Investment Rating - The investment rating for the pharmaceutical and biotechnology industry is "Positive" and the rating has been maintained [1] Core Views - The report emphasizes three core investment directions: 1) Breakthroughs in cutting-edge technologies (e.g., First-in-class drugs in oncology, weight loss, autoimmune fields, and innovative devices like brain-machine interfaces); 2) Clinical validation and commercialization potential (focus on the progress of domestic innovative drugs going abroad and the clinical development progress post-BD transactions); 3) Efficiency advantages in the industry chain (CXO leaders and high-value consumables' global layout) [8] Industry Review - The pharmaceutical and biotechnology industry index increased by 0.81%, ranking 21st among 31 primary industries, outperforming the CSI 300 index which decreased by 0.27% [5][16] - The sub-industries of pharmaceutical circulation and in vitro diagnostics saw significant gains of 7.61% and 5.32% respectively, while medical research outsourcing and medical devices experienced declines of 3.49% and 1.76% [5][16] - As of November 14, 2025, the industry PE (TTM overall method, excluding negative values) was 30.89x, up from 30.67x in the previous period, indicating an upward valuation trend that remains below the average [21] - The top three PE ratios among the sub-industries were for vaccines (50.42x), hospitals (43.67x), and medical devices (37.84x), while pharmaceutical circulation had the lowest valuation at 15.46x [21] Important Industry News - The National Health Commission and others issued implementation opinions to promote and regulate the application of "AI + healthcare" [7] - The NMPA released a new version of the "Medical Device Production Quality Management Specifications" [7] - Novartis received NMPA approval for its first radioligand therapy drug "Pluvicto®" for dual indications [7] - Sanofi's innovative targeted nano-antibody "Cablivi®" was approved by NMPA for treating immune-mediated thrombotic thrombocytopenic purpura [7] - The U.S. government reached a drug price control agreement with Eli Lilly and Novo Nordisk, leading to significant price reductions for GLP-1 drugs [7]

Group 1 - The A-share pharmaceutical index has increased by 3.3% this week and 22.1% year-to-date, outperforming the CSI 300 by 4.4% and 4.5% respectively [1] - The Hang Seng Biotechnology Index has risen by 7.0% this week and 88.8% year-to-date, outperforming the Hang Seng Technology Index by 7.4% and 58.7% respectively [1] - Notable weekly gains in the pharmaceutical sector include: pharmaceutical commerce (+5.7%), chemical pharmaceuticals (+4.5%), traditional Chinese medicine (+4.1%), biological products (+2.7%), medical services (+1.8%), and medical devices (+1.8%) [1] Group 2 - Bai Li Tian Heng focuses on major tumor treatment needs and has developed a global pipeline of innovative candidate drugs, including three platforms: HIRE-ADC, GNC, and HIRE-ARC [2] - As of November 2025, the company has 17 clinical-stage candidate drugs, with 6 undergoing clinical trials in the United States [2] - The pipeline includes izabren (EGFR×HER3 ADC) as a core representative, with 3 global pivotal phase III trials and 10 pivotal phase III trials in China initiated [2] Group 3 - Kolun Pharmaceutical's generic version of Enzalutamide has been approved for market launch, marking it as the first approved generic in China [3] - Jin Fang Pharmaceutical has initiated the first phase III clinical trial for GFH375 (VS-7375), which is the second KRAS G12D inhibitor to enter phase III globally [4] Group 4 - Recommended sub-industry rankings include: innovative drugs > research services > CXO > traditional Chinese medicine > medical devices > pharmacies [4] - Specific companies to focus on from the innovative drug perspective include Bai Li Tian Heng, BeiGene, Kolun Botai Biological, Heng Rui Pharmaceutical, and Zai Lab [4] - From the PD1/VEGF dual antibody perspective, recommended companies include Sanofi, Kintor Pharmaceutical, and Rongchang Biopharmaceutical [4]

Core Viewpoint - The company achieved good revenue and profit growth in 2024, with overall performance meeting expectations. The profit level in Q1 2025 showed good growth, slightly exceeding previous expectations. The raw material drug segment maintained steady growth, with strong performance in cardiovascular, respiratory, and anti-infection categories. The formulation business expanded, actively pursuing overseas markets, and the company partnered with East China Normal University to develop AI small nucleic acid drug discovery [1][4][6]. Financial Performance - In 2024, the company reported revenue of 1.476 billion, a year-on-year increase of 16.89%; net profit attributable to shareholders was 355 million, up 22.59%; and net profit excluding non-recurring items was 351 million, up 34.25% [2][4]. - For Q1 2025, the company recorded revenue of 402 million, a year-on-year increase of 19.78%; net profit attributable to shareholders was 119 million, up 45.30%; and net profit excluding non-recurring items was 113 million, up 37.51% [2][4]. Dividend Distribution - The company plans to distribute a cash dividend of 2.90 per 10 shares (including tax), totaling 118 million in cash dividends [3]. Raw Material Drug Segment - The raw material drug intermediate business generated revenue of 1.14 billion in 2024, a year-on-year increase of 7.73%. Key segments included: 1. Cardiovascular drugs with revenue of 432 million, up 43.81% 2. Respiratory drugs with revenue of 191 million, up 16.80% 3. Anti-infection drugs with revenue of 25 million, up 34.49% 4. Female health products with revenue of 126 million, down 33.11% [4][5]. Formulation Business Expansion - The formulation business performed well in 2024, achieving revenue of 220 million, a year-on-year increase of 144.87%. The company improved its distributor network and academic team for promoting Dydrogesterone, expanding its market presence [5]. AI Drug Discovery Collaboration - In March 2025, the company signed an agreement with East China Normal University to establish a joint laboratory for AI small nucleic acid drug discovery, aiming to leverage AI technology for accelerating drug discovery processes [6]. Profitability and Cost Control - The company reported a gross margin of 58.56% and a net margin of 24.04% in 2024, indicating steady improvement in profitability. The sales expense ratio was 8.84%, while the management expense ratio was 11.53%, reflecting good overall cost control [7]. Future Outlook - Key areas to watch include: 1. Expansion of raw material drug capacity, with ongoing projects expected to contribute significantly to revenue in 2025. 2. Continued expansion of the formulation business and overseas market penetration, with multiple new product applications in progress [8]. Earnings Forecast - The company forecasts revenues of 1.791 billion, 2.125 billion, and 2.595 billion for 2025-2027, representing year-on-year growth of 21.4%, 18.6%, and 22.2%, respectively. Net profits are expected to be 463 million, 561 million, and 707 million, with corresponding growth rates of 30.5%, 21.2%, and 26.1% [9].