V i e w p o i n t | 06 Jan 2025 10:43:18 ET │ 74 pages Pan-Asia Internet 2025 Outlook: Quality Profit, Moderated Competition & AI Impact CITI'S TAKE Global internet sector performance varied in 2024: India outperformed with +73.7%, SEA +35.3%, Japan +35.0% and the US +33.8%, while China and Korea underperformed at +15.6% and -11.4% (vs. S&P 500 +23.3%, Nikkei +19.2%, HSI +17.7%, Nifty 50 +8.8% and KOSPI -9.6%). Geopolitical tension and changes to tariff and regulatory policy could continue affecting investo ...

Key Points Industry Overview - **2025 Outlook**: China's healthcare sector is expected to see significant growth in 2025, driven by structural changes and increased innovation. - **New Wallet Opening Up**: The integration of commercial insurance as a significant payer is expected to drive market recovery and growth. - **Out-of-Policy Market Rising**: The rise of the out-of-policy market, mirroring trends in the US in the 80s, is expected to benefit private medical services, pharmacies, and online healthcare companies. - **Globalization of China Innovation**: The globalization of China's innovation is speeding up, with increased out-licensing and BD collaborations. Core Views and Evidence - **Commercial Insurance as a New Key Payer**: Data sharing between the NHSA and other ministries will improve insurance margins and lower claim validation expenses. - **Out-of-Policy Market Rising**: DRG/DIP implementation has led to tighter cost control and increased demand for mid/high-end commercial insurance. - **Globalization of China Innovation**: Growing out-licensing and BD collaborations will benefit innovative pharma/biopharma companies with rich pipelines. - **Multiple Inflection Points**: Companies that adapted to the challenges in 2024 are set to rebound in 2025. - **Import Substitution**: Government support for "made in China" devices will accelerate import substitution and benefit domestic equipment/IVD players. - **Geopolitical Risks for CDMOs**: Short-term US sanction risk has diminished, and market interest in China CDMOs has improved. Investment Highlights - **Top Buys**: Hengrui, Hansoh, SSY, Akeso, Kelun Biotech, Mindray, Sinopharm, Wuxi Apptec, Wuxi Bio, Gushengtang. - **Top Sells**: Bloomage, Topchoice. Other Important Points - **Hengrui**: Innovative drug sales reached Rmb6.6bn in 1H24 (+33% yoy), and 10 more innovative products are expected to be approved in 2025/26. - **IQVIA**: Indicated faster Rx sales growth since July 2024. - **Import Substitution**: New policies to boost tender scores of made-in-China products will benefit domestic brands and foreign brands with local fully integrated manufacturing capacity. - **Geopolitical Risks**: Short-term US sanction risk has diminished, and market interest in China CDMOs has improved. - **Top Picks**: Hengrui, Hansoh, SSY, Akeso, Kelun Biotech, Mindray, Sinopharm, Wuxi Apptec, Wuxi Bio, Gushengtang.

