Guojin Securities: Research on the Pharmaceutical and Health Industry —— Earnings and Clinical Data Catalyze Intensive Activity, Positive Outlook for the Recovery of the Innovative Drug Sector

The turning point for innovative drug companies to reverse losses has arrived, with a dense schedule of clinical data catalyzation throughout the year. Coupled with the smooth overseas clinical progress of already BD-outbound pipelines, we are optimistic about the investment opportunities in the innovative drug sector. According to statistics from Yibao Magic Cube, by 2025, the number of new drug License-out transactions in China will reach 158 deals, with a total transaction volume of $135.7 billion and an upfront payment scale of $7 billion, setting a new high for both transaction numbers and amounts over the past decade. The prosperity of outbound BD is expected to significantly boost the short-term performance of innovative drug companies on one hand, and promote the international development process of domestically produced new drugs on the other, substantially increasing long-term value. In the short term, February to March may usher in the earnings disclosure window for innovative drug companies, with multiple pharmaceutical enterprises poised to reduce losses or reverse them. Meanwhile, we anticipate that more innovative drug companies will turn profitable and release substantial profits by 2026. Looking ahead to the entire year, domestic innovative drugs are expected to further deliver on clinical data at academic conferences such as AACR (April), ASCO (May), and ESMO (October). Overall, we believe that the previous pullback in innovative drugs has been relatively thorough, the upward industry trend is clear, and recent catalysts are dense; thus, we continue to be optimistic about the investment opportunities in this sector.