Core Viewpoint - The Shanghai Municipal Committee emphasizes the importance of strengthening the research and development of innovative drugs and medical devices, focusing on new drug targets, accelerated results transformation, improved clinical trial efficiency, and innovative payment methods to promote the high-end and efficient development of the biopharmaceutical industry [1] Group 1: Investment Opportunities - Jianghai Securities predicts that 2026 will see a surge in BD transactions and mergers in the innovative drug sector, highlighting three main investment themes: focusing on ADC, bispecific antibodies, and RDC tracks, selecting globally competitive innovative drug companies, and paying attention to the commercialization and BD progress of late-stage pipelines [1] - The second investment theme involves closely following cutting-edge fields like small nucleic acids, targeting leading companies with proprietary delivery platforms and chronic disease pipelines [1] - The third theme looks favorably on supporting companies in the innovative drug industry chain, such as CXO firms that will benefit from increased R&D investment and accelerated international expansion, as well as niche companies deeply engaged in industry chain integration that hold long-term value [1] Group 2: Market Trends - Guosen Securities notes that the Chinese innovative drug industry has shown a long-term positive development trend, particularly evident in the explosive growth of BD transactions in recent years [1] - It is important to recognize that for most domestic innovative drugs, external licensing is often just the starting point for global development, with the progress of partners in overseas development and subsequent global clinical data readings further enhancing the certainty of product commercialization in the global market [1]

Core Viewpoint - Rongchang Biopharma signed an exclusive licensing agreement with AbbVie for RC148, a novel bispecific antibody targeting PD-1/VEGF, with a total deal value of up to $5.6 billion (approximately 39 billion RMB) and an upfront payment of $650 million [1][3]. Group 1: Licensing Agreement Details - The agreement grants AbbVie exclusive rights to develop, manufacture, and commercialize RC148 outside Greater China, with Rongchang Biopharma eligible for up to $4.95 billion in milestone payments and a double-digit royalty on net sales outside Greater China [3]. - This deal marks a new high for Rongchang Biopharma in terms of both upfront payment and potential total deal value compared to previous licensing agreements since its Hong Kong listing in 2020 [3]. Group 2: Market Impact - Following the announcement, Rongchang Biopharma's A-shares hit a 20% limit up, and the Hong Kong innovative drug ETF rose over 3%, with the A-share innovative drug sector increasing by over 2.7% [1]. - Significant stock price increases were observed in companies like Nossg, Prasis, and Huaren Health [1]. Group 3: Industry Developments - In the same week, five business development (BD) deals were reported in the innovative drug sector, showcasing China's leading position across various technology fields [6]. - Notable events included the collaboration of Kangfang Biopharma with Summit for AK112's BLA submission in the U.S. and the initiation of global Phase III trials for PF-08634404/SSGJ-707 by 3SBio and Pfizer [4]. Group 4: Market Trends and Valuation - Since the peak of the Hong Kong innovative drug index in September 2025, it has retraced 24%, while the U.S. biotech indices have seen gains of 18% to 29% [7]. - Despite not being at historical lows, the valuation of Hong Kong innovative drugs remains attractive compared to global peers, indicating a growing disparity in asset values between U.S. and Chinese innovative drugs [7].

Group 1 - The core point of the news is the significant licensing agreement between Rongchang Biopharma and AbbVie for the development and commercialization of RC148, a novel bispecific antibody targeting PD-1 and VEGF, which could lead to substantial financial benefits for Rongchang Biopharma [1] - Rongchang Biopharma will receive an upfront payment of $650 million and is eligible for up to $4.95 billion in milestone payments, along with double-digit royalties on net sales outside Greater China [1] - The deal exemplifies the "China innovation + global market" model in drug development, indicating a growing trend of collaboration between Chinese biotech firms and international pharmaceutical companies [1] Group 2 - In 2024, U.S. pharmaceutical companies significantly increased their acquisition of Chinese innovative drugs, with a year-on-year growth of 66%, leading to a total licensing transaction value of $41.5 billion [2] - Recently, five business development projects have been established in a short period, covering various fields such as small molecule inhibitors, monoclonal antibodies, bispecific antibodies, ADCs, and RDCs, indicating a flourishing environment for Chinese innovative drugs [2] - The Hong Kong innovation drug sector is showing signs of recovery, with the Hang Seng Innovation Drug Index having corrected approximately 25% since its peak in September 2025, but is now rebounding [3] Group 3 - The U.S. biotech sector, particularly the Nasdaq Biotechnology Index, has reached new highs, increasing by 23% since September of last year, highlighting a disparity in performance compared to the Hong Kong innovation drug sector [5] - The recent surge in business development projects serves as a catalyst that may reactivate the Hong Kong innovation drug sector, which is currently perceived to be at a relatively safe valuation compared to the Nasdaq [5]

