Core Viewpoint - The report from CMB International emphasizes a conservative investment approach, focusing on undervalued stocks in the healthcare sector, particularly in the context of recent market fluctuations and recovery in capital financing [1] Group 1: Market Performance - The MSCI China Healthcare Index has increased by 59.5% year-to-date, outperforming the MSCI China Index by 24.0% [1] - The healthcare sector has recently experienced a pullback, with the MSCI China Healthcare Index declining by 10% since October [1] Group 2: Investment Opportunities - CMB International identifies several stocks with attractive valuations, including Solid Biosciences (02273), Three-Sixty Biopharma (01530), Giant Biologics (02367), WuXi AppTec (02268), Innovent Biologics (01801), and China Biologic Products (01177) [1] - The report highlights a significant buyback plan from Solid Biosciences, which has repurchased HKD 350 million worth of shares this year, with a total expected return from buybacks and dividends reaching 7% [1] Group 3: Clinical Development and Regulatory Environment - The report stresses the importance of overseas clinical progress for authorized drug pipelines, which is expected to be a catalyst for stock price increases [2] - Three-Sixty Biopharma's collaboration with Pfizer is noted, with two global Phase 3 clinical trials for its drug 707 targeting non-small cell lung cancer and colorectal cancer [2] Group 4: Healthcare Policy and Market Dynamics - The recent healthcare negotiations and the 11th batch of centralized procurement have seen reduced market attention, with 127 drugs participating in negotiations and 55 drugs included in the procurement [3] - The new procurement rules focus on maintaining clinical stability and quality, indicating a shift towards rational price competition in the market [3] - Despite the reduced focus on procurement, the domestic market performance remains a critical variable for overall business performance [3]

Investment Rating - The report maintains a "Buy" rating for several companies in the pharmaceutical sector, indicating a potential upside of over 15% in the next 12 months [30]. Core Insights - The MSCI China Healthcare Index has increased by 59.5% since early 2025, outperforming the MSCI China Index by 24.0%. However, the healthcare sector has recently experienced a 10% pullback, presenting opportunities in undervalued stocks [1]. - The report emphasizes the importance of overseas clinical advancements for authorized innovative drug pipelines, which are expected to be significant catalysts for stock price increases [3]. - The report highlights a recovery in domestic innovative drug research and development demand, driven by a resurgence in capital market financing and an increase in the scale of innovative drug transactions abroad [1][3]. Summary by Sections Industry Overview - The report suggests a more conservative investment approach, focusing on undervalued stocks within the pharmaceutical sector. It notes that the recent healthcare insurance negotiations and the implementation of the 11th batch of centralized procurement have led to reduced market attention [3]. - The report identifies key products to watch in the upcoming healthcare negotiations, including drugs from companies like 信达生物 and 康方生物, among others [3]. Company Recommendations - The report recommends buying shares in 三生制药, 固生堂, 巨子生物, 药明合联, 信达生物, and 中国生物制药, citing their strong potential for growth and favorable market conditions [3]. - Specific companies are highlighted for their promising clinical trial results and strategic partnerships, such as 三生制药's collaboration with Pfizer on global clinical trials [3]. Valuation Metrics - The report provides a valuation table for recommended companies, showing target prices and potential upside percentages. For example, 固生堂 has a target price of 48.28 with a 62% upside potential [2].

Core Insights - The pharmaceutical industry is experiencing a structural change driven by the growth cycles of major products, with significant opportunities emerging in innovative drugs, medical devices, and consumer healthcare [3][6][31] - The demand for pharmaceuticals is expected to improve in 2026, supported by policies encouraging innovation and a recovery in domestic consumption [3][7] - The supply side of the pharmaceutical industry is characterized by high entry barriers due to patent protections and government regulations, which helps maintain a stable competitive environment [4][5] Group 1: Industry Trends - The aging population, urbanization, and changing disease patterns are making the pharmaceutical industry a perpetual growth sector [3] - The global pharmaceutical market has seen rapid expansion from 2009 to 2019, followed by a surge in demand due to COVID-19, and is now entering a phase of recovery and growth [3][6] - The Chinese pharmaceutical industry is expected to gradually produce world-class companies, with increasing recognition of Chinese innovative drug assets by multinational corporations (MNCs) [4][5] Group 2: Investment Opportunities - Opportunities in innovative drugs are highlighted, particularly in oncology, metabolic diseases, and autoimmune diseases, with a focus on next-generation therapies and precision medicine [6][31] - The demand for innovative drugs is expected to remain strong, with policies improving medical insurance payments and the upcoming launch of commercial insurance drug catalogs [7][31] - The medical device sector is anticipated to recover, with a focus on domestic demand and international expansion, particularly in areas with low domestic production rates [7][8] Group 3: Company Performance - Major pharmaceutical companies like Eli Lilly, AbbVie, and AstraZeneca are experiencing significant growth driven by key products, with Eli Lilly's Tirzepatide generating $24.8 billion in sales [12][15] - The report identifies specific companies such as Hengrui Medicine, Hansoh Pharmaceutical, and BeiGene as outperformers in the market, with strong pipelines and global competitiveness [7][8] - The report emphasizes the importance of mergers and acquisitions (M&A) and business development (BD) strategies for MNCs, with China becoming a significant source of projects for top global pharmaceutical companies [22][24]

