Core Viewpoint - The article emphasizes the importance of the innovation-driven pharmaceutical industry in China, highlighting the trend of internationalization and the potential for growth in both innovative drugs and medical devices, while also addressing the challenges posed by domestic demand and healthcare financing [2][3][4]. Group 1: Innovation and Internationalization - The Chinese innovative pharmaceutical industry has transitioned from "importing and imitating" to "innovating and exporting," with significant internationalization evidenced by increasing license-out deals and collaborations [3][5]. - By 2025, Chinese innovative drugs are expected to demonstrate global competitiveness with high-quality clinical data presented at major international conferences [5][9]. - The trend of innovative drugs is supported by improved financing conditions and a favorable regulatory environment, leading to a new cycle for CXO and upstream sectors [3][4]. Group 2: Domestic Demand and Healthcare Financing - Domestic demand has been weak but is gradually improving, with commercial insurance playing a crucial role in alleviating payment conflicts [3][4]. - The healthcare sector is undergoing a normalization phase post-medical corruption investigations, which is expected to ease the impact on the industry by 2025 [3][4]. - The article highlights the need for a multi-layered healthcare financing system, with commercial insurance expected to inject new vitality into the payment landscape [24][25]. Group 3: Investment Strategies - The "barbell strategy" remains applicable in 2026, combining aggressive investments in innovative healthcare technologies with defensive positions in traditional dividend-paying stocks [4][22]. - The article suggests that high-dividend pharmaceutical stocks still have room for valuation recovery, particularly in light of the aging population and the essential nature of healthcare demand [23][24]. - Key investment windows are identified around the release of 2025 annual reports and the end of 2026, as these periods may attract institutional investment due to clearer assessments of dividend sustainability [23][24]. Group 4: Medical Devices and Equipment - The medical device sector is expected to see a recovery, with companies gradually clearing inventory and improving revenue growth [14][18]. - The article notes that the competitive landscape for medical devices is shifting, with high-end products maintaining price stability while lower-end products face price competition [18][19]. - Chinese medical device companies are accelerating their international expansion, with overseas revenue growth outpacing domestic revenue growth [19][20]. Group 5: Future Outlook - The integration of AI in healthcare is anticipated to create new tools and business models, particularly in drug development and clinical diagnostics [20][21]. - The article posits that while rapid growth in new technologies may be challenging in the short term, supportive policies and clear clinical needs will present investment opportunities in the healthcare sector [21][22].

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].

Company Dynamics - On October 19, the company presented impressive interim analysis data from the HARMONi-6 trial at The Lancet & ESMO [1] - The company revised the HARMONi-3 trial protocol to conduct independent statistical analyses based on histological types [2] Clinical Trial Results - The interim analysis of HARMONi-6 showed a median progression-free survival (mPFS) of 11.1 months compared to 6.9 months, with a hazard ratio (HR) of 0.60 (P<0.0001), indicating a significant improvement [1] - The absolute difference in mPFS between the two groups was 4.24 months, with consistent results across subgroups regardless of PD-L1 expression or liver metastasis [1] - Treatment-related serious adverse events (SAE) were reported at 32.3% for the experimental group versus 30.2% for the control group, with no overall survival (OS) data available yet [1] HARMONi-3 Trial Updates - The HARMONi-3 trial will be divided into two parts: sq-NSCLC (600 patients) and nsq-NSCLC (1000 patients), with separate statistical analyses planned [2] - Enrollment for sq-NSCLC is expected to complete in the first half of 2026, with OS analysis anticipated around the same time [2] - The nsq-NSCLC group aims to complete enrollment in the second half of 2026, with PFS event numbers expected in the first half of 2027 [2] Expansion of Clinical Indications - The company plans to initiate a global multi-regional clinical trial (HARMONi-GI3) for AK112 in colorectal cancer, based on promising II phase data [2] - The trial will compare AK112 combined with chemotherapy against bevacizumab combined with chemotherapy, with an enrollment target of 600 patients [2] Earnings Forecast and Valuation - The company maintains its earnings per share (EPS) forecasts for 2025 and 2026 at 0.09 CNY and 0.59 CNY, respectively [2] - The target price has been adjusted down by 18.2% to 184.00 HKD, reflecting a 50.1% upside potential [3]

