Guosheng Securities: The trend of the domestic innovative pharmaceutical industry is gradually shifting from license-in to license-out.

Guosheng Securities released a research report stating that in the background of intense competition and internal cycle of innovative drug targets in China, going global is expected to break through the profit ceiling of the domestic market and follow the trend of innovative globalization industry. According to statistics from YaoMoFang, local innovative drugs have gradually shifted from being "buyers" to "sellers." In terms of License-in, the number of projects and transaction amounts introduced by domestic pharmaceutical companies reached their peak in 2021 and have been declining year by year; by 2024Q3, the activity of introducing projects has further decreased, focusing on late-stage clinical trials or already approved marketed varieties; In terms of License-out, the number of projects and transaction amounts that domestic pharmaceutical companies have reached agreements with foreign partners has steadily increased. Guosheng Securities' main points are as follows: Looking at the innovation of new energy vehicles to see the innovation of drugs Domestic high-end manufacturing industries are good at moving from imitation to innovation output. Domestic electric vehicles started with subsidies, initially flooding the market with low-quality products, but with the entry of Tesla Model 3 into China, the overall industry chain has been upgraded. After 2021, the market size of leading new forces in the industry has expanded. Similar to electric vehicles, the domestic innovation drugs in the middle to high-end manufacturing industry have also begun to introduce excellent foreign products through the License-in mode. After learning and imitation, the overall research and development level has significantly improved, with a decrease in the number of License-in projects and a substantial increase in License-out to foreign partners, achieving a shift from "import" to "export." Berlintianheng (688506.SH): EGFR-HER3 ADC joins Pfizer's pan-cancer comprehensive layout Berlintianheng: BL-B01D1 is the world's first and only clinical-stage dual-target EGFRHER3 ADC. BL-B01D1 has conducted more than 20 clinical studies, including 7 phase III clinical trials for post-cancer treatment2 non-small cell lung cancer indications, 1 small cell lung cancer indication, 2 breast cancer indications, 1 esophageal squamous cell carcinoma indication, and 1 nasopharyngeal carcinoma indication, as well as 8 phase II trials for first-line treatment in combination with PD-(L)1 class drugs for a total of 9 indications, and 1 phase II trial for first-line lung cancer treatment in combination with TKI class drugs, etc. As of November 6, 2024, after signing a cooperation agreement with BMS, Berlintianheng's stock price has risen by 73.98%. Korobiotai (06990): Potential BIC Trop2-ADC, leading the way in first-line NSCLC treatment in collaboration with MSD SKB BIO-B: Potential best-in-class TROP2 ADC, with impressive data from 2024 ASCO in single-agent treatments for TNBC and first-line treatments for NSCLC in combination with PD-L1 monoclonal antibodies. Since the first global phase III trial initiated by MSD until the close of trading on November 4, 2024, Korobiotai has seen a 142% increase in its share price. Yasheng Medicine (06855): The world's second third-generation BCR-ABL inhibitor, licensed overseas to Takeda Yasheng Medicine: Aprepitant was launched in China in 2021 and is the world's second third-generation BCR-ABL inhibitor, specifically targeting resistance issues with first and second-generation drugs like Glivec. On the evening of June 14, Yasheng announced an agreement with Takeda, with Takeda paying $100 million to obtain first refusal rights for Yasheng Medicine's aprepitant in overseas markets. From June 18, 2024, to November 6, 2024, Yasheng Medicine's share price has risen by 66%. Hansoh Pharma (03692): B7H3/B7H4-ADC licensed to GlaxoSmithKline Hansoh Pharma: HS-20089 is a novel B7-H4 targeted antibody-drug conjugate (ADC) currently undergoing a phase I clinical study in China for the treatment of gynecological cancers. On October 20, 2023, following a global commercialization agreement with GlaxoSmithKline, the share price of Hansoh Pharma has risen by 58% by the close of trading on November 6, 2024. Domestic new drug license-out transactions have seen both quantity and quality increases, with clear innovation attributes and diverse technologies From 2019 to 2024Q3, domestic new drug license-out transactions have seen both quantity and quality improvements, with local innovations gradually gaining global industry recognition. Data from YaoMoFang shows that domestic innovative drug enterprises have seen both quantity and price increases in license-out transactions, with 11 more projects and a 100% increase in disclosed transaction amounts in 2024Q1-3 compared to the previous year; In the first three quarters of 2024, the total number of global pharmaceutical transactions was 502, a decrease of 17% year-on-year; despite the waning enthusiasm for global pharmaceutical investments, Chinese new drugs, especially FIC new drug pipelines, have ranked second globally, and domestic innovative drug companies and technologies have gained international recognition, continuously enhancing China's pharmaceutical innovation capabilities. Data from YaoMoFang shows that from 2019 to 2024Q3, domestic new drug license-out transactions have seen both quantity and quality improvements, with local innovations gradually gaining global industry recognition. The projects that have been authorized show clear innovation attributes, with potential first-in-class projects accounting for over 20% in 2022-2023; The types of technologies in projects authorized to foreign partners are more diverse, with bi/multi-specific antibodies, ADCs, cell gene therapies, radiotherapeutics, and technical platforms accounting for over 50% of collaborations achieved in 2024Q1-3. Biotech companies are the main players in license-out globalization, with an increase in cooperation with MNCs Data from YaoMoFang shows that from 2019 to 2023, biotech companies were the main players in license-out globalization, with an increase in cooperation with MNCs. The proportion of top-tier companies in early-stage license-out globalization in China has significantly increased, reaching 54% by 2023. Currently, from the supply side, biotech companies are still the main players in globalization, with a proportion of over 50% in 2019-2023, reaching 69% in 2023. From the perspective of overseas recipients, commercialization capabilities are...The percentage of high-ranking MNCs in overseas cooperation is increasing, reaching 36% by 2023.The license-out transactions of domestic new drugs focus on tumors, with a variety of projects in development. According to data from the pharmaceutical Rubik's Cube, License-out projects are fairly evenly distributed across clinical stages, with a high proportion focusing on oncology. Looking at the current clinical stages of License-out projects, in 2023 the distribution is similar to 2022, with minimal overall change. In terms of indications for License-out projects, tumors remain the main focus, accounting for 54% of projects in 2023. Analyzing the performance of domestic innovative drug companies in the Top 10 cooperation projects in 2023 after six months of international transactions, we can see that the stock price of Bailing Tianheng has risen significantly by 88%, while the stock price of Conerica has declined by 29%. Comparing the upfront payments and total amounts of domestic License-out projects with overseas transactions, it is apparent that the overall costs of domestic projects are still lower, with the total amount of the top ten transactions not even reaching 50% of the overseas threshold. Among the top ten global pharmaceutical transactions in 2023, only one authorization project was held by Bailing Tianheng and BMS. The transaction prices of domestic projects are still relatively low. Overall, domestic projects are still in the "good value for money" stage. Risk Warning Unexpected negative pharmaceutical policies: In recent years, a series of policies have been introduced in the pharmaceutical field, such as centralized procurement of generic drugs, centralized procurement of high-value consumables, and negotiations on medical insurance for innovative drugs. The actual operations of related products or companies may be impacted by these policies. If there are further policies introduced to reduce prices, related companies may face temporary pressures on operations. Industry growth lower than expected: Deterioration of the competitive landscape in certain sectors and products, as well as disruptions from negative policies, may lead to growth rates lower than expected. Increased competition in the industry: With the continuous launch of similar products or new generations of products in the market, competition in the pharmaceutical industry may intensify, leading to risks of lower-than-expected market share or decline in product sales, affecting the revenue and profits of related companies.