Investment Rating - The report maintains a "Buy" rating for the company [5] Core Views - The company has shown a steady recovery in performance, with a 13.8% year-on-year increase in revenue to 461 million yuan in the first half of 2025, and a 15% increase in net profit to 90 million yuan [1] - The marketing reform has yielded positive results, with significant growth in self-operated regions and a reduction in sales expense ratio to 44.35%, down 3.49 percentage points year-on-year [1] - The innovative drug pipeline is progressing well, with multiple products in various stages of clinical trials, indicating a promising future for the company [2][3] Financial Performance - For the first half of 2025, the company achieved a revenue of 461 million yuan, with a net profit of 90 million yuan, and a non-GAAP net profit of 96 million yuan, reflecting year-on-year growth rates of 13.8%, 15%, and 29.2% respectively [1] - The company expects net profits to reach 152 million yuan, 183 million yuan, and 220 million yuan for the years 2025, 2026, and 2027, with corresponding growth rates of 259.8%, 20.3%, and 20.1% [3][4] - The projected P/E ratios for 2025, 2026, and 2027 are 59X, 49X, and 41X respectively, indicating a favorable valuation outlook [3][4] Product Development - The company is advancing its innovative drug products, including KC1086, which is in Phase I clinical trials for treating advanced solid tumors, and KC1036, which is in Phase III trials with expected progress [2] - The submission of ZY5301 for Pre-NDA has been accepted, targeting chronic pelvic pain, and the registration application for a veterinary product has also been accepted [2] Strategic Investments - The company has invested 150 million yuan in a financing round for a subsidiary, enhancing its portfolio in respiratory innovation and commercial products [3]

Core Insights - Merck's total revenue for the first half of the year was $31.335 billion, a 2% year-over-year decline, with pharmaceutical revenue at $27.688 billion, down 3% [2] - Sales of the core HPV vaccine plummeted, with revenue in China dropping 70% to $1.075 billion, representing only 3.9% of Merck's global pharmaceutical business [2] - Keytruda (pembrolizumab) sales increased by 7% to $15.16 billion, but the growth rate has slowed significantly compared to 18% in the first half of 2024 [2] - The HPV vaccine Gardasil/Gardasil9 also saw a significant decline, with sales of $2.453 billion, down 48% year-over-year [2] Cost-Saving Measures - In response to the decline in performance, Merck initiated a cost-saving plan aimed at saving $3 billion annually until the end of 2027, with funds reinvested to support new product launches across multiple therapeutic areas [2] - As part of this plan, Merck approved a restructuring project that will involve cutting administrative, sales, and R&D positions while continuing to hire in strategic growth areas [2] - The company will also reduce its global real estate footprint and optimize its manufacturing network [2] Future Outlook and Challenges - The slowdown in core product growth is expected to impact Merck's annual and future performance, with key patents for Keytruda expiring in 2028 and competition from biosimilars and domestic PD-1 drugs threatening market share [3] - Geopolitical tensions and trade wars pose additional risks, with potential tariffs on goods from various countries, including a 15% to 50% tariff on imports, affecting Keytruda's production base in Ireland [3] - Merck has taken measures to mitigate these risks by transferring sufficient inventory to the U.S. to ensure supply is not affected by tariff policies before the end of 2025 [3] - For the full year 2025, Merck projects global sales between $64.3 billion and $65.3 billion, raising questions about finding new growth drivers [3] Investment Plans - Merck is looking to invest in chronic obstructive pulmonary disease (COPD) as a potential growth area, announcing a $10 billion acquisition of Verona Pharma, which focuses on respiratory diseases [3] - The acquisition centers on Ensifentrine, a dual inhibitor of phosphodiesterase-3 and phosphodiesterase-4, which is expected to be a breakthrough therapy for COPD, with market sales projected to exceed $1 billion and potentially reach $4 billion [3]

Core Insights - Merck's total revenue for the first half of the year was $31.335 billion, a 2% year-over-year decline, with pharmaceutical revenue at $27.688 billion, down 3% [1] - Sales of the core HPV vaccine plummeted, with revenue in China dropping 70% to $1.075 billion, representing only 3.9% of Merck's global pharmaceutical business [1] - Keytruda (pembrolizumab) sales grew by 7% to $15.16 billion, but the growth rate has slowed compared to 18% in the first half of 2024 [1] - Gardasil/Gardasil9 sales were significantly down by 48%, totaling $2.453 billion [1] - In response to declining performance, Merck initiated a cost-saving plan aimed at saving $3 billion annually until the end of 2027, with funds reinvested in new product launches and multiple therapeutic areas [1] Strategic Moves - Merck is implementing a restructuring plan that includes job cuts in administrative, sales, and R&D positions while continuing to hire in strategic growth areas [1] - The company plans to reduce its global real estate footprint and optimize its manufacturing network [1] Market Challenges - Keytruda faces challenges as key patents will expire in 2028, with biosimilars and domestic PD-1 innovations threatening market share [2] - Geopolitical tensions and trade wars pose additional risks, particularly with the U.S. imposing tariffs on many countries, affecting production based in Ireland [2] - Merck has taken measures to transfer sufficient inventory to the U.S. to mitigate tariff impacts by the end of 2025 [2] Future Outlook - For the full year 2025, Merck projects global sales between $64.3 billion and $65.3 billion, amidst multiple pressures [2] - The company is betting on chronic obstructive pulmonary disease (COPD) as a new growth area, announcing a $10 billion acquisition of Verona Pharma, focusing on its recently approved product, Ensifentrine [2] - Ensifentrine is expected to become a breakthrough therapy for COPD, with market sales projected to exceed $1 billion, potentially reaching $4 billion [2]

