HuaYuan Securities: The potential of PD1/VEGF/IL-2 is promising, insisting on innovative drugs as the main line for the whole year

According to the Zhitong Finance APP, Huayuan Securities released a research report stating that overall, the pharmaceutical industry is experiencing a continuous marginal improvement in 2025, and operational performance is expected to further improve in 2026. Structural high-growth sub-sectors and individual stocks are worth looking forward to. The focus on "innovation" will be the main theme for the entire year of 2025, with attention to assets that are relatively undervalued in the second half of the year, such as "going overseas + aging."

The main points of Huayuan Securities are as follows:

The PD1/VEGF/IL-2 triple antibody mechanism is clearly complementary, and it is recommended to pay attention to SHANGHAI YIZHONG (688091.SH).

Target mechanism: 1) PD-(L) 1: The PD-1 and its ligand PD-L1 pathway controls the induction and maintenance of immune tolerance in the tumor microenvironment. The activity of PD-1/PD-L1 is responsible for the activation, proliferation, and cytotoxic secretion of T cells in cancer, thereby reducing the degraded anti-tumor immune response; 2) VEGF(R): Vascular endothelial growth factor (VEGF) is a class of factors that regulate angiogenesis. VEGF is expressed in many tumors and induces the formation of abnormal tumor blood vessels, stimulating tumor angiogenesis, making blood vessels leaky, twisted, and immature. VEGF is involved in the entire process of tumor growth and is the most important angiogenic factor; 3) IL-2(R): In the tumor microenvironment (TME), the IL-2/IL-2R signaling pathway has a complex role, which can promote the expansion of Tregs to suppress anti-tumor immunity, as well as enhance the infiltration of cytotoxic T lymphocytes and natural killer cells to boost anti-tumor immunity. Due to the dual role of IL-2(R) in the tumor microenvironment, the development of IL-2(R) therapies requires more precise strategies. The triple antibody YXC-001 being researched by SHANGHAI YIZHONG integrates PD-1, VEGF, and IL-2 into a single molecule, possessing higher mechanism integration and in vivo synergy efficiency, making the therapeutic strategy highly feasible, and is expected to show significant advantages in efficacy consistency, pharmacokinetic coordination, and immune activation precision.

Adhere to innovative drugs as the main line for the year, focusing on relatively undervalued assets such as manufacturing going overseas + aging consumption.

In 2025, the pharmaceutical industry is expected to rebound significantly under the leadership of innovative drugs, with Chinese innovative drugs being a clear investment opportunity for the next decade. Additionally, the performance of medical consumption and pharmaceutical manufacturing is expected to bottom out and rebound in the second half of 2025 to the first half of 2026, with valuations likely to further recover, and structural market trends may continue to unfold. The Chinese pharmaceutical industry has basically completed the transition from old to new growth drivers (innovation replacing generics, enhanced overseas capabilities), especially as innovative drugs have significantly opened up a new growth curve for Chinese pharmaceutical companies. Specifically:

1. The Chinese innovative industry has reached a scale, with traditional pharma companies such as HengRui Medicine (600276.SH, 01276), Hansoh Pharmaceutical (03692), and China Biopharmaceutical completing a remarkable transformation towards innovation. Innovative drug companies like BaiLi TianHeng (688506.SH) and Kelun-Botai Biotech-B (06990) are rapidly rising with a global First-in-class posture;

2. The ability to go global is accelerating, and Chinese pharmaceutical companies have become a source of innovation transformation that is highly valued by multinational corporations (MNCs). Medical devices, supply chains, and other sectors have established a strong presence globally, continuously emerging in developed markets in Europe and America as well as in emerging markets, such as United Imaging Healthcare (688271.SH), BGI Genomics (688114.SH), and Meihua Medical (301363.SZ).

3. On the demand side and payment side, new growth is being continuously driven: the aging population is accelerating, and the demand for chronic diseases such as cardiovascular, endocrine, and orthopedic diseases is continuously increasing, leading to a long-term economic trend.

4. From the payment side, medical insurance revenue and expenditure are still growing steadily, while the Medical Insurance Bureau is actively promoting the development of commercial insurance to build a multi-tiered payment system.

5. Additionally, new technologies are accelerating industry transformation: under the wave of AI, the pharmaceutical industry is expected to release new growth logic. Looking ahead to Q4 2025, we remain optimistic about the main line of innovative drugs and pay attention to the medical device sector, especially medical equipment and home devices, which are showing signs of stabilization and recovery in Q3 performance. We also suggest positioning for the industry, which is expected to reverse due to aging and out-of-hospital consumption (pharmacies, traditional Chinese medicine, etc.) by 2026, while also focusing on undervalued narcotics and blood products.

Risk Warning: Risks of intensified industry competition, risks of policy changes, and risks of industry demand falling short of expectations