5 January 2026 China Pharma and Biotech China Pharma and Biotech 2026 Outlook: Off to the races Rebecca Liang, Ph.D. +852 2123 2656 rebecca.liang@bernsteinsg.com Ellie Li +852 2123 2621 ellie.li@bernsteinsg.com "The stock market is a device for transferring money from the impatient to the patient." Positive outlook at sector level: valuation-wise we're back in a more rational range than July - Aug, with most stocks dialing back 20-30%. The major healthcare and biotech indices are below the price levels of 2 ...

China healthcare Global Markets Research EQUITY: HEALTH CARE & PHARMACEUTICALS GLP-1 expert call takeaways Discussion centered on the recent clinical progress and commercial updates in the China market On 15 Dec, we hosted an expert call with a seasoned professional in the area of GLP-1 drugs. During the call, the expert shared his insights on the recent clinical development and his thoughts on the domestic GLP-1 market. For Eli Lilly's retatrutide, the expert believes this triple-agonist (GIP/GLP-1/glucago ...

Core Viewpoint - The article discusses the rising global obesity rates and the emergence of innovative weight loss drugs, particularly focusing on Mazdutide, a dual agonist of GLP-1R and GCGR, which has shown significant weight loss and metabolic improvement in clinical trials [7][15]. Group 1: Clinical Trial Results - The GLORY-1 trial is a randomized, double-blind, placebo-controlled phase 3 study assessing the efficacy and safety of Mazdutide in Chinese adults with obesity [8]. - The study included 610 participants with a BMI of ≥28 kg/m² or ≥24 kg/m² with at least one weight-related comorbidity, with an average baseline weight of 87.2 kg and BMI of 31.1 kg [8]. - At 32 weeks, the Mazdutide 4 mg and 6 mg groups showed weight reductions of 10.97% and 13.38%, respectively, compared to a 0.24% reduction in the placebo group [9]. - At 48 weeks, the weight reductions were 12.05% for the 4 mg group, 14.84% for the 6 mg group, and 0.47% for the placebo group [10]. Group 2: Efficacy in Weight Loss - The proportion of patients achieving weight loss of ≥5% at 32 weeks was 76.3% for the 4 mg group, 84% for the 6 mg group, and 10.9% for the placebo group [11]. - At 48 weeks, these proportions were 73.5%, 82.8%, and 11.5%, respectively, with ≥10% weight loss achieved by 55.2% and 67.9% in the Mazdutide groups compared to 2.9% in the placebo group [11]. Group 3: Waist Circumference and Metabolic Benefits - At 48 weeks, waist circumference decreased by 9.48 cm in the 4 mg group, 10.96 cm in the 6 mg group, and 1.48 cm in the placebo group, indicating significant improvement in the Mazdutide groups [12]. - The study also monitored cardiovascular health, showing significant benefits from Mazdutide, including reductions in systolic blood pressure (6.75 mmHg), triglycerides (0.52 mmol/L), total cholesterol (0.45 mmol/L), LDL-C (0.31 mmol/L), serum uric acid (50.75 μmol/L), and ALT (10.00 U/L) at 48 weeks [13]. Group 4: Safety Profile - Common adverse effects of Mazdutide were mild to moderate gastrointestinal discomfort, with an overall good and manageable safety profile [14]. Group 5: Future of GLP-1/GCGR Agonists - The development of GLP-1/GCGR dual receptor agonists is progressing, with 11 drugs in the pipeline globally, including one that has submitted for market approval and five in phase 2-3 clinical trials [15][16].