Core Viewpoint - The article highlights the rise of Zhong Huijuan, the chairwoman of Hansoh Pharmaceutical, who has become China's richest woman with a wealth of 141 billion yuan, surpassing previous titleholder Zong Fuli of Wahaha Group. This wealth surge is attributed to the significant increase in Hansoh Pharmaceutical's market value, which has more than doubled within the year, reflecting the company's strategic shift towards innovative drugs and the overall boom in the innovative pharmaceutical sector [1][2][5]. Group 1: Wealth and Company Growth - Zhong Huijuan's wealth has increased by over 60 billion yuan this year, driven by Hansoh Pharmaceutical's market capitalization rising from approximately 90 billion HKD to over 200 billion HKD, marking a year-to-date increase of over 100% [2][12]. - The salary structure within the company shows that in 2024, Zhong Huijuan's salary is 11.93 million yuan, while her daughter Sun Yuan, an executive director, earns 19.04 million yuan, significantly higher than her husband Sun Piaoyang, who earns only 1.65 million yuan [6][7]. Group 2: Strategic Shift to Innovative Drugs - Hansoh Pharmaceutical has transitioned from a focus on generic drugs to innovative drugs, with the number of innovative drugs increasing from 1 in 2019 to 7 in 2022, and innovative drug revenue surpassing generic drug revenue for the first time, reaching 50.6% [12]. - The company has also engaged in strategic overseas licensing agreements, with a notable deal involving a targeted antibody-drug conjugate (ADC) that includes an upfront payment of 80 million USD and potential milestone payments totaling 1.45 billion USD [12]. Group 3: Compliance and Regulatory Challenges - Despite its success, Hansoh Pharmaceutical has faced scrutiny over compliance issues, including a significant fine of 25.54 million yuan for improper competition practices related to "kickback sales" [22][23]. - The company's sales and distribution expenses have consistently exceeded 3 billion yuan annually for seven years, raising concerns about its marketing practices and business model [19][20]. - Historical allegations of bribery and improper conduct have also surfaced, with past incidents involving the company's sales managers engaging in corrupt practices to secure business advantages [24].

Group 1 - The core viewpoint of the article highlights the licensing agreement between Hansoh Pharmaceutical (03692) and Roche for HS-20110 (CDH17ADC), which includes an upfront payment of $80 million and potential milestone payments of up to $1.45 billion, along with product sales sharing [1] - HS-20110 is a potential first-in-class (FIC) product currently undergoing global Phase I clinical trials for the treatment of colorectal cancer and other solid tumors in China and the United States [1] - The report indicates optimism regarding Hansoh Pharmaceutical's milestone revenue normalization and external licensing opportunities, with management raising the annual revenue guidance to a mid-to-high double-digit growth [1] Group 2 - The company is expected to achieve over 10 billion in innovative drug revenue by 2025, with the innovative drug revenue proportion likely to exceed 80% [1] - Milestone and upfront payment revenue is anticipated to exceed 2.2 billion [1] - The early pipeline includes several innovative molecules such as EGFR/cMET ADC and CDH6ADC, which have external licensing opportunities [1] Group 3 - The company is also optimistic about the continued growth of its core product, Amivantamab, in the domestic market, with four approved indications and projected sales exceeding 6 billion by 2025, with a peak single-drug sales potential of 8 billion [2] - Amivantamab in combination with chemotherapy for first-line treatment of NSCLC is expected to receive approval in the second half of the year [2] - The research pipeline includes combinations of Amivantamab with c-Met TKI and EGFR/c-Met bispecific antibodies/ADCs, which are expected to further strengthen the company's leading position in the lung cancer market [2]

