Galaxy Securities: Deepseek sparks AI medical boom, boosting valuations in the pharmaceutical sector.

China Galaxy Securities released a research report stating that Deepseek has sparked an AI medical boom and boosted the valuation of the pharmaceutical sector. In January 2025, the release of Deepseek R1 version triggered a wave of low-cost, high-quality AI applications. Medical is one of the most important and promising scenarios for AI applications, with its core mainly focused on the resonance between AI large model reasoning capabilities and medical big data. Industry pharmaceutical companies are rapidly deploying Deepseek localization applications, significantly improving performance after deploying professional large models. AI will widen the gap between industry leaders and followers, favoring the increase in core business shares. At the same time, AI applications will also give rise to new services and functions, bringing incremental growth to the industry. Key points from China Galaxy Securities include: - Deepseek has ignited an AI medical boom, boosting the valuation of the pharmaceutical sector. The release of Deepseek R1 version in January 2025 sparked a wave of low-cost, high-quality AI applications. Medical is one of the most important and promising scenarios for AI applications, with its core mainly focused on the resonance between AI large model reasoning capabilities and medical big data. Industry pharmaceutical companies are rapidly deploying Deepseek localization applications, significantly improving performance after deploying professional large models. AI will widen the gap between industry leaders and followers, favoring the increase in core business shares. At the same time, AI applications will also give rise to new services and functions, bringing incremental growth to the industry. - AI enhances big data reasoning capabilities, combined with professional databases to enhance value. AI technology is transforming the paradigm of the biopharmaceutical industry from "experience-driven" to "data-driven innovation," reflected in many aspects. In the early stages of drug development, AI can improve research and development efficiency, leading to faster entry of drugs into clinical trials. In the field of diagnostic services, artificial intelligence can empower various sub-directions through multidimensional empowerment, providing accurate diagnostic assistance. In the direction of medical services and medical informationization, artificial intelligence can empower various medical scenarios, promoting innovative applications to accelerate deployment. - A multi-dimensional perspective on Deepseek applications has far-reaching implications for the pharmaceutical industry. 1) Historical perspective: The advent of AI technology singularity may lead to a paradigm shift in the biopharmaceutical industry, from "experience-driven" to "data-driven" innovation. 2) Economic perspective: The rise of big data processing capabilities, driven by new demands, we expect the leap in medical data processing capabilities to bring nearly $40 billion in direct incremental revenue to the global pharmaceutical biologics market annually, with more precise medical and other demands released in the long term. The industry may release a larger order of magnitude of service ecosystem market. 3) Industry perspective: Industry leaders strengthen rigid barriers, the market share of core businesses tends to increase, and the closed-loop of clinical data is always the moat of enterprises. The intelligentization of equipment requires continuous clinical data feedback optimization algorithms, and head enterprises use a large number of equipment installations to form a closed-loop of data acquisition, making it difficult for small and medium-sized manufacturers to break through the bottleneck of data scale. The cost of intelligentization upgrade or further strengthen the scale effect. 4) Investment perspective: The liquidity of pharmaceutical assets is improving, and the central valuation is expected to rise. Based on the concept of AI medical sector liquidity and valuation expansion form a positive feedback mechanism of "fund inflow - value discovery - reallocation," supporting the rise of the sector valuation central. Risk warning: - Increased macroeconomic pressure leading to insufficient growth in pharmaceutical consumption capacity; - Risks of policies such as innovative drug medical insurance payments falling short of expectations; - Risks of global order shifts due to geopolitical factors; - Risks of centralized procurement or price reductions exceeding market expectations.