Group 1 - The core viewpoint indicates that the innovative drug sector in Hong Kong is showing clear signs of bottoming out, supported by several factors [1] - BD (Business Development) transactions have started to recover since October, with historical data showing that transactions from October to January account for over 50% of the annual total, and transaction amounts can reach 60% to 70% of the yearly total [1] - Positive data from ESMO (European Society for Medical Oncology) has emerged, with several important clinical studies, such as AK112 and 3SB707, showing promising results, which is expected to catalyze further trading and stock price increases [1] - The valuation of innovative drugs has reached an absolute bottom, with some companies having little room for further decline [1] Group 2 - As of October 21, 2025, the National Securities Hong Kong Stock Connect Innovative Drug Index (987018) shows mixed performance among its constituent stocks, with notable gainers including CloudTop New Drug (01952) up 5.29% and Zai Lab (09688) up 1.80%, while major decliners include Juno Therapeutics-B (02617) down 6.82% [2] - The Hong Kong Innovative Drug ETF (159286) closely tracks the National Securities Hong Kong Stock Connect Innovative Drug Index and has seen a slight increase of 0.22%, with the latest price at 0.93 yuan [2] - As of September 30, 2025, the top ten weighted stocks in the National Securities Hong Kong Stock Connect Innovative Drug Index account for 71.83% of the index, including companies like BeiGene (06160) and Innovent Biologics (09926) [2]

Group 1 - The core viewpoint is that the innovative drug sector remains a strong investment theme despite a recent 15% pullback, with a year-to-date performance still among the best in the market [2] - From January to September, the total contract value for Chinese innovative drugs going overseas exceeded $100 billion, marking a 170% year-on-year increase, indicating a robust long-term outlook for the innovative industry chain [2] - The trend of innovative drugs going global is expected to continue, with more business development (BD) deals anticipated by year-end, reinforcing confidence in the innovative sector [2] Group 2 - The innovative drug sector is expected to receive significant catalysts in the fourth quarter, with 23 Chinese studies selected for presentation at the upcoming ESMO conference, a substantial increase from 7 studies in 2024 [3] - Macroeconomic conditions are favorable for the innovative drug sector, as recent comments from Powell suggest potential interest rate cuts, which are beneficial for rate-sensitive innovative drugs [3] - The innovative drug sector is seen as a good investment choice amid market resistance and a rotation in tech growth, with BD deals expected to drive recovery in the sector [3] Group 3 - The fourth quarter typically sees BD transactions account for about 40% of annual totals, with large products also expected to contribute positively [3] - Recent adjustments in the market provide a favorable entry point for long-term investors in the innovative drug sector [3] - Investors are encouraged to consider ETFs focused on innovative drugs, particularly those targeting the STAR Market and smaller-cap stocks, which may show stronger resilience [3]

