Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **China Healthcare** sector, specifically the **pharmaceutical industry** in China, with insights into various companies and their performance outlooks for 2025 and 2026 [1][2][6]. Core Companies Discussed 1. **Jiangsu Hengrui Pharmaceuticals (600276.SS)** - Expected product sales growth of **12% YoY** in 2025, driven by **~25% growth** in innovative drug sales [10]. - Anticipated net profit growth faster than revenue due to higher contributions from business development (BD) income and lower operating expenses [10]. - Projected to achieve **25%+ growth** in innovative drug sales in 2026, supported by **10 new NRDL entries** [36]. 2. **Hansoh Pharmaceutical Group Co Ltd (3692.HK)** - Total revenue growth forecasted at **20%** in 2025, with **17%** growth in product sales [10]. - Net profit expected to grow at a slower pace due to high base effects and ongoing R&D investments [10]. 3. **3SBio (1530.HK)** - Revenue projected at **Rmb19bn** in 2025, with a slight decline in product sales [10]. - Anticipated modest growth in 2026, with new products ramping up [10]. 4. **CSPC Pharmaceutical Group (1093.HK)** - Projected total revenue decline of **7% YoY** in 2025, with a **10% drop** in finished drug sales [10]. - Expected net profit growth of **17%** due to BD income [10]. 5. **Sino Biopharmaceutical (1177.HK)** - Forecasted total revenue growth of **15%** in 2025, driven by biosimilar growth [11]. - Projected net profit growth of **73%**, largely due to higher dividend payments from Sinovac [12]. 6. **Fosun Pharmaceutical (2196.HK)** - Expected flat total revenue in 2025, with a projected **20% growth** in net profit due to operational savings [12]. 7. **China Medical System (0867.HK)** - Revenue growth of **10%** expected in 2025, with a focus on innovative drugs [12]. - Plans to spin off its dermatology subsidiary, Dermavon, to unlock equity value [49]. Key Insights and Trends - **Globalization** remains a significant theme, with companies focusing on pipeline advancements and out-licensing deals to enhance revenue streams [2][8]. - The **China pharma sector** is experiencing a shift towards innovative drug development, with many companies investing heavily in R&D to mitigate the impact of pricing pressures and regulatory changes [49][67]. - **Out-licensing deal momentum** for China-originated assets is robust, indicating a healthy market for collaboration and partnerships [8]. Financial Projections - **Hengrui**: Projected **Rmb31.4bn** in revenue for 2025, with a **12.3% YoY** increase [16]. - **Hansoh**: Expected revenue of **Rmb14.7bn** in 2025, with a **20.1%** growth rate [16]. - **3SBio**: Revenue forecasted at **Rmb19bn** in 2025, with a significant increase in net profit [16]. - **CSPC**: Anticipated revenue of **Rmb26.997bn**, reflecting a **-6.9%** change [16]. - **Sino Biopharma**: Expected revenue of **Rmb33.333bn**, with a **15.5%** growth [16]. Risks and Considerations - Companies face **regulatory pressures** and pricing challenges, particularly from the **Volume-Based Procurement (VBP)** policies [49][63]. - The potential for **pipeline setbacks** and delays in new product launches could impact growth trajectories [63][67]. - The **spinoff of Dermavon** may be perceived negatively by some investors, but it is expected to enhance the financial flexibility of China Medical System [50]. Conclusion The conference call highlighted a positive outlook for the China pharmaceutical industry, driven by innovative drug sales and strategic partnerships. However, companies must navigate regulatory challenges and market pressures to sustain growth.

Core Viewpoint - Dividend investing can build wealth and provide passive income, with dividend stocks outperforming non-dividend payers in the long run [1] Group 1: Dividend Stocks Overview - Dividend stocks can be ideal long-term investments even for those focused on growth stocks, as they provide stability during market fluctuations [2] - Companies that are essential in their industries and offer in-demand products and services are key targets for dividend investing [2] Group 2: Verizon Communications - Verizon is a leading telecom company in the U.S. with over 146 million wireless customers, playing a significant role in the economy [4] - The company is expanding its broadband business and plans to add over 2.2 million new fiber subscribers through the acquisition of Frontier Communications [5] - Verizon's stock has a yield of 7.01%, a payout ratio of 57.68%, and has raised dividends for 21 consecutive years, paying an annual dividend of $2.76 per share [5] - Despite recent struggles in gaining new wireless customers, Verizon is viewed as a long-term stability and dividend investment opportunity [7] Group 3: Johnson & Johnson - Johnson & Johnson is now a pure-play health company focusing on medical technology and innovative drugs, operating in a non-cyclical industry [8] - The stock has a yield of 2.37%, priced at $219.57, and has gained 48% over the past year [9] - The company reported a 4.4% year-over-year revenue increase and a 15.7% EPS jump in the third quarter, generating $14.3 billion in free cash flow in the first nine months of 2025 [10] - Johnson & Johnson has a payout ratio of 48.94%, has increased dividends for 63 years, and pays an annual dividend of $5.20 per share with a 5-year dividend growth rate of 5.25% [12] Group 4: Coca-Cola - Coca-Cola is a blue-chip dividend stock with a yield of 2.89%, having raised dividends for 63 consecutive years [13] - The stock is priced at $70.48, with a 13% gain over the past year, and has a payout ratio of 67.85%, paying an annual dividend of $2.04 per share [14] - Coca-Cola operates an asset-light business model, selling concentrates and syrups to bottling partners, which minimizes operating costs and generates steady revenue [15] - The company has demonstrated resilience, generating over 100% total return over the past decade, making it a reliable choice for dividend investors [16]