Core Insights - Hansoh Pharmaceutical (03692) has signed a licensing agreement with Roche for HS-20110 (CDH17ADC), which includes an upfront payment of $80 million and potential milestone payments of up to $1.45 billion for development, regulatory approval, and commercialization progress, along with product sales sharing [1] Group 1: Licensing Agreement and Product Details - HS-20110 is a potential first-in-class (FIC) product, combining a CDH17 antibody with a topoisomerase inhibitor through a covalent bond [1] - The product is currently undergoing global Phase I clinical trials for the treatment of colorectal cancer and other solid tumors in China and the United States [1] Group 2: Revenue and Growth Projections - The report indicates optimism regarding Hansoh's milestone revenue normalization and external licensing opportunities, with the company exceeding expectations for milestone revenue in the first half of 2025 [1] - Management has raised the full-year revenue guidance to a mid-to-high double-digit growth rate, with innovative drug revenue expected to surpass 10 billion in 2025, accounting for over 80% of total revenue [1] - Milestone and upfront payment revenue is anticipated to exceed 2.2 billion [1] Group 3: Core Product Performance - The company is also optimistic about the continued growth of its core product, Amivantamab, which has received approval for four indications, with sales expected to exceed 6 billion in 2025 and a peak single-drug revenue potential of 8 billion [1] - The indication for Amivantamab in combination with chemotherapy for first-line treatment of non-small cell lung cancer (NSCLC) is expected to receive approval in the second half of the year [1] Group 4: Pipeline and Market Expansion - The early pipeline includes several innovative molecules such as EGFR/cMET ADC and CDH6ADC, which present external licensing opportunities [1] - Ongoing research and development efforts for Amivantamab in combination with c-Met TKI and EGFR/c-Met bispecific antibodies/ADCs are expected to further solidify the company's leading position in the lung cancer market [1]

Investment Rating - The report maintains a positive outlook on Hansoh Pharmaceutical, indicating an expectation of outperforming the market in the next 12-18 months [15]. Core Insights - Hansoh Pharmaceutical has entered into a licensing agreement with Roche for HS-20110 (CDH17 ADC), which includes an upfront payment of USD80 million and potential milestone payments of up to USD1.45 billion, along with royalties on product sales [5][6]. - The company anticipates significant growth in milestone revenues and out-licensing opportunities, with management raising the full-year revenue guidance to mid-to-high double-digit growth [6][7]. - Revenue from innovative drugs is projected to exceed CNY10 billion in 2025, with innovative drug revenue likely surpassing 80% of total revenue [6][7]. - The core product Aumolertinib is expected to achieve sales exceeding CNY6 billion in 2025, with peak sales potential reaching CNY8 billion [7]. Summary by Sections Licensing Agreement - Hansoh has licensed HS-20110 (CDH17 ADC) to Roche, receiving an upfront payment of USD80 million and up to USD1.45 billion in milestone payments tied to development and commercialization [5][6]. Revenue Growth - The company’s milestone revenues for the first half of 2025 have significantly exceeded expectations, prompting an upward revision of the revenue guidance [6]. - Combined milestone and upfront payments are projected to exceed CNY2.2 billion [6]. Product Pipeline - Aumolertinib has received approval for four indications, with anticipated sales growth and further approvals expected to solidify its market position [7]. - The early-stage pipeline includes innovative molecules like EGFR/cMET ADC and CDH6 ADC, which present out-licensing opportunities [6].

Industry Rating - The report maintains an "Outperform" rating for the pharmaceutical and biotechnology industry [1] Core Insights - The innovative drug sector is experiencing a positive trend with significant revenue growth and a reduction in losses, indicating a potential for sector-wide profitability [2][6] - The overall revenue for the innovative drug sector in H1 2025 reached 30.649 billion yuan, a year-on-year increase of 9.77%, while the net loss attributable to shareholders was 2.096 billion yuan, showing a substantial reduction in losses [6] - The sector's gross margin remains high at 84.43%, with a slight decrease compared to the previous year, but showing signs of recovery in Q2 2025 [3][6] Summary by Sections Innovative Drug Sector - The innovative drug sector's revenue for H1 2025 was 30.649 billion yuan, with a growth rate of 9.77% year-on-year. Q2 2025 revenue was 16.387 billion yuan, reflecting a 33.24% increase [5][6] - The sector's gross margin for H1 2025 was 84.43%, slightly down from the previous year, but Q2 2025 saw an increase to 84.73% [3][6] - The number of License-out transactions with upfront payments exceeding 10 million USD reached a new high, indicating that overseas rights have become a crucial funding source for Chinese companies [4][7] Financial Performance - The innovative drug sector's net loss for H1 2025 was 2.096 billion yuan, with a significant reduction in losses of 127.58% year-on-year. The adjusted net loss was 2.880 billion yuan, reflecting a 151.25% reduction in losses [5][6] - The sector's operating cash flow was positive at 210 million yuan, indicating improved financial health [5] Traditional Pharmaceutical Sector - The traditional pharmaceutical sector, comprising 136 listed companies, reported total revenue of 254.895 billion yuan in H1 2025, a decrease of 1.64% year-on-year. The net profit attributable to shareholders was 32.099 billion yuan, down 4.83% [26][32] - The gross margin for the traditional pharmaceutical sector was 51.05% in H1 2025, showing a slight increase compared to the previous year [27][32] - The sector is adapting to policy changes, with increased industry concentration and some leading companies achieving growth through transformation and international expansion [32]

