Core Viewpoint - After a decade of growth, multinational pharmaceutical companies are facing a changing environment in China, entering a phase of cyclical adjustment, as evidenced by Bristol-Myers Squibb's (BMS) decision to sell 60% of its stake in its joint venture in China, Shanghai Bristol-Myers Squibb Pharmaceutical (SASS) [1][3][4] Group 1: Company Actions - BMS has signed an agreement to sell its 60% stake in SASS to Hillhouse Capital, with the transaction expected to be completed by early 2026 [2][3] - The divestiture reflects BMS's evolving network strategy, allowing the company to focus resources on core areas with the highest growth potential [2][5] - BMS's decision to exit the joint venture indicates a shift towards innovation and a focus on drug development rather than reliance on established products [4][13] Group 2: Market Context - The Chinese pharmaceutical market has undergone significant changes, with government policies increasingly favoring innovative drugs, making it difficult for multinational companies to rely on high-priced original drugs [8][9] - The implementation of centralized procurement policies since 2018 has severely compressed profit margins for off-patent original drugs, with price reductions typically ranging from 50% to 85% for selected drugs [5][9] - BMS's revenue from mature products has declined by 20%, primarily due to intensified competition from generics and changes in U.S. healthcare policies [6][7] Group 3: Strategic Implications - Analysts suggest that multinational pharmaceutical companies must adapt to the changing landscape by focusing on innovative drug development, local partnerships, and financial health [3][13] - The transition from a broad coverage strategy to a more focused approach emphasizes the importance of local ecosystems and collaboration with domestic firms [3][10] - Future strategies may include prioritizing high-barrier and differentiated innovative drugs, deepening local cooperation, and restructuring business models to mitigate risks associated with mature products [13][12]

Group 1 - The complexity of hematological tumors presents numerous investment opportunities in various subtypes of treatment [1] - The market for hematological tumors is expanding due to innovative therapies, with significant product launches expected [1] - The number of long-term patients is increasing, with approximately 4 million patients globally having survived five years or more as of 2022, which is three times the number of new patients [1] Group 2 - Future development directions for hematological tumor treatment include improving efficacy, reducing recurrence, and optimizing administration [2] - Acute leukemias like AML and ALL primarily use chemotherapy or targeted combination therapies to enhance survival rates [2] - CAR-T therapy shows high remission rates for aggressive lymphomas and multiple myeloma, providing more treatment options for patients [2] Group 3 - The competition in the targeted drug market for hematological tumors has entered a new phase, with a focus on technological iterations and exploration of new targets [3] - In the BTK field, new products are emerging to compete in the post-resistance market, with Zebutinib outperforming Ibrutinib [3] - The BCL-2 domain is seeing advancements with differentiated designs and optimized dosing strategies to gain competitive advantages [3]

Core Viewpoint - The report from China Galaxy recommends the pharmaceutical industry, highlighting the significant growth potential in the hematological oncology market driven by innovative therapies and the increasing number of long-term patients [1] Group 1: Market Dynamics - The hematological oncology market is expanding due to advancements in precision diagnostics, prognostic stratification, immunotherapy, and targeted therapies, leading to improved survival rates and quality of life for patients [1] - According to WHO, the number of long-term patients with hematological malignancies reached approximately 4 million in 2022, which is three times the number of new patients, indicating a growing market for treatments [1] - The market is expected to see blockbuster products, with global sales of Daratumumab exceeding $10 billion in 2024, and both Ibrutinib and Lenalidomide surpassing $5 billion in sales [1] Group 2: Treatment Trends - Future treatment directions for hematological malignancies focus on improving efficacy, reducing relapse rates, and optimizing administration methods, particularly in acute leukemias and chronic leukemias [2] - In chronic myeloid leukemia (CML), the use of BCR-ABL TKI therapy is being explored to overcome resistance through technological iterations and new targets [2] - CAR-T therapy is providing more treatment options for patients with high relapse rates, particularly in aggressive lymphoma and multiple myeloma [2] Group 3: Competitive Landscape - The targeted drug market for hematological malignancies is entering a new competitive phase, with innovations in BTK inhibitors and BCL-2 inhibitors leading the way [3] - Zebutinib has outperformed Ibrutinib, establishing itself as a leading product in the BTK space, while the market for post-resistance treatments is becoming increasingly competitive [3] - In the BCL-2 space, advancements in dosing and differentiated designs are giving products like Lisocabtagene Maraleucel a competitive edge [3] Group 4: Investment Opportunities - The complexity of hematological malignancies presents numerous investment opportunities, particularly as treatment approaches evolve towards chronic disease management [4] - Companies to watch include BeiGene, which is covering the CLL/SLL indications with a comprehensive product matrix, and Innovent Biologics, which is building a diversified product portfolio centered around Orelabrutinib [4] - Ascentage Pharma is focusing on third-generation BCR-ABL inhibitors and BCL-2 inhibitors to create differentiated competitive advantages [4]