Summary of Tigermed (3347.HK) Conference Call Company Overview - **Company**: Tigermed (3347.HK) - **Market Cap**: HK$51,795 million (approximately US$6,654 million) [2] Industry Insights - **Industry**: Innovative drugs financing in China - **Growth Metrics**: - Total financing size for innovative drugs in China increased by 342% year-over-year (yoy) to Rmb18.0 billion in December 2025, marking a new high in the past three years [1] - Primary market financing for innovative drugs grew by 140% yoy to US$1.1 billion in December 2025 [1] - For the year 2025, total financing and primary market financing sizes rose by 38% and 25% yoy, respectively [1] Financial Performance and Projections - **Booking Growth**: Tigermed is expected to deliver higher new booking growth in 2026 compared to a mid-teens percentage in 2025 [1] Valuation - **Target Price**: HK$73.00, representing a potential upside of 72.0% from the current price of HK$42.44 [2] - **Expected Total Return**: 72.8%, including a dividend yield of 0.8% [2] - **Valuation Breakdown**: - HK$21.8 per share for clinical trial solutions - HK$35.8 per share for clinical-related and laboratory services - HK$0.4 per share for other services - HK$1.5 per share for net cash - HK$13.5 per share for investment income [11] Risks - **Downside Risks**: - Weaker-than-expected client orders - Intense market competition - Less-than-expected investment gains - Increased investment in AI potentially affecting operating profit margin (OPM) - Margin pressure due to overseas expansion - Lower-than-expected long-term margins with AI adoption [12] Conclusion - Tigermed is positioned to benefit from the significant growth in the innovative drugs financing sector in China, with strong projections for new bookings and a favorable valuation outlook. However, potential risks related to market dynamics and operational challenges must be monitored closely.

Core Viewpoint - The "AI Plus" initiative in Zhejiang Province, particularly in Qiantang District, is significantly advancing the biomedical engineering sector, with a focus on integrating artificial intelligence into drug development processes [1][3][10]. Industry Overview - Hangzhou Biopharma Town in Qiantang District is a central hub for the biomedical and medical device industry, housing over 1,800 biomedical enterprises and currently having 90 innovative drugs in clinical trials [3][12]. - The district has attracted major pharmaceutical companies, including 7 of the world's top 10, and has a biomedical output value accounting for approximately 50% of Hangzhou's total [12]. AI Integration in Drug Development - AI technology is revolutionizing drug development by significantly reducing the time and cost associated with bringing new drugs to market, with MindRank reporting a reduction of 1.5 to 3 years and over 50% in early R&D costs [4][6]. - The use of AI allows for faster and more accurate screening of molecules, enabling the discovery of original molecules and new treatment ideas for previously intractable diseases [6][7]. Infrastructure and Support - Qiantang District has established a robust industrial foundation with 15 large model projects and over 18 AI research platforms, fostering a closed-loop biomedical industry chain that integrates AI into every stage of drug R&D [13][10]. - High-level scientific and technological innovation platforms, such as Zhejiang University's Innovation Institute for Artificial Intelligence in Medicine, are providing full-cycle AI innovation services to enterprises [14][15]. Future Prospects - Qiantang District aims to enhance its industrial policies and ecological systems to transform Hangzhou Biopharma Town into a national industrial landmark, anticipating a significant breakthrough in biomedical technologies [17].