Core Viewpoint - The article highlights a significant development in the innovative drug sector, particularly focusing on the exclusive licensing agreement between Rongchang Biopharma and AbbVie for the dual-specific antibody drug RC148, which is expected to drive market interest and stock performance in the innovative drug space [1][2]. Group 1: Licensing Agreement Details - Rongchang Biopharma signed an exclusive licensing agreement with AbbVie for RC148, a novel dual-specific antibody targeting PD-1/VEGF, with a total transaction value of up to $5.6 billion (approximately 39 billion RMB) [1][2]. - The agreement includes an upfront payment of $650 million, with potential milestone payments of up to $4.95 billion and tiered royalties on net sales outside Greater China [2]. Group 2: Market Impact - Following the announcement, Rongchang Biopharma's A-shares hit a 20% limit-up, and the Hong Kong innovative drug ETF rose over 3%, indicating strong market enthusiasm [1]. - The innovative drug sector saw a general increase, with the A-share innovative drug sector rising over 2.7%, and notable gains in companies like Nossg, Proris, and Huaren Health [1]. Group 3: Recent Developments in Innovative Drugs - The article notes that three significant events occurred in the second-generation IO therapy sector on January 12, including the successful BD deal for Rongchang Biopharma, AK112's BLA submission by Kangfang Biopharma/Summit, and the initiation of five global Phase III clinical trials for PF-08634404/SSGJ-707 by 3SBio/Pfizer [3]. - A total of five BD deals were reported in the innovative drug sector within a week, showcasing China's leading position across various technological fields [5]. Group 4: Market Trends and Valuation - According to Huatai Securities, since reaching a yearly high in September 2025, the Hong Kong innovative drug index has retraced 24%, while the US biotech indices have shown positive growth, indicating a valuation disparity between Chinese and global innovative drug assets [6]. - Despite not being at historical lows, the current valuation of Hong Kong innovative drugs remains attractive compared to global peers [6].

Summary of the Conference Call on China Healthcare Sector Industry Overview - The conference call focused on the **China healthcare sector**, highlighting recent weaknesses and potential opportunities for 2026 [2][5][6]. Core Insights and Arguments - **Current Market Performance**: The Hang Seng Healthcare Index (HSHCI) has declined by **3.1%**, while the Hang Seng Index fell by **1.6%**. The HSHCI has dropped approximately **17%** from its year-to-date high in early October, with some small and mid-cap stocks down around **30%** [2][5]. - **Valuation Outlook**: Despite the current weakness, the fundamentals of the sector remain intact, and valuations are becoming more attractive, suggesting a potential rebound in 2026 [2][5][6]. - **Investment Recommendations**: - **Biotech**: Innovent and Kelun Biotech (rated Overweight) - **Pharma**: Hansoh Pharma and Hengrui-A (rated Overweight) - **CXO**: WuXi Apptec and WuXi XDC (rated Overweight) - Caution is advised regarding Akeso due to unclear updates on HARMONi-2 OS [2][5][6]. Upcoming Events and Legislative Considerations - **NRDL Price Negotiations**: Anticipated results from the National Reimbursement Drug List (NRDL) price negotiations are expected to be neutral to negative, reflecting the current weak sentiment [5][6]. - **Biosecure Act**: The potential passing of the Biosecure Act could be a negative headline event, although it is not expected to significantly impact China CXOs' business [5][6]. - **Medical Conferences**: Upcoming medical conferences in December (e.g., ASH'25 and SABCS'25) are not expected to affect overall sentiment towards the China healthcare sector [5][6]. Emerging Themes for 2026 - Potential interest in new drug modalities such as **siRNA** (small interfering RNA) and **RDC** (radionuclide drug conjugate) is anticipated, along with expectations for global Phase 3 data from out-licensed assets [5][6]. - A healthy out-licensing deal flow is expected in 2026, although it may not surpass the total deal size of 2025 due to several significant deals this year [6]. - The **JPM Global Healthcare Conference** in January 2026 is expected to provide further insights into the prospects for the China healthcare sector, with presentations from over a dozen public and private Chinese companies [6]. Key Companies Discussed - **Akeso** (9926.HK) - **Hansoh Pharma** (3692.HK) - **Hengrui** (600276.SS) - **Innovent Biologics** (1801.HK) - **Kelun Biotech** (6990.HK) - **WuXi AppTec** (603259.SS and 2359.HK) - **WuXi XDC** (2268.HK) [8]. Conclusion - The China healthcare sector is currently facing challenges but presents potential investment opportunities as valuations become more attractive. Key themes and developments in 2026 will be closely monitored, particularly in light of upcoming conferences and legislative changes [2][5][6].

