China Merchants International: Focus on the advancement of authorized drug development, recommend buying 3SBIO, etc

According to the Zhitong Finance APP, CMB International released a research report stating that the MSCI China Healthcare Index has risen 58.6% from the beginning of 2025 to date, outperforming the MSCI China Index by 24.2%. Recently, the pharmaceutical sector has seen a slight pullback (the MSCI China Healthcare Index has pulled back 10% since October), and the bank believes this will present a bottom-fishing opportunity. Due to the recovery of capital market financing and the increase in the scale of innovative drug overseas transactions, there has been a warming demand for domestic innovative drug research and development. Coupled with the U.S. interest rate cuts, the CXO industry is expected to see performance recovery in 2H25E. Additionally, investors are advised to pay attention to the clinical progress of authorized innovative drug pipelines overseas. Recommended stocks include 3SBIO (01530), GUSHENGTANG (02273), GIANT BIOGENE (02367), WuXi AppTec (02268), SINO BIOPHARM (01177), and INNOVENT BIO (01801).

The report mentions that several significant clinical data were released at the ESMO conference. Key points of focus include: 1) SKB264 (Kanglongda) - SKB264 is currently the only drug in Phase III clinical trials that has shown statistically significant overall survival (OS) in NSCLC with EGFR-TKI resistance. In the OptiTROP-Lung04 Phase III trial, the mOS for SKB264 monotherapy in second-line patients has not yet been reached, compared to 17.4 months in the chemotherapy group, HR=0.56. 2) lvonescimab (Kangfang Bio): In HARMONi-6, for first-line sqNSCLC, the mPFS of AK112 combined with chemotherapy was 11.1 months vs. 6.9 months for Tislelizumab + chemotherapy (HR=0.60), with OS data still immature. Summit has revised the HARMONi-3 trial protocol to conduct efficacy assessments for both sqNSCLC and nsqNSCLC, with mPFS results for the sqNSCLC cohort expected to be read out in 2H26. 3) 707 (3SBIO): In first-line colorectal cancer, the uORR of 707 5mg/kg Q3W + chemotherapy reached 82.6%, with a cORR of 65.2%. In comparison, in the Phase II trial, Kangfang Bio's ivonescimab (20mg/kg Q2W) combined with chemotherapy had an ORR of 81.8% in first-line colorectal cancer.

The bank indicated that the driving force of business development (BD) for stock prices has weakened, suggesting attention to the clinical progress of authorized pipelines overseas. Recently, innovative drug BD has continued to land, but stock prices have reflected weak performance. The bank believes this is mainly due to valuation and expectations. INNOVENT BIO announced a global strategic cooperation with Takeda Pharmaceutical for IBI363 (PD-1/IL-2) and other drugs. Regarding IBI363, INNOVENT BIO will bear 40% of the global R&D costs and share 40% of the commercial rights in the U.S. The bank believes that INNOVENT's choice to share risks with Takeda reflects both INNOVENT's strong confidence in IBI363 and its high emphasis and investment in globalization strategy. Although Takeda has limited layout in the solid tumor field, its excellent global clinical and commercialization capabilities will support the value discovery of IBI363. The bank advises investors to focus on the clinical progress of authorized pipelines overseas, as 1) the certainty of clinical progress is relatively high, which will become a catalyst for stock price increases, and 2) the final value realization comes from only a small portion of the upfront payment from the licensing deal The vast majority still relies on milestone payments and sales sharing brought about by the commercialization success of the varieties. The bank expects that Pfizer will announce the overseas clinical plan for 3SBIO's 707 within the year, focusing on the combination of 707 with several ADC products from Pfizer