Summary of the Conference Call for 康方生物 Company Overview - 康方生物 is a leading player in the field of bispecific antibodies, focusing on innovative drug development for cancer and autoimmune diseases. The company has over 50 drug candidates, with 24 in clinical or commercial stages and approximately 15 with first/best in class potential [2][5]. Key Points and Arguments Clinical Trial Success - **AK104** has shown outstanding results in clinical trials for cervical and gastric cancers, particularly in patients with low PD-L1 expression, demonstrating significant statistical differences in overall survival (OS) [2][4]. - **AK112** has entered the global market and is advancing in clinical trials for lung, colorectal, and biliary cancers, with promising data expected to be released at the upcoming CES conference [2][6]. Market Position and Sales Growth - Both **AK104** and **AK112** have been included in health insurance coverage, indicating strong market support. The sales figures are steadily increasing, driven by the expansion of indications and a snowball effect [2][7]. - The domestic sales peak for **AK112** is projected to reach 9 billion RMB, while the overseas market could see sales peak at 10 billion USD, contributing significantly to the company's valuation [16][17]. Research and Development - The **Harmony 6 study** is a pivotal head-to-head clinical trial comparing bispecific antibody combination chemotherapy with PD-1 monoclonal antibody combination chemotherapy, particularly focusing on central squamous cell lung cancer patients [2][8]. - **AK112** has successfully translated progression-free survival (PFS) into OS in the Harmony A study, indicating a significant breakthrough in treatment efficacy [9]. Addressing Market Concerns - 康方生物 has conducted extensive data analysis to demonstrate the consistency of its drugs across different populations, alleviating concerns regarding HR value discrepancies among various ethnic groups [3][10]. Future Development Directions - The company plans to continue enhancing its bispecific platform capabilities, expanding beyond oncology into autoimmune diseases, with multiple bispecific molecules entering Phase II clinical trials [11]. - The ongoing development of new first/best in class molecules is expected to elevate 康方生物's profile as a comprehensive platform company rather than a single-product entity [11]. Valuation and Financial Outlook - As 康方生物 progresses its Phase II clinical drugs, these will gradually be incorporated into the valuation framework, enhancing the overall stability of the company's operations [12]. - The long-term valuation potential for 康方生物 is estimated to reach 200 billion RMB, driven by the performance of AK104 and AK112, along with other drug candidates in the pipeline [18]. Additional Important Insights - The **AK104** drug has been approved for multiple indications, including first-line and second-line treatments for cervical cancer and first-line treatment for gastric cancer, achieving significant OS metrics [13][14]. - 康方生物 is conducting important global clinical trials for **AK104** across various indications, which are expected to further enhance its market position and sales potential [15]. This comprehensive overview highlights 康方生物's strong clinical performance, market positioning, and future growth potential, making it a significant player in the biopharmaceutical industry.

Summary of Key Points from the Conference Call on China's Innovative Drug Industry Industry Overview - The Chinese innovative drug industry is transitioning from a follower to a leader, showcasing significant advantages in R&D efficiency and cost control, particularly in popular technology areas such as bispecific antibodies (双抗) and antibody-drug conjugates (ADC) [1][2][3] - The approval speed of innovative drugs directly impacts market volume and competitive landscape, with early market entry being crucial [1][6] Core Insights and Arguments - **Market Dynamics**: The Chinese innovative drug sector is experiencing a shift in underlying logic, with improved liquidity in the Hong Kong stock market and increased risk appetite expected to boost the pharmaceutical sector, especially innovative drugs [1][8] - **International Recognition**: Chinese innovative drugs are gaining international recognition, exemplified by the $1.25 billion upfront payment for the PD-1 VGF bispecific antibody licensed to Pfizer by 3SBio, marking a significant milestone in outbound business development (BD) transactions [1][9] - **Policy Influence**: Healthcare policies are encouraging differentiated innovation, with diverse payment methods being explored, and the impact of drug price reduction policies being limited [1][4][5] Key Factors Affecting the Industry - **Types of Companies**: The innovative drug sector comprises Big Pharma and Biotech companies, with Big Pharma focusing on commercialization and Biotech emphasizing R&D innovation [1][7] - **Investment Sentiment**: The overall performance of the pharmaceutical sector has been weak from 2020 to 2024 due to investor preference for dividend stocks, but improvements in liquidity and risk appetite in 2025 are expected to enhance the performance of the innovative drug sector [1][8] Challenges and Opportunities - **Global Competition**: As the global source innovation enters a bottleneck, Chinese companies can leverage high efficiency to achieve competitive advantages, particularly in ADC and bispecific antibody fields where they hold significant market shares [1][20][22] - **Market Entry Timing**: The timing of market entry is critical, with first-in-class drugs capturing an average of 45% market share, while subsequent entrants see diminishing returns [1][18] Emerging Trends and Future Directions - **New Drug Development**: The focus on PD-1 bispecific antibodies and ADCs is expected to drive future growth, with several companies poised to launch significant products in the near term [1][31][32] - **Clinical Trial Efficiency**: Chinese companies demonstrate superior enrollment speeds in clinical trials, significantly reducing time and costs compared to international counterparts [1][16] Conclusion - The Chinese innovative drug industry is positioned for substantial growth driven by policy support, international recognition, and advancements in R&D efficiency. The upcoming years are likely to see increased BD activities and successful product launches, contributing to the sector's evolution and competitiveness on a global scale [1][10][32]

