotech innovations [4][10]. 5. **CAGR Forecast**: Innovative drug sales are expected to grow at a compound annual growth rate (CAGR) of 21% from 2024 to 2030, increasing their share of the pharmaceutical market from 29% in 2023 to 53% by 2030 [10][12]. 6. **Aging Population**: China's aging population is projected to reach 260 million by 2030, creating significant demand for innovative healthcare solutions [65][66]. 7. **Rural Healthcare Disparity**: The healthcare spending gap between urban and rural areas is estimated at RMB 2.4 trillion, which is a key driver for the growth of innovative drugs [26][69]. Additional Important Insights 1. **Regulatory Environment**: Recent policy reforms have created a more favorable environment for innovation, aligning closely with global standards [14][15]. 2. **Talent Pool**: The repatriation of STEM graduates has bolstered China's scientific output and kept clinical trial costs competitive [14][20]. 3. **Globalization of Pharma**: Chinese pharmaceutical companies are increasingly focusing on globalization, with significant out-licensing deals indicating a shift towards international markets [33][38]. 4. **Valuation Trends**: The valuation of Chinese biotech stocks has surged, with a current price/peak sale multiple of approximately 4.5x, which is significantly higher than the US biotech average of 2.5x [21][50]. 5. **CDMO Role**: Contract Development and Manufacturing Organizations (CDMOs) in China are playing a critical role in reducing drug development costs and enhancing speed to market, which is vital for smaller biopharma companies [41][42][44]. Conclusion - The call highlights the transformative potential of China's biotech industry, driven by innovation, favorable demographics, and a supportive regulatory environment. The sector is poised for significant growth, with increasing global recognition and opportunities for both domestic and international markets [51][64].

Summary of China Pharma and Biotech Conference Call Industry Overview - The China healthcare sector is experiencing its strongest rally since mid-2023, with the Hang Seng Biotech and MSCI China Healthcare indices showing year-to-date (YTD) returns of 57% and 38%, respectively, outperforming broader indices like Hang Seng and MSCI China at 20% and 16% [1][10] - The current market is at 30% of the peak seen during the last healthcare boom in 2020-2021, with a notable shift towards mature companies and top players rather than early-stage firms [1][2] - Public financing has surged, increasing 4 times in 1H25 compared to 1H24, with about two-thirds of IPO and follow-on offerings yielding positive returns [1][12] Market Valuation and Opportunities - Valuations in the China healthcare sector are now at or above global counterparts, with MSCI China healthcare P/S ratios crossing over with S&P 500 healthcare [2] - Individual stock performance varies significantly, with funds showing interest in companies with lower valuation multiples and potential for out-licensing deals [2][52] - Specific companies like CSPC are considered overheated with a PEG ratio of 14.5x, while Hengrui (2.3x) and Sino Biopharm (2.0x) are viewed as cheaper alternatives [3][44] Biotech Sector Insights - Biotech companies are valued based on market cap to projected 2032 revenue, ranging from 2-5x. Companies like BeiGene (2.7x) and Zai Lab (1.2x) are seen as undervalued, while Akeso (4.7x) and Kelun Biotech (5.6x) are considered relatively pricey [4][48] - The biotech sector has seen a significant increase in market capitalization, rising from US$102 billion to US$160 billion YTD 2025 [11] Clinical Trials and R&D - The number of clinical trial starts in China has shown consistent growth, with local assets making up over 50% of the global pipelines for the first time in 2025 [1][33] - Innovative drug modalities, particularly in oncology, have seen a resurgence in clinical trials, indicating sustained R&D efforts despite previous market downturns [32][36] Out-licensing Trends - There has been a boom in outbound licensing deals, with companies like RemeGen and Innovent leading the way. This trend is expected to continue, although there are concerns about saturation in certain drug classes [34][52] - The out-licensing model has remained resilient against geopolitical challenges, with no significant shifts in FDA attitudes towards China-originated drugs [34] Investment Implications - The report rates Akeso, Hansoh, Innovent, and Hengrui as Outperform, while BeiGene, CSPC, Sino Biopharm, and Zai Lab are rated as Market-Perform [7] - A methodological shift in valuation is noted, with increased emphasis on multiple-based valuation for mature companies, while biotechs will continue to use P/S and DCF models [8] Conclusion - The China pharma and biotech sector is on an upward trajectory, driven by strong market sentiment, increased public financing, and a robust pipeline of clinical trials. However, caution is advised regarding valuation levels and the sustainability of the current rally, particularly in the context of out-licensing deals and market saturation [52][53]

Investment Rating - The report rates the China Healthcare industry as Attractive [4][47]. Core Insights - The NHSA and NHC have released measures to support the high-quality development of innovative drugs, including establishing a new drug list for commercial insurance and encouraging investment funds for innovative drug development [2]. - Sino Biopharma has received approval for anlotinib in combination with chemotherapy for the first-line treatment of advanced or metastatic soft tissue sarcoma, marking a significant milestone as the first combination therapy approved globally for this indication [2]. - Hengrui has gained approval for an additional indication for its JAK1 inhibitor, ivarmacitinib, now also indicated for severe alopecia areata [2]. Summary by Sections Regulatory Developments - New measures from NHSA and NHC include a drug list for commercial insurance that will not count towards DRG/DIP budgets and a commitment to ensure hospital access for newly listed drugs within three months [2]. Company Updates - Sino Biopharma has achieved multiple approvals, including for anlotinib and recombinant human coagulation factor VIIa N01, enhancing its product portfolio [2]. - Hengrui's ivarmacitinib has expanded its indications, showcasing the company's innovative capabilities in the biopharmaceutical sector [2]. Market Trends - The report highlights ongoing R&D progress among covered companies, indicating a robust pipeline and potential for future growth in the healthcare sector [10].