Investment Rating - The report assigns a "Buy" rating for Jiangsu Hengrui Pharmaceuticals with a target price of Rmb123.000, indicating an expected share price return of 95.5% and an expected total return of 95.9% [4]. Core Insights - Jiangsu Hengrui Pharmaceuticals is positioned as a leading global biopharma, ranking No.2 in the size of its originated pipeline and No.3 in pipeline growth, benefiting from China's status as a significant source of global innovation [4][6]. - The report highlights that approximately 30% of global innovative drug trials originate from China, and about one-third of global innovative pipelines are from China-headquartered companies, indicating a robust growth trajectory for the industry [2][3]. - The Chinese pharmaceutical market shows significant potential for growth in innovative drugs, which currently account for only about 14% of total drug sales in hospitals, compared to much higher percentages in developed markets [3]. Summary by Sections Globalization and Innovation - Jiangsu Hengrui has made substantial progress in globalization, with over 20 global trials ongoing and a diversified portfolio across key therapeutic areas [6]. - The company leverages global partnerships and in-house capabilities to maximize innovation impact, with a strong record in out-licensing and strategic partnerships since 2018 [6]. Market Dynamics - The report notes that the demand for affordable innovation from China is expected to thrive due to increasing pricing pressures and the loss of exclusivity for leading multinational corporations [2]. - China's commitment to supporting innovative drugs is underscored by strong government backing for commercial health insurance, which is anticipated to improve coverage for innovative drugs in the future [3]. Financial Valuation - A discounted cash flow (DCF) approach is used to assess the fair value of Jiangsu Hengrui Pharmaceuticals, with a terminal growth rate of 4% and a weighted average cost of capital (WACC) of 8.3% [7].

Summary of Expert Call on China's Pharma Market Industry Overview - **Industry**: Pharmaceutical Industry in China - **Focus**: Multinational Corporations (MNCs) and their strategies in the Chinese market Key Insights 1. **Long-term Strategic Focus**: China is viewed as a top-five market for MNCs due to its large population and aging demographics, maintaining its strategic importance despite cost control policies impacting revenue growth [2][8][9] 2. **Cost Control Policies**: Policies like Value-Based Pricing (VBP) and Diagnosis-Related Groups (DRG) have led MNCs to shift focus from off-patent drugs to innovative drug sales, akin to a "patent cliff" scenario [3][8] 3. **Out-of-Pocket (OOP) Market**: MNCs are prioritizing the OOP market, which, despite higher prices compared to National Reimbursement Drug List (NRDL) drugs, has seen reduced patient costs through assistance programs and commercial insurance [3][10][11] 4. **In-Licensing Strategies**: MNCs are increasingly in-licensing innovative assets from China, driven by the improving quality of Chinese clinical trial data and faster development speeds [4][12][14] 5. **Collaboration Models**: New collaboration models are emerging, such as establishing NewCos and co-development agreements, as Chinese firms seek international R&D expertise [15][12] 6. **Regulatory Environment**: The Chinese pharmaceutical market is highly regulated, with ongoing refinements to policies like VBP, which now emphasizes drug quality [9][18] Additional Considerations 1. **Impact of CIDL**: The newly launched Commercial Insurance Innovative Drug List (CIDL) negotiations are expected to unlock growth opportunities for innovative drugs, particularly high-cost treatments [2][9] 2. **Geopolitical Factors**: MNCs are less focused on geopolitical factors when in-licensing Chinese assets, prioritizing therapeutic fit and strategic alignment instead [14] 3. **Quality of Clinical Trials**: MNCs maintain high standards for clinical trial data, with increasing investments in Chinese assets reflecting confidence in the quality of local clinical data [13][12] 4. **Risks in the Market**: Potential risks include unexpected price cuts from Group Purchasing Organizations (GPOs), intensified competition, and stricter regulations [18] This summary encapsulates the insights from the expert call regarding the evolving landscape of the pharmaceutical industry in China, highlighting both opportunities and challenges for MNCs operating in this market.

