Core Viewpoint - Sino Biopharm is undergoing a significant transformation focused on innovation, with a robust pipeline in key therapeutic areas and strong financial support from biosimilars and generics [1][2] Group 1: Innovation and R&D - Sino Biopharm has increased its R&D investment to 17.6% of total revenue in 2024, up from 9.9% in 2019 [1] - By the end of 2024, 17 innovative drugs, including biosimilars, are expected to contribute 42% of total revenue, compared to only 11% in 2015 [1] - The company has completed more than 3 deals on average annually from 2019 to 2024 to enhance its innovative pipeline [1] Group 2: Key Therapeutic Areas - The company focuses on four core therapeutic areas: oncology, liver/metabolism, respiratory, and surgery/analgesia [1][2] - In oncology, Anlotinib has 9 approved indications and 4 under review, with potential for first-line treatment combinations [3] - The PDE3/4 inhibitor TQC3721 is positioned as a potential blockbuster for COPD and is a candidate for overseas licensing [4] Group 3: Sales and Market Performance - The combined sample-hospital market size for seven approved biosimilars reached RMB24 billion in 2024, with rapid sales expected, particularly for pertuzumab [4] - The generics business has shown resilience, with revenue growth of 3.1% YoY in 2024, despite policy shifts in China [4] - The impact of volume-based procurement has been minimized, with only 1% of total revenue affected in 2024 [4] Group 4: Financial Projections - The company is initiated with a BUY rating and a target price of HK$9.40, forecasting revenue growth of 11.4%/10.5%/9.6% YoY for 2025E/2026E/2027E [5] - Adjusted net profit is projected to grow by 12.2%/11.5%/10.5% YoY for the same periods [5] - The target price implies a 37x 2026E adjusted P/E based on a 10-year DCF model [5]

Investment Rating - The report assigns a "Buy" rating to Sino Biopharmaceutical with a 12-month price target of HK$3.92, indicating a downside potential of 17.7% from the current price of HK$4.77 [8][10]. Core Insights - The company is expected to achieve double-digit sales growth in 2025, driven by a 25% year-on-year increase in innovative drug sales, projected to rise from approximately Rmb12 billion in 2024 to around Rmb15 billion in 2025, contributing over half of total sales [2][8]. - The management highlighted a significant deal worth several billion US dollars is anticipated to be realized soon, reflecting the company's active negotiations with multinational pharmaceutical and leading biotech companies [3][6]. - The earnings growth is expected to outpace revenue growth due to ongoing savings in selling, general, and administrative expenses, along with an improved gross margin from a shift towards more profitable innovative drugs [2][8]. Summary by Sections Sales Growth and Financial Performance - The company is confident in achieving double-digit total sales growth in 2025, with innovative drug sales expected to grow by 25% year-on-year [2]. - The generic portfolio is also anticipated to show positive growth, with major drugs having Rmb500 million or more in sales effectively managing the impacts of the volume-based procurement (VBP) policy [2][8]. Pipeline and Deal-Making - Sino Biopharmaceutical has a robust R&D pipeline with multiple innovative assets, including potential treatments for COPD and breast cancer, which are currently in various phases of clinical trials [6][7]. - The company is focusing on out-licensing as a key strategy to unlock global potential and generate sustainable collaboration income [3][6]. Market Position and Competitive Advantage - Anlotinib, a key product, is targeting peak sales of over Rmb6 billion, demonstrating superior efficacy compared to existing treatments for non-small cell lung cancer (NSCLC) [7]. - The management emphasized the large market for NSCLC in China, which can accommodate multiple players, and highlighted the advantages of their product's established recognition and cost efficiency [7].

Summary of Sino Biopharmaceutical Conference Call Company Overview - **Company**: Sino Biopharmaceutical (1177.HK) - **Industry**: Pharmaceuticals, specifically focusing on oncology treatments Key Points and Arguments Clinical Efficacy - **Anlotinib and Benmelstobart Combination**: Demonstrated superior efficacy in first-line (1L) non-small cell lung cancer (NSCLC) without brain or liver metastasis compared to current standard of care (SoC) treatments - **PFS Comparison**: Anlotinib/benmelstobart combination showed a progression-free survival (PFS) of 11.0 months versus 7.1 months for Keytruda (HR=0.70) [2] - **Squamous Subtype**: Stronger PFS benefits observed in squamous subtype (HR=0.63) compared to non-squamous (HR=0.83) [2] - **Sequential Treatment**: In patients with wild-type NSCLC, the combination of benmelstobart plus chemotherapy followed by anlotinib resulted in longer PFS (10.12 months) compared to tislelizumab plus chemotherapy (7.79 months, HR=0.64) [2] Safety Concerns - **Adverse Events**: Notable safety concerns with the anlotinib/benmelstobart combination, particularly VEGF-related adverse events - **Hemoptysis**: 21.3% vs 3.4% for Keytruda - **Hypertension**: 51.1% vs 14.2% for Keytruda [2] Market Potential and Innovative Assets - **Emerging Assets**: Focus on innovative assets with global potential - **TQ05105**: First-in-class JAK/ROCK inhibitor for myelofibrosis and GVHD, currently in phase 3 trials - **TQC3721**: PDE3/4 inhibitor showing preliminary efficacy for COPD - **TQB2102**: HER2 bispecific ADC with anti-tumor effects in various solid tumors [2] Financial Outlook - **Price Target**: Buy-rated with a 12-month sum-of-the-parts (SOTP) based target price of HK$3.92 - **Valuation Breakdown**: Innovative pipeline valued at HK$41.5 billion and generics at HK$32.1 billion [7] - **Revenue Projections**: Expected revenue growth from Rmb 28.87 billion in 2024 to Rmb 37.42 billion by 2027 [10] Risks - **Key Risks**: - Broader price cuts on generics portfolio - Delays in regulatory approval for key products - Low return on R&D investment due to resource allocation issues - Below-expectation ramp-up of innovative drugs [7] Additional Important Information - **Market Capitalization**: Approximately HK$83.0 billion (US$10.6 billion) [10] - **Enterprise Value**: HK$92.1 billion (US$11.7 billion) [10] - **Analyst Contact Information**: Ziyi Chen and Honglin Yan from Goldman Sachs [4] This summary encapsulates the critical insights from the conference call regarding Sino Biopharmaceutical's clinical advancements, market positioning, financial outlook, and associated risks.