Summary of the China GLP-1 Consumer Survey Industry Overview - The report focuses on the **GLP-1 drug market** in China, particularly for treating **type 2 diabetes (T2DM)** and **weight loss**. - The survey conducted by **UBS Evidence Lab** indicates a generally improving user base for GLP-1 drugs in terms of access, affordability, and treatment duration. Key Findings User Access and Affordability - **Access Improvement**: 91% of respondents found it easy to access GLP-1 drugs in 2025, up from 67% in 2024. The percentage of those who found it "very easy" increased to 44% from 18% in 2024 [3][31]. - **Affordability**: 77% of respondents considered GLP-1 drugs "completely affordable," an increase from 69% in 2024 [3][31]. - **Channel Shift**: The ex-hospital channel has become the major access point for GLP-1 drugs, with 71% of users accessing them through this channel, up from 44% in 2024 [3][25]. Treatment Duration and Satisfaction - **Longer Duration of Treatment (DoT)**: Expected DoT for T2DM and weight loss has increased to 15.3 months (up 18.6%) and 14.6 months (up 29.2%), respectively [4][57]. - **User Satisfaction**: Nearly 100% of users reported satisfaction with GLP-1 drugs, with 63% indicating they were "very satisfied," up from 29% in 2024 [4][42]. Product Preferences - **Semaglutide Dominance**: Injectable semaglutide remains the best-selling GLP-1 product in China, holding a 75.1% market share YTD [5][24]. - **Domestic Product Awareness**: Awareness of domestic products like mazdutide has increased, with its sales ramping up significantly post-launch [5][17]. - **User Preferences**: 48% of respondents preferred imported products due to perceived lower side effects and better efficacy, while domestic products were favored for long-term supply and lower prices [3][45]. Side Effects and Concerns - **Side Effect Concerns**: The main concerns for users include digestive system issues, with 53% reporting this as a concern, down from 69% in 2024 [73][101]. - **Non-User Concerns**: Among non-users keen to lose weight, 70% cited side effects as their top concern, followed by doubts about efficacy [45][46]. Market Dynamics - **Shift in Treatment Lines**: There is a notable shift towards using GLP-1 drugs as a second-line therapy for T2DM, with 50% of users now using them as such, up from 32% in 2024 [87]. - **Future Prospects**: The report highlights strong momentum for companies like **Innovent** with mazdutide and **Hengrui** with HRS-9531, which is under NDA review for weight loss treatment expected to launch in 2026 [2][5]. Additional Insights - **Demographics of Respondents**: The survey included 830 respondents with a balanced distribution across gender, city tier, and age [7]. - **Income Levels**: The median monthly household income of respondents was Rmb22,500, with 59% earning between Rmb15,000 and Rmb24,999 [7][15]. This comprehensive analysis indicates a positive trend in the GLP-1 market in China, with increasing access, affordability, and user satisfaction, alongside a growing preference for both imported and domestic products.

Summary of Innovent Biologics (1801.HK) Conference Call Company Overview - **Company**: Innovent Biologics (1801.HK) - **Industry**: China Pharma, Biotech & Medtech Key Points Takeda Partnership - Innovent Biologics announced an **US$11 billion** deal with Takeda, highlighting Takeda's commitment as a partner for IBI363 and IBI343 [5] - The collaboration reflects a **US$50 billion+** global total addressable market (TAM) as outlined in Takeda's Q2 2025 results [5] - The clinical development plan (CDP) will focus on **NSCLC (Non-Small Cell Lung Cancer)** and **CRC (Colorectal Cancer)**, with five global Phase 3 trials planned [5] - Innovent will lead exploratory trials in China for other indications to guide global trials [5] - Innovent has a strong cash position, with **US$1.3 billion** in cash as of June 30, 2025, to support a **40/60** split on global R&D costs, estimated at **US$1.5-2 billion** for the first five global Phase 3 trials [5] Near-term Growth Drivers - **CVM (Cardiovascular Metabolism)** assets are identified as the primary growth drivers towards a target of **RMB 20 billion** by 2027 [5] - Key contributors include: - **Mazdutide**: Participating in the Double 11 online promotion with encouraging initial orders [5] - **Tafolecimab (PCSK9)**: Experienced a quick ramp-up post-NRDL coverage, with market growth observed at **20+%** [6] - **IBI311 (IGF-1R)**: Good initial adoption expected to increase with potential NRDL coverage in 2026 [6] IBI363 Catalyst - Multiple data readouts for IBI363 are planned in 2026, including: - Phase 1/2 POC data for **1L NSCLC** and **1L CRC** in **2H26**, considered a key catalyst [6] - Novel ADC pipeline readouts, including IBI3001, IBI3005, and IBI3020 [6] - Phase 1 data for an oral small-molecule GLP-1 and autoimmune readouts [6] Financial Outlook and Risks - The 12-month price target is set at **HK$103.22**, with a current price of **HK$90.20**, indicating an upside of **14.4%** [7] - Key financial metrics include: - Market cap: **HK$146.3 billion / US$18.8 billion** - Revenue projections for 2025E: **RMB 12,694.9 million** [7] - EPS projections for 2025E: **RMB 0.54** [7] - Risks include: - Intensifying competition in the PD-1/L1 market in China - Uncertain approval timelines for key candidates - Potential restrictions on off-label use due to safety issues - Failure of R&D projects [6] Valuation Metrics - **P/E Ratio**: Projected to be **30.3x** in 2026E [7] - **P/B Ratio**: Expected to be **7.5x** in 2026E [7] - **Free Cash Flow Yield**: Projected at **2.7%** in 2026E [7] Additional Insights - The management emphasized the importance of maintaining a competitive edge through innovative product designs and strategic partnerships [5][6] - The focus on market share gain in 2026 is prioritized over reducing sales expense ratios [6] This summary encapsulates the critical insights from the conference call, providing a comprehensive overview of Innovent Biologics' strategic direction, financial outlook, and market positioning.