Summary of Key Points from the Conference Call Industry Overview - **Industry**: China's Healthcare Market - **Market Size**: Expected to grow from US$1.4 trillion in 2024 to US$2.1 trillion by 2030, representing a US$700 billion incremental revenue pool over the next five years, with an additional US$1.1 trillion potential by 2040 [2][12][52] Core Insights - **Aging Population**: The proportion of adults aged 65 and older is projected to rise from 15% in 2024 to 27% by 2040, significantly increasing healthcare spending as this demographic spends more on healthcare [2][15][52] - **Healthcare Expenditure Growth**: China's healthcare expenditures are currently at 5.4% of GDP and are expected to reach approximately 10% by 2040, indicating substantial growth potential [15][19][59] - **Incremental Demand**: The market may be overlooking US$700 billion in incremental healthcare demand between 2024-2030, driven by the aging population and increased healthcare needs [12][52] Key Drivers of Growth - **Basic Medical Insurance (BMI)**: Covers over 95% of the population and is projected to grow at a 5.5% CAGR, reaching nearly US$1 trillion by 2040 [3][24] - **Out-of-Pocket Expenditures**: Expected to grow at a 7% CAGR, reaching US$568 billion by 2030, indicating a shift towards discretionary healthcare spending [4][44] - **Innovative Drugs and Medtech**: Anticipated to be major beneficiaries of the healthcare market expansion, with innovative drugs expected to account for nearly 60% of BMI drug expenditures by 2030, up from 34% in 2024 [3][37][40] Investment Opportunities - **Biopharma Companies**: Positive outlook on innovative biopharma companies such as Innovent, BeOne, Hansoh, and Hengrui, as well as global firms like AstraZeneca and Merck with significant exposure to China [5][49] - **Medtech and CROs**: Companies like Mindray, Boston Scientific, Wuxi Apptec, and Lonza are expected to benefit from the structural changes in the healthcare market [5][49] - **Consumer Healthcare**: Growth in out-of-pocket spending is likely to benefit sectors such as traditional Chinese medicine (TCM), medical services, and home-use medical devices [4][50] Structural Changes and Challenges - **Regulatory Environment**: Despite the growth potential, challenges such as regulatory uncertainty, competition, and geopolitical risks remain [2][5] - **BMI Reform**: Ongoing reforms in BMI, including volume-based procurement and diagnosis-related groups, are expected to support innovation and improve funding for new treatments [3][37] Additional Insights - **Comparative Analysis**: China's healthcare expenditure growth is expected to mirror trends seen in other aging societies, particularly Japan, where healthcare spending has increased significantly alongside an aging population [64][70] - **Long-term Projections**: The healthcare market's potential is highly dependent on economic growth and the healthcare expenditure ratio, with various scenarios suggesting a range of incremental market sizes by 2030 [34][36] This summary encapsulates the key points discussed in the conference call regarding the future of China's healthcare market, highlighting both opportunities and challenges within the industry.

Summary of Key Points from the HSBC China Healthcare Conference Industry Overview - The industrial supply chain for innovative drugs in China is benefiting from domestic policy support and strong business development demand from global multinationals [4][5] - Leading pharmaceutical companies are well-positioned with diversified pipelines and abundant clinical trial resources in China [4] - Medtech companies faced challenges in the first half of 2025 but are expected to recover due to improved domestic demand and readiness for global supply-chain changes [4] - CXOs (pharma outsourcing services) are showing signs of recovery with higher utilization rates and solid backlogs, indicating that the worst is behind them [4] - Hospitals and pharmacies are still facing challenges due to domestic demand fluctuations and changing consumer behavior [4] Key Takeaways from the Conference - China has made significant advancements in healthcare over the past 10-15 years, particularly in innovative drug development and participation in global clinical trials [5] - Large pharmaceutical companies are focusing on internal R&D and business development as strategies to capitalize on opportunities in the Chinese market [5] - Despite uncertainties related to US drug pricing and regulatory changes, there is a trend towards developing best-in-class drugs at lower costs, with Chinese companies positioned to benefit global patients [5] - The innovative drug sector is expected to be a new chapter in China's pharmaceutical story, integrating more into the global healthcare ecosystem [5] Investor Sentiment and Market Trends - Investor sentiment towards China healthcare is positive, with a focus on drug innovation, although concerns remain regarding geopolitical impacts on CXOs [6] - Leading pharmaceutical and biotech companies are favored by investors due to new inflows from ETFs and increasing healthcare positioning [6] - Medtech is anticipated to be a strong sector in 2026 as signs of growth recovery in the domestic market are awaited [6] Stock Recommendations - Preferred stocks include Hansoh Pharma (3692 HK), Wuxi XDC (2268 HK), and Snibe (300832 CH), all rated as Buy [6][8] - Hansoh Pharma has a target price of HKD 47.00, implying a 26% upside from its current price of HKD 37.18 [15] - Wuxi XDC has a target price of HKD 75.00, indicating an 11.9% upside from its current price of HKD 67.00 [15] - Snibe has a target price of RMB 76.00, suggesting a 17.2% upside from its current price of RMB 64.82 [15] Financial Performance Insights - Global healthcare funding has shown recovery, with 1H25 growth at 18% year-over-year [10] - CXOs and biopharmaceuticals have led A-share performance in the past three months, while pharmacies and medical services have lagged [10][12] - The performance of various healthcare subsectors indicates a strong recovery in CXOs and biopharma, contrasting with the struggles of hospitals and distributors [11][12] Risks and Challenges - Potential risks include slower-than-expected sales ramp-up of new drugs, R&D progress delays, and impacts from anti-graft policies [15] - Biotech funding volatility and global competition could affect Wuxi XDC's growth [15] - Snibe faces risks from reduced IVD testing volumes and potential price cuts due to regulatory changes [15] This summary encapsulates the key insights and recommendations from the HSBC China Healthcare Conference, highlighting the positive outlook for the innovative drug sector while acknowledging the challenges and risks that remain.