Industry and Company Overview * **Industry**: US Biotechnology and Pharmaceuticals * **Time Period**: 2025 * **Key Players**: Lilly, Vertex, Gilead, AbbVie, Amgen, Bristol-Myers Squibb, Merck, Pfizer, Biogen, Regeneron, and others Key Points 1. Sector Performance and Outlook * **2024 Performance**: The biopharma sector underperformed the broader market in 2024, with the NBI index down 2% and the DRG index up 3% compared to the S&P500's 26% increase. * **2025 Outlook**: Citi remains bullish on the biopharma sector for the long term due to high innovation and potential for growth. However, near-term concerns over reimbursement and access may persist. * **Tailwinds**: Favorable capital markets backdrop, strong pipeline of new approvals and launches, and beatable growth expectations of 3% (revenue) and 6% (non-GAAP EPS) for larger cap biopharma companies. 2. Sector Driving Catalysts * **Lilly's orforglipron phase 3 trials and Amgen's MariTide phase 2 details for obesity. * **Vertex's Alyftrek and suzetrigine launches for CF and acute pain, respectively. * **Merck's Winrevair and Bristol's Cobenfy launches for PAH and schizophrenia. * **Potential M&A activity from Merck, AbbVie, Amgen, and others. * **Opthea's OPT-302 phase 3 data for wAMD. * **Ionis' pelacarsen phase 3 HORIZON data for Lp(a). * **Immunovant's batoclimab phase 2 (CIDP) and 3 (gMG) data. 3. Top Picks * **Large Cap Biopharma (growth)**: Lilly and Vertex * **Large Cap Biopharma (GARP / value)**: Gilead * **SMID Biotech**: Ideaya, Ultragenyx, Ionis, Immunovant, and MoonLake 4. Healthcare Policy * **HC Policy**: Policy will continue to dominate the narrative in biopharma in 2025. * **FDA Approval Processes**: Disruption to FDA approval processes remains unlikely. * **IRA Pricing**: Downside risk remains due to the gap between current negotiated pricing and G20 pricing. * **Medicare Coverage**: Amendment of Medicare coverage for GLP-1 for inclusion of obesity is likely. 5. M&A and IPOs * **M&A**: Subdued M&A activity in 2024, but expected to rebound in 2025 due to pent-up demand and attractive valuations. * **IPOs**: 2024 saw improvements for biotech IPOs, with 24 biotech companies going public and total proceeds of $3.9B. Expect a recovery in the IPO market in 2025. 6. Valuation and Growth Expectations * **PE Multiples**: Current PE multiples for US Large Cap Biopharma are in line with the broader market, but potential for multiples expansion beyond 2024. * **Revenue Growth**: Expected to accelerate further out, with two-year projections having healthcare (+13%) slightly above the S&P500 (+12%), pharma in-line (+12%), and biotech (+10%) below the median. * **Earnings Growth**: Healthcare's +19% EPS forecast tops the 11 GICS sectors' 10% median, with pharma (+32%) and biotech (+30%) driving estimates outperformance. 7. New Drug Launches and Approvals * **New Drug Launches**: Several new drug launches expected in 2025, including Vertex's suzetrigine for acute pain, AbbVie's Vyalev for Parkinson's, and Gilead's Livdelzi for primary biliary cholangitis. * **New Drug Approvals**: Potential approval of Vertex's suzetrigine, AbbVie's BoNT/E for glabellar lines, and Gilead's Lenacapavir (PrEP) for HIV/AIDS. 8. Therapeutic Themes * **GLP-1**: Expect further label expansion opportunities, orforglipron phase 3 datasets, and tirzepatide's ex-US rollout. * **Non-opioid Pain**: Vertex's suzetrigine launch for acute pain could disrupt the pain care space. * **Neuro**: Focus on Alzheimer's disease, neuropsychiatric conditions, and Parkinson's disease. 9. Capital Markets * **M&A**: Sufficient capacity for additional large-scale M&A and bolt-ons. * **Biotech**: Focus on new launches and commercial success from new programs. * **Pharma**: Focus on LOE exposure and new product launches to offset this reliance. 10. SMID-cap Dynamic * **IPOs**: Expected to pick up and approach normalized average of ~50/year in 2016-2019. * **M&A**: Consistent strength, with Pharma having ~$250B in aggregate capital to keep rewarding innovation. * **Macro Factors**: Continued rate declines and new FDA leadership to defend the need for an appropriately funded agency. 