Investment Rating - The report maintains a "Buy" rating for the blood cancer drug industry [3][6]. Core Insights - The blood cancer market is expanding due to innovative therapies, with significant advancements in precision diagnosis, prognosis stratification, and targeted therapies such as CAR-T and TCE, leading to improved patient survival and quality of life [5][8]. - The number of patients with blood cancer who have survived for five years or more is approximately 4 million globally, which is three times the number of new patients, indicating a growing market for long-term treatments [5][13]. - The high cost of blood cancer drugs and the emergence of blockbuster products are driving market growth, with several drugs expected to exceed $10 billion in sales by 2024 [5][17]. Summary by Sections 1. Blood Cancer Market Expansion - The proportion of new blood cancer patients is less than 10% of all new cancer cases, with a steady increase in incidence rates [8]. - Blood cancer patients have a long survival period, resulting in a large population of existing patients [13]. - The high cost of blood cancer treatments contributes to the frequent emergence of blockbuster drugs [17]. 2. Clinical Diagnosis and Treatment of Blood Cancer - Blood cancers are classified based on cell origin, differentiation, and affected sites, including leukemia, lymphoma, and multiple myeloma [19][20]. - Treatment for acute leukemia primarily involves chemotherapy or targeted combination therapies to improve survival rates [24]. - Lymphoma treatment varies by subtype, with Rituximab being a cornerstone therapy [23]. - Multiple myeloma treatment focuses on CD38 monoclonal antibodies, with ongoing exploration of solutions for relapsed and refractory cases [23]. 3. Analysis of Popular Targets and Therapies - The BTK field is seeing intense competition, with new products emerging to address resistance issues [5]. - The BCL-2 area is advancing with differentiated designs and optimized dosing strategies [5]. - The BCR-ABL TKI domain is witnessing the introduction of third-generation inhibitors that show superior efficacy [5]. 4. Company Profiles - BeiGene is focusing on a comprehensive product matrix to cover CLL/SLL indications [5]. - Innovent Biologics is building a diversified product portfolio centered around Oubreti [5]. - Ascentage Pharma is developing third-generation BCR-ABL inhibitors and BCL-2 inhibitors to create competitive advantages [5]. - Diligent Pharma is innovating with a globally first high-selectivity JAK1 inhibitor and a dual-target LYN/BTK inhibitor [5]. 5. Investment Recommendations - The blood cancer sector presents numerous investment opportunities due to its complexity and the variety of treatment subfields [5]. - The long survival cycle of blood cancer patients and the high costs of drug treatments indicate a significant market potential [5].

Financial Performance - The company's net profit for the first half of 2025 is projected to be between 100 million and 135 million CNY, representing an increase of 237.95% to 356.24% compared to the same period last year [2] - The net profit after deducting non-recurring gains and losses is expected to decline by 1.9 million to 3.5 million CNY, a decrease of 70.96% to 84.23% year-on-year [2][3] - The fair value changes of financial assets resulted in a significant gain of approximately 110 million CNY in the first half of the year [3] Product Development and Innovation - Key innovative drugs in development include DT678, MBT-1608, PHP1003, PHP0101, long-acting recombinant human follicle-stimulating hormone injection, and GLP-1-Fc fusion protein [4] - The long-acting recombinant human follicle-stimulating hormone injection and GLP-1-Fc fusion protein have completed clinical trials and are about to be submitted for market approval [4] - The company has a unique anti-platelet aggregation drug developed in collaboration with a U.S. university, which is currently in Phase II clinical trials [4][5] New Product Launches - The nitroglycerin spray, as a unique dosage form in China, has significant market potential, especially for emergency use in angina and myocardial infarction [6] - The company plans to enhance marketing strategies for the nitroglycerin spray through academic conferences and collaborations with various sales channels [6] Shareholder Returns - Since its listing in 2004, the company has consistently paid cash dividends, with total dividends exceeding 2.1 billion CNY, which is more than ten times the initial fundraising amount [7] E-commerce and Sales Channels - The company has established a flagship store on JD.com, with a growing range of products available for sale [9] - The proportion of oral formulations has been increasing, prompting the company to explore new marketing models, including e-commerce [9] Investment Activities - The company holds a 55.69% stake in Beijing New Mile Health Industry Group through a partnership, which is expected to yield good returns in the future [10]