Core Insights - Merck's total revenue for the first half of 2025 was $31.335 billion, a 2% decrease year-on-year, with pharmaceutical revenue at $27.688 billion, down 3% [2] - The company's performance in China was significantly impacted, with revenue dropping 70% to $1.075 billion, accounting for only 3.9% of global pharmaceutical revenue [2] - Keytruda (K drug) generated $15.161 billion in sales, representing nearly 50% of total revenue and a 7% increase year-on-year, although growth has slowed compared to 18% in the previous year [2][4] - The HPV vaccine Gardasil/Gardasil9 saw a substantial decline in sales, down 48% to $2.453 billion [2] Financial Performance - Merck's revenue for the first half of 2025 was $31.335 billion, a decrease from the previous year [2] - Keytruda's sales for the first half of 2025 were $15.161 billion, a 7% increase year-on-year, but slower than the previous year's growth rate [4] - Gardasil/Gardasil9's sales dropped 48% to $2.453 billion, with a 55% decline in the second quarter [5] Strategic Initiatives - Merck has initiated a multi-year optimization plan aimed at saving $3 billion annually by 2027, focusing on productivity improvements and product portfolio transformation [2][3] - A restructuring project has been approved, which includes job cuts in administrative, sales, and R&D roles while continuing to hire in strategic growth areas [3] - The company expects the restructuring to yield approximately $1.7 billion in annual cost savings by 2027 [3] Market Challenges - Keytruda faces challenges with key patents expiring in 2028, potential market share erosion from biosimilars, and geopolitical uncertainties [5] - The HPV vaccine's sales decline is primarily attributed to reduced demand in China, although U.S. sales showed a 2% increase [5][6] Leadership Changes - Merck's China region recently underwent management changes, with Anna Van Acker stepping down and Kyle Tattle taking over, who has a strong background in oncology business [6] Growth Prospects - Merck anticipates global sales for 2025 to be between $64.3 billion and $65.3 billion, while actively seeking new growth engines [7] - The acquisition of Verona Pharma for approximately $10 billion aims to enhance Merck's product pipeline in respiratory diseases [7][8] - The global COPD patient population exceeds 390 million, highlighting the potential market for new treatments [8] Industry Context - The pharmaceutical industry is facing a significant patent cliff risk from 2023 to 2028, with major companies losing market exclusivity on core products [9] - Merck has completed three acquisitions valued at over $10 billion in the past five years, indicating a strategy to diversify and expand its product line [9]

Investment Overview - The company announced an investment of 150 million RMB in Nuance Biotech (referred to as "优锐开曼") through its wholly-owned subsidiary, 康辰药业（香港）有限公司 [1][2] - The investment consists of 50 million RMB in rental contributions and 100 million RMB in cash [1][2] - Following this investment, the total investment in 优锐开曼 by the company will amount to 312.03 million RMB, with a shareholding exceeding 5% [2] Company Profile - 优锐开曼 is a biopharmaceutical company based in the Cayman Islands, focusing on innovative drug development, particularly in respiratory diseases and iron deficiency anemia [2][3] - The company is currently developing Ensifentrine, a dual-target inhaled phosphodiesterase inhibitor for the treatment of chronic obstructive pulmonary disease (COPD), which has received approval in the US and is in the process of applying for approval in China [2][3] Financial Data - As of March 31, 2025, 优锐开曼 reported total assets of approximately 1.07 billion RMB and total liabilities of approximately 3.09 billion RMB [4] - The company has not been profitable in the last five years, with a net loss of approximately 41.61 million RMB for the fiscal year 2024 [4] Transaction Details - The investment will be used for business expansion, capital expenditures, and operational funding to support the drug application process [1][5] - The transaction is structured as a Series E Preferred Share Purchase Agreement, with 康辰香港 acquiring 38,439,537 shares [1][4] Strategic Implications - The investment is expected to enhance the strategic partnership between the company and 优锐开曼, leveraging each other's strengths in the pharmaceutical market [8] - The company aims to utilize 优锐开曼's resources and expertise to expand its international collaboration in innovative and original drug commercialization [8]