Lyon: The fundamentals of China's biotechnology sector remain solid, with a preference for BeOne Medicines Ltd. (06160), INNOVENT BIO (01801), and Wilshire Biosciences (09887).

Lyon released a research report stating that the fundamentals of China's biotech industry remain solid, benefiting from strong mid-term performance, sustained momentum in external licensing deals, and encouraging clinical data readouts. However, the sentiment in the sector has not fully reflected the fundamental progress, and the firm believes that this discrepancy primarily comes from liquidity factors rather than a weakening of fundamentals. The firm maintains BeOne Medicines Ltd. (06160), INNOVENT BIO (01801) and LEADS BIOLABS-B (09887) as its preferred choices in the Chinese biotech sector. The firm pointed out that during the mid-term performance period in the first half of 2026, most of the SBP GROUP companies it covers exceeded market expectations, especially BeOne Medicines Ltd. and INNOVENT BIO, where the growth in innovative drug sales and operational leverage were the main drivers of profitability exceeding expectations. In terms of external licensing, in the first half of the year, China had 96 external licensing deals for innovative drugs, with a disclosed total transaction value of $99.7 billion, which corresponds to 61% and 73% of the total for 2025; transactions originating from China accounted for 59% of the global innovative drug transaction value, with 8 out of the top 10 global innovative drug transactions sourced from China. Clinically, Chinese companies have positive data readouts for assets across early to late stages, with key data from AKESO (09926) on its Ivosidenib and Kelun-Biotech (06990) on its sac-TMT both exceeding investor expectations. In terms of individual stocks, BeOne Medicines Ltd. reported a 29.6% year-on-year revenue growth in the second quarter, reaching $1.7 billion, with a net profit increase of 151.3% to $237 million, both surpassing market expectations. Management has once again raised its revenue guidance for 2026 to $6.6 billion to $6.8 billion, with the GAAP operating profit guidance adjusted to $1 billion to $1.1 billion. The firm maintains a target price of HKD 321.7 for BeOne Medicines Ltd. H shares and an "Outperform" rating. INNOVENT BIO saw a 44.8% year-on-year revenue increase to RMB 8.618 billion in the first half, in line with market expectations, while net profit grew 50.2% year-on-year to RMB 1.253 billion, exceeding market expectations, with product sales increasing by 56.7% year-on-year to RMB 8.2 billion. Management has proposed a mid-term target of total revenue of RMB 35 billion to RMB 40 billion by 2030. The firm maintains a target price of HKD 146.1 and an "Outperform" rating. Wuxi Biologics is still in the stage of having no revenue, but the firm is optimistic about its differentiated technology platform and points out that the data updates on the PD-L1/4-1BB bispecific antibody LBL-024 for first-line non-small cell lung cancer serve as a short-term catalyst, maintaining a target price of HKD 116.9 and an "Outperform" rating.