Core Viewpoint - Bank of America Securities reports that Innovent Biologics (01801) achieved total revenue and product revenue of 6 billion and 5.2 billion RMB respectively in the first half of this year, representing a year-on-year growth of 50.6% and 37.3% [1] Group 1: Financial Performance - Innovent Biologics' total revenue reached 6 billion RMB in H1, showing a 50.6% increase year-on-year [1] - Product revenue for Innovent Biologics was 5.2 billion RMB, reflecting a 37.3% year-on-year growth [1] Group 2: Forecast Adjustments - Bank of America Securities raised the gross margin forecast for Innovent Biologics for the next two years by 0.6 to 0.8 percentage points due to efficiency improvements [1] - The target price for Innovent Biologics was increased from 70.1 HKD to 106.9 HKD, maintaining a "Buy" rating based on strong R&D capabilities and a rich pipeline [1] Group 3: Product Developments - The successful progress of IBI363 in China has led to adjustments in overseas revenue projections starting from 2028, along with an increase in its sales probability in China [1] - The sales success rates for taletrectinib and mazdutide for obesity indications were raised to 100% due to their approval in the first half of this year [1] - The peak sales forecast for Sintilimab was also increased due to its growing market share [1]

Group 1 - The core viewpoint of the report is that 信达生物 (Innovent Biologics) has shown significant revenue growth in the first half of the year, with total revenue reaching 6 billion RMB and product revenue at 5.2 billion RMB, representing year-on-year increases of 50.6% and 37.3% respectively [1] - 美银证券 (Bank of America Securities) has raised its gross margin forecasts for 信达生物 for the next two years by 0.6 to 0.8 percentage points, citing efficiency improvements [1] - The target price for 信达生物 has been increased from 70.1 HKD to 106.9 HKD, with a "Buy" rating reaffirmed, reflecting confidence in the company's robust R&D capabilities and diverse pipeline [1] Group 2 - The report highlights the successful progress of 信达生物's drug IBI363 in China, leading to adjustments in overseas revenue projections starting from 2028 and an increase in the probability of success (PoS) for its sales in China [1] - The sales success rates for 信达生物's drugs taletrectinib and mazdutide for obesity indications have been raised to 100%, as these drugs received approval in the first half of the year [1] - The peak sales forecast for 信迪利单抗 (sintilimab) has been increased due to its growing market share [1]

Summary of Innovent Biologics (1801.HK) Earnings Review and Key Insights Company Overview - **Company**: Innovent Biologics - **Ticker**: 1801.HK - **Industry**: Biopharmaceuticals, focusing on immuno-oncology and other therapeutic areas Key Financial Highlights - **1H25 Revenues**: Rmb5.95 billion, representing a **51% year-over-year increase** [1] - **Product Sales**: Rmb5.2 billion, up **37% year-over-year** [1] - **License Income**: Rmb666 million, primarily from a US$80 million upfront payment from the DLL3 ADC deal with Roche [1] - **Net Profit**: Rmb834 million, a significant improvement from Rmb-393 million in 1H24 [1] - **Gross Profit Margin (GPM)**: 86.0%, with product GPM at 84.1%, reflecting a **185 basis points year-over-year increase** [1] - **R&D Spending**: Rmb1 billion, down **28% year-over-year** [1] - **SG&A Spending**: Rmb3.37 billion, up **29% year-over-year** [1] - **Non-IFRS EBITDA**: Rmb1.4 billion, with expectations for better bottom-line performance in FY25 [1] Product Development and Clinical Trials - **IBI363 Development**: Progressing into global phase 3 trials, targeting IO-resistant squamous NSCLC, with IND clearance from the FDA [2] - **Trial Design**: Includes randomized controlled groups and aims for overall survival (OS) as the primary endpoint [2] - **Additional Trials**: Plans for further phase 3 trials in other indications, including MSS CRC and broader exploration in NSCLC [6] Market Strategy and Product Launch - **Mazdutide Launch**: Launched in late June with a multi-channel marketing strategy, focusing on weight management and metabolic benefits [7] - **Initial Market Feedback**: Positive user feedback and sales ramp-up observed [7] - **New Trials for Mazdutide**: Two new phase 3 trials initiated for MAFLD and OSA indications [7] Valuation and Price Target - **Updated Price Target**: HK$103.22, increased from HK$98.23 [8] - **EPS Estimates**: Adjusted for 2025-2027 from Rmb0.43/Rmb2.79/Rmb2.69 to Rmb0.54/Rmb2.73/Rmb2.62 [8] - **Market Cap**: HK$147.6 billion [12] Risks and Challenges - **Competitive Landscape**: Intensifying competition in the PD-1/L1 market in China [8][11] - **Approval Timelines**: Uncertain timelines for key candidates [8][11] - **Regulatory Risks**: Potential restrictions on off-label use due to safety issues [8][11] - **R&D Project Failures**: Risks associated with the failure of ongoing R&D projects [8][11] Conclusion Innovent Biologics is positioned for growth with strong financial performance and a robust pipeline of products. The company is actively advancing its clinical trials and expanding its market presence, particularly with the launch of mazdutide. However, it faces significant competition and regulatory challenges that could impact its future performance.