Financial Performance - The company experienced significant fluctuations in revenue and profit due to various factors, including changes in the fair value of financial assets and a high base from the previous year's demand for flu treatment drugs [2][3]. - The price reductions from centralized procurement have led to substantial decreases in the prices of key products: Temozolomide decreased by 57%, Lenalidomide by nearly 70%, and the price of Oxaliplatin injection dropped by over 80% [4]. Future Outlook - The company anticipates an improvement in performance next year, as most products involved in national procurement are newly launched and should not face significant price declines [3][4]. - The company has several new products expected to be approved, which may contribute positively to future revenue [3]. R&D and Product Development - The company is focusing on innovative drug development, with several key products in clinical trials, including DT678 and PHP1003, which are expected to address significant medical needs [7]. - The company has increased its R&D investment, with over 60% of its 400+ R&D personnel holding master's degrees or higher [14]. Market Strategy - The company is expanding its overseas market presence, particularly in developing countries, with plans to enter the European and American markets [10]. - Recent products have been included in centralized procurement, which is expected to become a new profit growth point for the company [11]. Investment and Acquisitions - Currently, the company has no plans for refinancing or mergers and acquisitions [8]. - The company holds a 55.69% stake in Beijing New Mile Health Industry Group, which is expected to yield good returns in the future [5][6]. Regulatory and Competitive Landscape - The ongoing centralized procurement policy is likely to continue, but the extent of price reductions may stabilize, leading to a more rational market environment [4]. - The company is committed to increasing R&D investment despite recent performance challenges, aiming to enhance its competitive position in the industry [4].

Core Viewpoint - Cancer remains a significant challenge in modern society, with a new revolutionary technology, targeted protein degradation, offering potential solutions for previously "undruggable" targets [1][2]. Group 1: Targeted Protein Degradation Technology - PROTAC (Proteolysis Targeting Chimeras) is an emerging therapeutic strategy that targets and degrades proteins associated with cancer and other diseases, with approximately 3,000 proteins linked to these conditions, but only about 700 are currently druggable [2][3]. - PROTAC operates by briefly binding to the target protein and directing it to the cell's natural degradation system, allowing for efficient and sustained effects with minimal dosage [2][3]. - The mechanism of PROTAC is described as "capture-release," which allows for the complete elimination of pathogenic proteins, addressing multiple disease-causing pathways [2]. Group 2: Clinical Trials and Developments - Since 2019, at least 30 PROTACs have entered clinical trials, primarily targeting cancer, with three PROTACs currently in Phase III trials for breast cancer, prostate cancer, and leukemia [3][4]. - The first PROTAC to enter Phase III trials is vepdegestrant, developed by Arvinas and Pfizer, which has shown to extend disease-free survival in patients with a specific breast cancer mutation compared to standard anti-estrogen therapies [3]. - Other PROTACs in Phase III trials target the androgen receptor in metastatic prostate cancer and the BTK enzyme in chronic lymphocytic leukemia, addressing issues of drug resistance in advanced cancers [3]. Group 3: Limitations and Future Prospects - Despite the promising potential of PROTACs, they face limitations, such as difficulty in targeting membrane-embedded proteins and the risk of unintended degradation of other proteins [4]. - The first approval of a PROTAC is anticipated to be a significant milestone, likely targeting an already druggable cancer-related protein, while true breakthroughs would involve previously untargeted proteins [4]. - Molecular glue is emerging as another potential protein degradation agent, which operates differently from PROTAC by altering the surface of ubiquitin ligases to facilitate protein degradation without direct binding [5].

Investment Rating - The report initiates coverage with an OUTPERFORM rating for BeiGene [2]. Core Views - BeiGene is positioned as a leading innovator in China's biopharmaceutical sector, with a strong focus on oncology treatments and a robust pipeline of over 60 clinical projects globally [3][11]. - The company is expected to achieve profitability by 2025, driven by significant revenue growth from its core products, particularly the BTK inhibitor, Zanubrutinib, which is projected to double its revenue in 2024 [4][20]. - BeiGene's global commercialization capabilities and a well-established management team are key competitive advantages that will support its growth trajectory [12][29]. Summary by Sections 1. Innovative Product Globalization - BeiGene has a diverse product pipeline and aims to become the first biopharma company to achieve consistent profitability [11]. - The company has 17 commercialized products, including Zanubrutinib and Tislelizumab, with strong sales performance in the US and Europe [20]. - Revenue for 2024 is projected at $3.81 billion, a 55% increase year-over-year, with significant contributions from the US market [20]. 2. Leadership in Hematology - The combination of BTK inhibitors and BCL-2 inhibitors is expected to solidify BeiGene's leadership in hematological malignancies [5]. - Zanubrutinib has shown superior efficacy compared to Ibrutinib, establishing its best-in-class status [5][24]. - The company is also developing Sonratoclax, a BCL-2 inhibitor, which is anticipated to enhance its market position [5]. 3. Expansion in Solid Tumors - BeiGene is actively expanding its presence in solid tumors, with Tislelizumab gaining traction in various indications [11]. - The company is developing next-generation CDK inhibitors targeting a market exceeding $10 billion [11]. - Focus areas include lung cancer and breast cancer, with ongoing clinical trials for multiple candidates [11]. 4. Financial Projections and Valuation - Revenue forecasts for FY25-27 are $5 billion, $6 billion, and $6.7 billion, respectively, with a CAGR of 21% [7]. - The net profit is expected to turn positive by FY25, reaching $390 million by FY26 [7]. - The target price is set at HK$182.35, based on a DCF model with a WACC of 9% and a perpetual growth rate of 4% [7].