Core Viewpoint - Insilico Medicine is set to become the largest biotech IPO in the Hong Kong market in 2025, with significant backing from prominent investors like Qiming Venture Partners, Warburg Pincus, Temasek, Hillhouse, and Sequoia China [2] Investment Background - Qiming Venture Partners led Insilico Medicine's Series B financing in 2019 and has since increased its stake, holding approximately 7% before the IPO [2] - The investment was driven by the belief that AI will profoundly change drug development pathways and efficiency [2][4] - Insilico Medicine's collaboration with WuXi AppTec in 2018 resulted in the rapid identification of a small molecule lead compound targeting DDR1 in just 46 days, showcasing the potential of AI in drug discovery [4] Company Development and Strategy - Insilico Medicine has established a pipeline of over 30 innovative projects across various therapeutic areas, including oncology, immunology, fibrosis, and metabolism [7] - The company has partnered with 13 of the top 20 pharmaceutical companies globally, generating potential revenue of $2 billion through pipeline licensing agreements [7][8] - The introduction of Dr. Ren Feng, a seasoned drug development expert, was facilitated by Qiming to strengthen the company's capabilities in drug development [5] Future Expectations - The increasing validation of Insilico Medicine's platform is expected to enhance its attractiveness as a partner for top international pharmaceutical companies [8] - There is an anticipation that AI will not only empower early-stage research but also significantly accelerate clinical development processes, allowing new drugs to reach patients sooner [2][8] - The company aims to expand the application of its AI-driven platform beyond preclinical stages to include clinical phases, enhancing efficiency in patient recruitment, clinical protocol writing, data analysis, and regulatory review [11] Industry Insights - Qiming Venture Partners has previously invested in Schrödinger, gaining insights into the AIDD sector, which has informed their investment strategy in Insilico Medicine [9][10] - The firm recognizes that merely providing software services in the AIDD space may lead to slow growth, prompting a focus on generating pipeline projects for scalability [10] - The collaboration between Qiming's medical innovation and technology investment teams has been crucial in identifying and supporting leading companies in the AI and healthcare sectors [10]

Investment Rating - The report maintains a "Buy" rating for Viva Biotech Holdings (1873.HK) with a target price of HKD 4.0, indicating a potential upside of 41.3% from the current price of HKD 2.83 [1][3]. Core Insights - The company is leveraging AI to enhance drug development and is on the verge of a commercial explosion in its CDMO (Contract Development and Manufacturing Organization) products [1][3]. - Despite a 15.3% year-on-year decline in revenue to RMB 830 million in the first half of 2025, the adjusted net profit increased by 9.1% to RMB 180 million, indicating resilience in profitability [3][6]. - The CRO (Contract Research Organization) business has shown recovery, with a 9.6% increase in revenue to RMB 420 million, supported by a growing client base and a significant contribution from AI-enabled projects [7][8]. Company Operations Review - The CDMO segment's revenue decreased by 31.4% to RMB 410 million due to upgrades for FDA audits and geopolitical supply chain disruptions, but profitability improved with a gross margin of 35.9% [5][18]. - The CRO business has expanded its client base to 1,669, with overseas revenue accounting for 85% of total income, reflecting a 4.9% increase year-on-year [5][8]. - AI-enabled projects now contribute approximately 10% of CRO revenue, showcasing the integration of advanced technology in drug discovery processes [14][18]. Financial Forecast - Revenue projections indicate a gradual recovery, with expected revenues of RMB 1,912 million in 2025, followed by growth to RMB 2,478 million by 2027 [6][23]. - The gross margin is anticipated to improve from 40.0% in 2025 to 43.9% by 2028, reflecting operational efficiencies and enhanced service offerings [6][23]. - The adjusted net profit is forecasted to rise from RMB 356 million in 2025 to RMB 569 million by 2028, indicating strong growth potential [6][23].

Core Viewpoint - The company reported a strong financial performance for the first half of 2025, with significant growth in revenue and profit driven by improvements in its CRO and CMC business segments [1][2][7]. Financial Performance - Revenue reached RMB 831.9 million, with a gross profit of RMB 339.4 million and a gross margin of 40.8%, up 6.3 percentage points year-on-year [1]. - Net profit was RMB 148.6 million, a 3.1% increase from RMB 144.2 million in the same period last year [1]. - Adjusted non-IFRS net profit grew nearly 9.1% to RMB 183.5 million from RMB 168.2 million year-on-year [1]. CRO Business Growth - CRO revenue increased from RMB 385.9 million to RMB 422.8 million, representing a growth of approximately 9.6% [2]. - Adjusted gross profit for the CRO segment rose from RMB 167.2 million to RMB 194.6 million, marking a 16.4% increase [2]. - The number of CRO clients increased to 1,669, with major clients contributing 25.9% of revenue [3]. Domestic and International Market Dynamics - Domestic revenue from CRO services surged by 46.6%, driven by a booming market for innovative drug BD transactions [3]. - International revenue accounted for approximately 85.0% of CRO income, with a year-on-year growth of about 4.9% [3]. Technological Advancements - The company has delivered over 90,739 protein structures, with 8,023 delivered in the first half of 2025 [4]. - The new molecular modalities contributed around 15.0% to CRO revenue, showing a growth of nearly 19.0% [4]. - The AI-driven drug discovery platform has been developed to enhance the drug discovery process, integrating various advanced technologies [6]. CMC Business Developments - The acquisition of Zhejiang Langhua Pharmaceutical has strengthened the company's production capabilities [6]. - Langhua's revenue for the first half of 2025 was RMB 409.0 million, with an adjusted gross margin of 37.9%, up 7.9 percentage points year-on-year [7]. - The company is preparing for new commercial projects in the CDMO sector, with significant improvements in CMC profitability [7][9]. Investment and Incubation Activities - The company has successfully exited several incubation projects, realizing approximately RMB 76.5 million in returns [10]. - A total of 93 biotech startups have been incubated, with 67.7% located in North America [10]. - The company has established a RMB fund to invest in promising biotech businesses, aiming to foster strategic partnerships [11]. Workforce and Infrastructure - As of June 30, 2025, the company employed 2,085 staff, with 1,098 in CRO R&D [12]. - The company has expanded its facilities, including a new headquarters in Shanghai and multiple research centers across China [13][14][15].