China Securities Co.,Ltd.: CXO industry adjustment basic completion, focus on CDMO enterprises with strong ability to go overseas and leading clinical CRO.

China Securities Co., Ltd. released a research report stating that the field of innovative drugs is presenting three major trends: internationalization 2.0 deepening, with the number of license-out transactions reaching 103 by 2025 and the first installment of $8.45 billion, setting a new record high, benefiting independent overseas enterprises with valuation premiums; unprecedented policy support, efficiency improvement in medical insurance negotiations and the establishment of an innovative drug catalog for commercial insurance for the first time; continuous breakthroughs driven by technology, with ADC, IO dual-targeted therapy, GLP-1 weight reduction, and multiple developments in small nucleic acid drugs. The adjustment of the CXO industry is basically completed, overseas demand is stable, domestic investment and financing have bottomed out and rebounded, focusing on CDMO companies with strong overseas capabilities and leading clinical CROs. The recovery of the upstream industry chain is significant, the space for increasing localization is broad, intelligent, digital production and international expansion are driven by dual wheels. Optimistic about the future development of the pharmaceutical industry chain in China. Global perspective: External challenges intensify, China Meheco Group's industrial competitiveness continues to improve. From an international comparative advantage perspective, China has population and domestic demand advantages, manufacturing and supply chain advantages, rapid innovation capabilities, and a continuous increase in the number of Chinese assets going global. The United States has obvious advantages in innovation and early-stage research and development, as well as a domestic market with high pricing. Although external challenges are increasing, there are still great opportunities in overseas markets. It is recommended to focus on increasing domestic market share and opportunities for overseas expansion. Based on domestic foundations, embrace innovation and integration. Policy outlook: Reform enters a deep water area, high-quality growth becomes the norm. In the second half of 2025, we will focus on optimizing drug and consumables procurement policies, diversifying payment methods and reforming medical service prices. Pharmaceutical industry chain: optimize procurement, actively innovate and transform, focus on supply chain security. Medical devices: enthusiastic about import substitution and merger opportunities, actively focus on new technologies such as AI and brain-machine interfaces. Pay attention to the operating bottoming out pace and long-term transformation and upgrade direction in industries such as traditional Chinese medicine, pharmacies, distribution, medical services, and vaccines. Expand overseas: grasp the rhythm and path, actively explore overseas markets. Innovative drugs: Chinese innovation shines on the international stage, and the industry trend continues to strengthen. Pharmaceutical upstream and life sciences: actively explore overseas markets, seeking a second growth curve. Active pharmaceutical ingredients: short-term tariff disturbances are limited, pay attention to industry transformation opportunities. Internationalization of medical devices: firmly optimistic about the trend of going global, focus on some innovative medical devices for independent sales and BD opportunities. Blood products going global: Pegaspargase provides an opportunity for blood products to go global, and overseas registration of blood products continues to advance. Vaccine going global: the model tends to be diversified, and progress is expected to accelerate.