According to GF Securities' research report, Wind data shows that the overall revenue growth rate of chemical pharmaceutical companies in Q1-Q3 2025 was -2.1%, while the adjusted net profit margin reached 12.5%, indicating short-term revenue pressure but sustained profitability improvement.

From a global perspective, data from PharmaCube reveals that China-related pharmaceutical transactions totaled $93.7 billion in Q1-Q3 2025, matching overseas transaction volumes. Upfront payments hit $5 billion across 230 deals, surpassing full-year 2024 figures in both volume and value. This demonstrates accelerating internationalization of China's pharmaceutical innovation.

GF Securities maintains a positive outlook on mid-to-long term investment opportunities arising from domestic drugmakers' innovation upgrades and global expansion. Key observations include:

1. **Sector Profitability & R&D Growth** Analysis of 56 A-share chemical pharmaceutical companies shows a 9.6% R&D expense ratio (+0.7pp YoY). Among 18 Biotech firms, revenue grew 17.3% YoY to RMB 10 billion, with adjusted net losses narrowing by 25.2%. The recovery of hospital demand, new innovation cycles, and product mix optimization are driving sustained sector improvement.

2. **Globalization as Strategic Imperative** U.S. remains the largest single market for innovative drugs. Most Chinese companies adopt partnerships with multinational pharma for overseas expansion through licensing/co-development models, minimizing tariff impacts. The $93.7 billion transaction volume highlights growing recognition of domestic R&D capabilities by global players.

3. **Investment Recommendations** Since 2015, systemic reforms have reshaped China's pharmaceutical ecosystem. The "Whole-Chain Support for Innovative Drug Development" policy further clarifies the innovation-driven roadmap. GF Securities recommends focusing on companies with: - Improving profitability - Globally competitive core products

**Highlighted Innovators**: Hengrui Pharma (600276.SH), Kelun-BTB (06990), Baili Pharma (688506.SH), Hansoh Pharma (03692), Innovent Bio (01801), Fosun Pharma (02696), 3SBio (01530), DualityBio (06628), Simcere (02096), BeiGene (688235.SH), Junshi Bio (01877), Keymed Biosciences (02162), ZJ Pharma (688266.SH), Haisco (002653.SZ), Kelun Pharma (002422.SZ), Sino Biopharm (01177), Changchun High-Tech (000661.SZ), Akeso (09926), LintonBio (02573), HUTCHMED (00013), Abbisko (02256), GenScript (01548), Yipinhong (300723.SZ), AskGene (002755.SZ), RemeGen (09995), CSPC Pharma (01093), Sinqi (300573.SZ), Salubris (002294.SZ), Ascentage Pharma (06855), ZSPHARMA (002317.SZ), Aidi Pharma (688488.SH)

**Specialty Pharma**: Humanwell (600079.SH), NHWA (002262.SZ), Dongcheng Pharma (002675.SZ)

**Risk Factors**: - Unexpected price cuts in generics procurement and drug negotiations - Clinical trial failures - Slower-than-expected commercialization of innovative drugs - Intensified market competition