Market Overview - The Hong Kong stock market saw all three major indices rise last week, with the Hang Seng Index increasing by 1.65% to close at 25,270.07 points, the Tech Index rising by 1.52% to 5,543.17 points, and the National Enterprises Index up by 1.62% to 9,039.09 points [1] - In the A-share market, the Shanghai Composite Index rose by 0.83% to 3,696.77 points, the Shenzhen Component Index increased by 1.6% to 11,634.67 points, and the ChiNext Index surged by 2.61% to 2,534.22 points. The total trading volume decreased by 34.597 billion yuan to 2,244.612 billion yuan [2] Pharmaceutical Industry Insights - Chinese pharmaceutical giants, Heng Rui Medicine and Hansoh Pharmaceutical, are expected to report significant profit improvements driven by the launch of innovative drugs and revenue from technology licensing. Heng Rui's net profit for the first half of the year is projected to grow by 40% to 4.1 billion yuan, with revenue increasing by 9% to 15.7 billion yuan. For the full year, profits are expected to rise by 28% to 8.1 billion yuan [3] - Heng Rui is actively optimizing its revenue structure, with the share of generic drug revenue in total revenue dropping from 62% in 2022 to 43% last year, and expected to further decline to 23% by 2027. The company has signed 14 out-licensing agreements since 2018, receiving 600 million USD in upfront payments and potential milestone payments of up to 13.4 billion USD [3] - Hansoh Pharmaceutical is also performing strongly, with a projected net profit increase of over 51% to 2.5 billion yuan for the first half of the year. Its annual profit is expected to grow by 6.2% to 4.64 billion yuan, with innovative drug sales projected to exceed 10 billion yuan, contributing approximately 80% of total revenue, up from 45% in 2021 [3] Banking and Insurance Sector Performance - In the first half of 2025, Chinese commercial banks achieved a cumulative net profit of 1.2 trillion yuan, although profitability indicators showed a slight decline. The average capital return rate was 8.19%, and the average asset return rate was 0.63%, indicating a slowdown in profit growth. However, the banks' risk resistance capacity has improved, with non-performing loans slightly decreasing to 3.4 trillion yuan and the non-performing loan ratio dropping to 1.49% [4] - The insurance industry maintained steady growth in the first half of 2025, with original insurance premium income increasing by 5.1% to 3.7 trillion yuan and the number of new policies rising by 11.1% to 52.4 billion. Despite an increase in claims and payouts, the industry's overall solvency remained robust, with comprehensive and core solvency ratios at 204.5% and 147.8%, respectively [4] - The banking sector has increased support for the real economy, with inclusive loans for small and micro enterprises reaching 36 trillion yuan, a year-on-year growth of 12.3%. Additionally, inclusive agricultural loans increased by 1.1 trillion yuan to 1.39 trillion yuan, reflecting a strong response to policy initiatives [5]

Investment Rating - The industry investment rating for China Healthcare is classified as Attractive [6][63]. Core Insights - The report discusses the potential impact of a proposed 200% US tariff on pharmaceuticals, highlighting the implications for both generic and innovative drugs [2][8]. - There is a significant shortage of sterile injectables in the US, with 102 generic medicines under-supplied from 2019-2024, primarily affecting categories such as anesthesia and oncology [3]. - Innovative drug manufacturers have higher gross margins (GMs of 80% or more) and are better positioned to absorb import costs compared to generic drug makers, who face GMs of 40-60% [4]. Summary by Sections Generic Drugs - The US is experiencing an acute shortage of sterile injectables, with 70% of the 102 under-supplied generic medicines being injectables [3]. - Most generic formulations and APIs are produced in India and China, with limited US-based production facilities [3]. Innovative Drugs - Innovative drug makers have more flexibility to manage import costs due to higher gross margins [4]. - Leading Chinese Contract Development and Manufacturing Organizations (CDMOs) are adapting their supply chains to include more US-based facilities [4]. Industry Ratings - The report includes a detailed list of companies within the China Healthcare sector, with various ratings such as Overweight (O), Equal-weight (E), and Underweight (U) [63][65].