Summary of Innovent Biologics Conference Call Company Overview - **Company**: Innovent Biologics (1801.HK) - **Industry**: Biopharmaceuticals, focusing on immuno-oncology and metabolic diseases Key Financial Performance - **2Q25 Product Revenue**: Exceeded Rmb2.7 billion, representing a **35% year-over-year increase** and a **13% quarter-over-quarter increase** from Rmb2.4 billion in 1Q25 [1] - **Tyvyt Sales**: Reported at US$137 million in 2Q25, a **19% year-over-year increase**, but largely flat compared to previous quarters [1] - **New Product Launches**: Five new products launched in 2025, contributing to a **186% year-over-year increase** in sales from the new product portfolio, excluding Tyvyt and biosimilars [1] Market Position and Strategy - **Mazdutide**: Recently approved and launched, positioned favorably in the obesity market, especially amid NOVO's destocking in China [2] - **Pricing Advantage**: Mazdutide priced at approximately Rmb2,920 per month, offering a discount compared to competitors like Zepbound [2] - **Sales Growth Drivers**: Continued momentum expected in 1H25, driven by strong uptake in tafolecimab post NRDL inclusion and the anticipated sales uptake of mazdutide [1][2] Competitive Landscape - **NOVO's Ozempic Sales**: Experienced a **37% year-over-year decline** in 2Q25 due to destocking, creating an opportunity for mazdutide to capture market share [2] - **Market Dynamics**: The obesity market in China is seen as expanding due to limited competition and NOVO's passive strategy, which benefits Innovent's proactive promotion of mazdutide [2] Financial Projections and Valuation - **2025 Revenue Forecast**: Full-year product sales projected at Rmb11.7 billion, a **42% year-over-year increase** [1] - **Target Price**: Updated DCF-based 12-month target price set at HK$98.23, reflecting a **7.5% upside** from the current price of HK$91.40 [7][15] - **Earnings Estimates**: Adjusted EPS estimates for 2025-2027 reflect slight downward revisions due to near-term sales growth adjustments [7] Risks and Considerations - **Key Risks**: 1. Intensifying competition in the PD-1/L1 market in China [7][13] 2. Uncertain approval timelines for key candidates [7][13] 3. Potential restrictions on off-label use due to safety issues [7][13] 4. Risks associated with R&D project failures [7][13] Conclusion - Innovent Biologics is positioned to leverage its strong product pipeline and market dynamics to drive growth, particularly with the launch of mazdutide. The company is viewed as undervalued relative to its potential, with a favorable outlook for continued revenue growth in the coming years.

Core Insights - A leading Chinese drug developer, Jiangsu Hengrui Pharmaceuticals, is advancing in the weight-loss medication market with promising Phase Three trial results for its dual-acting obesity drug, HRS9531, which targets the same peptide receptors as Eli Lilly's tirzepatide [2][3][4] Company Developments - Hengrui Pharmaceuticals recently listed its shares in Hong Kong and has reported positive trial data for HRS9531, a dual-acting obesity drug [3][5] - The company plans to apply for domestic marketing approval for HRS9531 following successful Phase Three trial outcomes [4][6] - The trial involved 567 participants, with those receiving the drug achieving significant weight loss, including a mean weight loss of up to 17.7% and 88% of participants losing at least 5% of their weight [7][8] Market Context - The weight-loss medication market is highly competitive, with major players like Novo Nordisk and Eli Lilly leading the sector [12][17] - Hengrui Pharma's drug is positioned to compete with established products, as it targets GLP-1 and GIP receptors, similar to tirzepatide [10][15] - The market for weight-loss drugs in China is expanding rapidly, with over 200 pipelines currently in development [13] Financial Implications - Hengrui Pharma's stock has traded at a premium of approximately 10% over its Shanghai-listed shares, reflecting investor confidence in its potential [5] - The company has licensed rights to HRS9531 outside Greater China to Kailera Therapeutics, receiving $110 million in upfront payments and potential milestone payments totaling up to $5.725 billion based on sales [11] Competitive Landscape - The success of semaglutide has spurred a race for similar products, with Hengrui Pharma aiming to launch China's first independently developed GLP-1/GIP product [13][17] - Despite the dominance of established players, the high-growth market presents opportunities for new entrants like Hengrui Pharma [16][17]