Summary of the Conference Call for Ruizhi Pharmaceutical Company Overview - **Company**: Ruizhi Pharmaceutical - **Industry**: Pharmaceutical and Biotechnology Key Points and Arguments Financial Performance - In Q1 2025, Ruizhi Pharmaceutical reported revenue of **261 million yuan**, a year-on-year increase of **11.37%** [2][4] - The net profit attributable to shareholders was **6.64 million yuan**, marking a return to profitability [2][4] - The company significantly reduced its non-deductible net profit loss to **1.57 million yuan**, a **94%** reduction in losses year-on-year [2][5] - For 2024, the company faced challenges with revenue dropping to **970 million yuan**, a **14.76%** decline, and a net loss of **226 million yuan**, although this was a **75.49%** improvement compared to the previous year [3] Strategic Initiatives - The company is implementing a comprehensive package strategy, providing one-stop solutions from IND to PCC, enhancing service capabilities across the entire chain [2][6] - Focus on high-value orders and investment in new modalities such as ADC, RDC, AOC, and PDC [2][6] - Initiated a partnership with leading companies in the ADC field to launch a new generation XDC conjugate drug R&D technology platform [2][7] Market Development - Emphasis on large clients in the domestic market, targeting traditional markets transitioning to innovation [2][8] - Optimizing the business development (BD) team for deeper engagement in the U.S. market and increasing exposure in emerging European markets [2][8] - Plans to establish new R&D centers on the U.S. East Coast and in the UK [2][8] Equity Incentive Plan - The company approved an equity incentive plan granting **52.61 million shares**, representing **10.57%** of total equity, to **124 core personnel** [2][9] - Performance targets include a **25%** increase in revenue and a return to profitability [2][9] Business Segment Insights - The small molecule drug segment is experiencing sluggish growth, needing significant effort to return to previous peak levels of **400-500 million yuan** [3][11] - The company is seeing rapid growth in high-risk related businesses, with domestic growth particularly boosted by recent large projects [3][11] ADC Business Capabilities - The company has comprehensive capabilities in the ADC sector, including chemistry, conjugation, and antibody development [2][12] - Currently rebuilding ABC CNC production capacity, with plans to initiate operations soon [2][12] Organizational Changes - The BD structure has been reformed to enhance domestic market engagement, which previously accounted for over **80%** of revenue from international orders [2][13] - New strategies include regional divisions and a focus on strategic client resources [2][13] Future Outlook - The management expresses confidence in achieving annual targets, supported by external market recovery and internal optimization [2][10] - The company is optimistic about future growth, especially in the innovative drug sector, as traditional pharmaceutical companies increase their investments [2][16][22] Investment Fund Strategy - Since 2022, the company has participated in investment funds to drive business development, leveraging government-guided funds for early-stage incubation [2][19] Market Recovery - The overseas market is showing signs of recovery, with a notable return of funds to primary markets [2][17] Emerging Market Trends - ADC, peptides, and small nucleotides are identified as high-growth areas, with the company securing multiple projects in these fields [2][18] Additional Important Insights - The company is focused on cost control while investing in platform development, including small nucleic acid drug platforms and ABC development [2][14] - The second quarter shows positive trends, with traditional pharmaceutical companies increasing their investment in innovative drugs [2][15]