11. High-Profile Catalysts * **Ophthalmology**: Phase 3 readouts for OPT-302 in wAMD. * **Cardiology**: Clinical data for firmonertinib in 1L NSCLC EGFR Exon 20 mutations. * **Autoimmune**: Phase 3 data for pelacarsen in elevated Lp(a) and phase 2 data for batoclimab in CIDP and gMG. 12. Favorite Stocks * **Eli Lilly**: New approval of tirzepatide for sleep apnea, label expansion for heart failure, and strong pipeline. * **Vertex**: Multiple product launches, including Alyftrek, suzetrigine, and Casgevy. * **Gilead**: Continued focus on HIV, lenacapavir launch in HIV PrEP market, and growth in combined HIV franchise. * **Ideaya**: Robust synthetic lethality pipeline and strong financial position. * **Ultragenyx**: Significant re-rating potential driven by key catalysts, including Ph3 OI trials and gene therapy pipeline. * **Ionis**: First two wholly owned assets, olezarsen and donidalorsen, for FCS and HAE, and multiple data releases in larger cardiovascular indications. * **Cogent Biosciences**: Emerging profile suggests potential to become a market leader for the treatment of NonAdvSM and AdvSM. * **Immunovant**: Potential to be a best-in-class FcRN inhibitor in gMG and other indications. * **MoonLake**: Topline Ph3 HS data for sonelokimab in HS. 13. Top 25 Events for 2025 * **Clinical Updates**: Phase 3 readouts for Lilly's orforglipron, Vertex's suzetrigine, and Gilead's lenacapavir. * **Launches**: Vertex's Alyftrek and suzetrigine, Bristol's Cobenfy, and Biogen's Leqembi and Kisunla. * **Approvals/Launches**: AbbVie's Tavapadon, Gilead's lenacapavir, and Merck's Winrevair. * **Policy**: Impact of IRA Part D changes and RFK Jr. policies. * **Regulatory**: Biosimilar launch progress for Amgen's Eylea and AbbVie's Botox. * **Clinical Updates**: Phase 3 data for Regeneron's Itepekimab and Gilead's Dom + Zim. * **Launches**: Merck's Winrevair launch in the US and Ex-US. * **Clinical Updates**: Phase 3 data for Vertex's VX-264 in T1D. 14. Therapeutic Themes * **GLP-1**: Focus on further label expansion opportunities, orforglipron phase 3 datasets, and tirzepatide's ex-US rollout. * **Non-opioid Pain**: Vertex's suzetrigine launch for acute pain. * **Neuro**: Focus on Alzheimer's disease, neuropsychiatric conditions, and Parkinson's disease. 15. Conference Calendar * **American Society of Clinical Oncology**: Gastrointestinal Cancers, Genitourinary Cancers, and General Meeting. * **American Academy of Allergy, Asthma & Immunology**: Annual Meeting. * **American Academy of Dermatology**: Annual Meeting. * **European Society for Blood and Marrow Transplantation**: Annual Meeting. * **American Academy of Neurology**: Annual Meeting. * **American Association for Cancer Research**: Annual Meeting. * **American Urological Association**: Annual Meeting. * **Association for Research in Vision and Ophthalmology**: Annual Meeting. * **International Society for Cell & Gene Therapy**: Annual Meeting. * **American Society of Gene & Cell Therapy**: Annual Meeting. * **The American Thoracic Society**: Annual Meeting. * **American Society of Clinical Oncology**: Annual Meeting. * **European Academy of Allergy & Clinical Immunology**: Annual Meeting. * **American Diabetes Association's**: Annual Meeting. * **European Academy of Neurology**: Annual Meeting. * **Endocrine Society**: Annual Meeting. * **Alzheimer's Association International Conference**: Annual Meeting. * **American Society of Retina Specialists**: Annual Meeting. * **European Society of Cardiology**: Annual Meeting. * **European Association for the Study of Diabetes**: Annual Meeting. * **European Society of Gene & Cell Therapy**: Annual Meeting. * **Congress of Neurological Surgeons**: Annual Meeting. * **European Society for Medical Oncology**: Annual Meeting. * **IDWeek**: Annual Meeting. * **American Association for the Study of Liver Disease**: Annual Meeting. * **American Heart Association**: Annual Meeting. * **Clinical Trials on Alzheimer's Disease Conference**: Annual Meeting. * **American Epilepsy Society**: Annual Meeting. * **American Society of Hematology**: Annual Meeting. * **San Antonio Breast Cancer Symposium**: Annual Meeting.