Core Viewpoint - The company reported strong financial performance for H1 2025, with total revenue of 7.434 billion RMB, a year-on-year increase of 14.3%, and a net profit attributable to shareholders of 3.135 billion RMB, up 15.02% [1] Financial Performance - Total revenue for H1 2025 reached 74.34 billion RMB, reflecting a 14.3% year-on-year growth [1] - Net profit attributable to shareholders was 31.35 billion RMB, marking a 15.02% increase compared to the previous year [1] - Revenue from innovative drug products amounted to 61.45 billion RMB, up 22.1%, accounting for 82.7% of total revenue [1] Product Revenue Breakdown - Revenue from the oncology product portfolio, including drugs like Amatinib and Flumatinib, was 45.31 billion RMB, remaining stable year-on-year [1] - Revenue from the anti-infection product portfolio, including Adefovir and Metronidazole, reached 7.35 billion RMB, a 4.9% increase [1] - Revenue from the central nervous system disease product portfolio, including Inalizumab, was 7.68 billion RMB, up 4.8% [1] - Revenue from the metabolic and other diseases product portfolio surged to approximately 14.00 billion RMB, a significant increase of 134.5% [1] Strategic Developments - The company received an upfront payment of 112 million USD from MSD for the agreement related to HS-10535 (an oral small molecule GLP-1RA) [1] - The sales data from sample hospitals indicated a growth from 18.41 million RMB in 2020 to 1.784 billion RMB in 2024, with a compound annual growth rate of 214% [2] - Amatinib has expanded its indications related to NSCLC, with four approved indications and additional ones under review [2] Clinical Development - The company has over 40 candidate innovative drugs undergoing more than 70 clinical trials as of H1 2025 [3] - Eight new innovative drugs entered clinical trials in H1 2025, including HS-20122 (EGFR/c-Met ADC) and HS-10510 (PCSK9) [3] - Three new drugs entered Phase III clinical trials, including HS-20137 (IL-23p19) for psoriasis and two ADCs for bone and soft tissue sarcoma and ovarian cancer, with overseas rights granted to GSK [3] Revenue and Profit Forecast - The company's revenue forecast for 2025 has been revised upward from 13.741 billion RMB to 14.668 billion RMB, with expected revenues of 15.835 billion RMB and 17.779 billion RMB for 2026 and 2027, respectively [3] - The net profit forecast for 2025 has been adjusted from 4.746 billion RMB to 5.167 billion RMB, with expected net profits of 5.325 billion RMB and 6.133 billion RMB for 2026 and 2027, respectively [3]

Core Viewpoint - Tianfeng Securities maintains an "overweight" rating for Hansoh Pharmaceutical, adjusting revenue and net profit forecasts for 2025, 2026, and 2027 due to expected large BD transaction payments [1] Group 1: Financial Performance - The revenue forecast for 2025 is raised from 137.41 billion to 146.68 billion RMB, with expected revenues of 158.35 billion and 177.79 billion RMB for 2026 and 2027 respectively [1] - The net profit forecast for 2025 is increased from 47.46 billion to 51.67 billion RMB, with expected net profits of 53.25 billion and 61.33 billion RMB for 2026 and 2027 respectively [1] - In the first half of 2025, total revenue reached 74.34 billion RMB, with a net profit of 31.35 billion RMB [1] Group 2: Product Performance - Revenue from innovative drug products reached 61.45 billion RMB, accounting for 82.7% of total revenue [1] - The metabolic and other fields saw significant growth, with revenue from this segment approximately 14.00 billion RMB, a year-on-year increase of 134.5% [1] - The anti-tumor product portfolio, including Amatinib and Flumatinib, generated revenue of 45.31 billion RMB, remaining stable year-on-year [1] Group 3: Innovation and Clinical Development - Over 40 candidate innovative drugs are undergoing more than 70 clinical trials, with 8 new drugs entering clinical trials in the first half of 2025 [3] - Three drugs have entered Phase III clinical trials, including HS-20137 for psoriasis and HS-20093 and HS-20089 for sarcoma and ovarian cancer respectively [3] - The TYK2 inhibitor HS-10374 is also in Phase III trials, showing low skin toxicity risk [3] Group 4: Market Position and Growth - Amatinib, as the first domestic third-generation EGFR TKI, has seen rapid sales growth, with a compound annual growth rate of 214% from 2020 to 2024 [2] - Amatinib is expanding its indications related to NSCLC, with four approved indications and additional ones expected in 2025 [2] - The drug received approval from the UK MHRA in June 2025, marking Hansoh's first entry into the overseas market [2]