Market Overview - The Hong Kong stock market showed a soft trend, with the Hang Seng Index (HSI) maintaining fluctuations and overall market sentiment being cautious [1] - The pharmaceutical sector exhibited mixed performance, with Kangfang Biopharma (09926) being a notable focus, closing at 140.1 HKD, down 1.68% for the day, with a trading volume of 29.57 billion HKD [1] Company Insights - Kangfang Biopharma's core product, AK112, is expected to release follow-up clinical data at the end of the month during an international medical conference, which has garnered market attention regarding its potential in cancer treatment [1] - The stock has experienced significant short-term volatility, with a 5-day price fluctuation of 21.6% [1] Technical Analysis - Technical indicators suggest a "buy" signal with a strength of 10, while multiple moving averages indicate a "strong buy" signal [3] - The Relative Strength Index (RSI) is at a relatively low level of 35, with several oscillators showing neutral signals, but some indicators indicate oversold conditions, suggesting a potential bottoming phase with a 57% probability of price increase [3] Support and Resistance Levels - The first support level for Kangfang Biopharma is at 128.3 HKD, with a second support level at 109.6 HKD [5] - The first resistance level is at 155.9 HKD, and if this level is surpassed, the second resistance level at 170.6 HKD may be challenged [5] - The current stock price of 140.1 HKD is positioned between the support and first resistance levels, making stability and movement towards the resistance level crucial for future trends [5] Investment Products - For investors optimistic about a rebound, the Huatai call warrant (18380) is recommended, offering a leverage of 3 times with an exercise price of 158.98 HKD, noted for its low premium and implied volatility [5][6] - The Bank of China call warrant (18157) is also worth considering, with a lower leverage of 2.6 times and a similar exercise price, but it has the highest implied volatility among similar products [6] - In terms of bull certificates, UBS's bull certificate (53839) has a high leverage of 4.6 times with a redemption price of 120 HKD, while JPMorgan's bull certificate (55333) offers an even higher leverage of 5.2 times with a redemption price of 124 HKD, suitable for investors confident in a short-term rebound [7][8]

Core Viewpoint - 招银国际 maintains a "Buy" rating for 康方生物 (09926), citing positive overall survival (OS) trends from the HARMONi trial, which enhances confidence in its first-line indication potential [1] Group 1: Clinical Trial Results - Summit released the latest data from the HARMONi global clinical trial, evaluating the efficacy of AK112 combined with chemotherapy versus chemotherapy alone in second-line EGFR-TKI resistant NSCLC patients [2] - Chinese patients demonstrated superior progression-free survival (PFS) results, with a median PFS of 6.8 months for AK112 combined with chemotherapy compared to 4.4 months for chemotherapy alone (HR=0.52, p<0.001) [3] - In long-term follow-up, the PFS HR slightly worsened to 0.57, potentially due to increased data maturity in Western populations, with North American and European patients showing PFS HRs of 0.67 and 0.55 respectively [3] Group 2: Overall Survival Analysis - In the final OS analysis, the median OS for the AK112 combined chemotherapy group was 16.8 months compared to 14.0 months for the chemotherapy alone group, with an HR of 0.79 (95% CI: 0.62–1.01, p=0.0570) [4] - Long-term follow-up showed an improvement in OS HR to 0.78 (95% CI: 0.62–0.98) with a nominal p-value of 0.0332, indicating a positive trend despite the FDA's reliance on pre-specified analysis results [4] - North American patients exhibited strong OS results with an HR of 0.70, although the confidence interval was wide (0.38–1.30) [5]