Equity Research 6 January 2025 Security/Design/Vertical SaaS 4 Ideas, 5 Themes, 20 Predictions for 2025 We present our 2025 outlook for the security, design, and vertical-specific software spaces and highlight ADBE, ADSK, NCNO, and VRNS as 4 names we like for the year ahead. We also present 5 industry/investor themes and 20 predictions for our individual names into the year in the slides. We present our 2025 outlook for the security, design, and vertical specific software spaces in the slides attached. Slid ...

January 6, 2025 11:41 AM GMT China Coal | Asia Pacific China's thermal coal prices stabilized after months of decline, while inventory declined across its domestic ports. November coal production broke historical records heading into heating season. Domestic coking coal prices fell amid sluggish downstream steel demand. Modest spot thermal coal price rebound after the pullback: QHD 5500 dipped 0.3% WoW to Rmb707/t as of January 3. CCI 5500 rose 0.7% WoW to Rmb770/t. BSPI was flat at Rmb703/t. Mine-mouth pri ...

January 6, 2025 10:00 PM GMT Thematics Uncovering Alpha in AI's Rate of Change More than two years since ChatGPT's launch, we remain in the early innings of AI's diffusion. This is the third iteration of the most comprehensive AI stock mapping exercise in the market. Rate of change continues to drive outperformance, and we believe 2025 will be the year of Agentic AI. AI's Rate of Change Continues to Surprise: Our first AI Adopter survey was published in January 2024, our second in June 2024. This is our thi ...

Global Research ab 6 January 2025 US Equity Strategy - Large Cap Core Large Cap Core Manager Performance - January 2025 Manager Performance vs. S&P 500 Large Cap Core managers trailed the S&P 500 by -2.8% in 2024 (22.2% vs. 25.0%), net of fees. During 4Q, managers lagged by -0.7%, with the underperformance taking place primarily in December. Sector vs. Stock Impacts on Manager Performance 2024: Sector decisions added +1.0% to performance in 2024. An overweight position in Financials and Industrials added 1. ...

ab 6 January 2025 Global Research US Equity Strategy Roadmap - January 2025 Stocks Deliver Another Strong Year The S&P 500 returned 25.0% in 2024, 70.1% since October 2022 lows. Big 6 TECH+ stocks once again provided an outsized contribution to this success, delivering 47.5% and 145.4%. Excluding these 6 outperformers, the market returned 16.0% and 48.3%. Small Caps lagged (11.5% and 36.5%) relative to Large, the result of weaker earnings. EAFE did particularly poorly (4.3% and 47.0%) when measured in US$. ...

Summary of Economic Data Surprises and Forecast Performance in 2024 Industry Overview - The report focuses on the US economy, analyzing economic data surprises, forecasting performance, and market reactions throughout 2024 [2][5][6]. Key Points Economic Growth - The US GDP increased approximately 2.5% Q4/Q4 in 2024, surpassing both Goldman Sachs' forecast of 2% and the consensus forecast of 0.8% [2][6]. - The growth forecast was adjusted multiple times throughout the year, initially boosted by recognizing the impact of immigration on labor force growth [6][8]. Inflation Trends - The core PCE price index rose around 2.8% Q4/Q4 in 2024, which was higher than Goldman Sachs' forecast of 2.2% and the consensus of 2.4% [2][13]. - Key contributors to the inflation surprise included methodological changes in calculating owners' equivalent rent and broader applications of "catch-up inflation" beyond just rent [2][13]. Forecast Performance - Goldman Sachs achieved a hit rate of 67% for economic indicator forecasts in 2024, slightly above the 63% average from the previous eight years [2][18]. - Strong performances were noted in indicators such as the unemployment rate (100% hit rate), core PCE (91%), retail control (86%), and core capex orders (86%) [2][18][24]. - Underperformance was observed in the Philly Fed (45%) and average hourly earnings (33%) due to unexpected technical distortions [2][24]. Market Reactions - Market sensitivity to inflation data was significantly elevated, with Treasury market sensitivity at 5.5 times the historical average and equity market sensitivity at 2.2 times normal [32][37]. - In 2024, equity prices consistently rose in response to positive growth surprises, indicating a stronger conviction that inflation would remain controlled despite robust growth [3][34]. Future Outlook - Looking ahead to 2025, forecasts suggest healthy growth and lower inflation, which may lead to reduced sensitivity to monthly economic data [42]. - The anticipated economic policy uncertainty due to potential changes in government control could also impact market reactions [42]. Additional Insights - The report highlights the importance of alternative data sources and proprietary indicators in improving forecasting accuracy [23][29]. - The performance of second-tier economic indicators was consistent with previous years, maintaining a hit rate of 59% [25]. This summary encapsulates the critical insights from the economic analysis conducted by Goldman Sachs, providing a comprehensive overview of the US economic landscape in 2024 and expectations for 2025.

ab 6 January 2025 Factor Impacts on Manager Performance 2024: Funds with a greater focus on Price Momentum and ROE outperformed by 5.7% and 3.8% during 2024 when compared with less exposed funds. 4Q24: Managers with an emphasis on stocks with high Beta to the Market outperformed their less exposed peers by 1.7% during 4Q. Global Research US Equity Strategy - Large Cap Value Large Cap Value Manager Performance - January 2025 Manager Performance vs. Russell 1000 Value Large Cap Value managers trailed the Russ ...