Guotai Haitong Securities released a research report stating that siRNA drugs have entered a rapid development phase, having validated their value in rare diseases and are now gradually entering the development and commercialization phase for common diseases. Given the high efficiency and specificity of the GalNAc delivery system, along with patent breakthrough opportunities, the firm believes that drugs using this mechanism will face intense competition in diseases with clear pathogenic genes or mechanisms and hepatic targets. Future breakthroughs may lie in exploring new disease areas, particularly previously undruggable targets, and advancements in extrahepatic delivery systems.

The small nucleic acid drug industry has recently seen intensive business development (BD) activities and data catalysts. As technology platforms mature and indications continue to expand, the therapeutic era for small nucleic acid drugs will gradually begin. The firm particularly focuses on the commercial value of siRNA drugs in major common disease indications.

Guotai Haitong Securities' main viewpoints are as follows:

Technology upgrades and product approvals drive platform maturation; siRNA drugs have transitioned from "rare diseases" to "common diseases"

Small nucleic acid drugs represent the third wave following small molecules and antibody drugs, featuring strong target expansion capabilities, robust R&D extensibility, long-acting drug effects, and resistance to drug resistance. Small nucleic acid drugs come in various types, with siRNA drugs offering better safety and long-acting properties, making them a development focus for domestic pharmaceutical companies.

Since 2016, with upgrades to the GalNAc delivery system and the application of fully modified approaches, siRNA drugs have entered a rapid development phase, validating their value in rare diseases and now gradually entering the development and commercialization phase for common diseases. Major drugs may emerge across large indications including cardiovascular diseases, chronic hepatitis B, weight management, anticoagulation, and autoimmune conditions.

Multinational corporations (MNCs) are actively pursuing transactions in the small nucleic acid field; the firm believes BD transactions in this sector will continue, with Chinese companies potentially excelling

Overseas MNCs are leveraging their understanding of specific indications to enter the small nucleic acid field through licensing pipelines and collaborating on technology platforms. The firm believes licensing transactions in this field will continue for several reasons: first, hepatic delivery systems have matured, and the technological advantages and commercial value of small nucleic acid drugs have been validated; second, many pharmaceutical companies face patent cliff challenges and need new products to address potential pipeline risks, making pipeline acquisition from companies specializing in small nucleic acid technology platforms a relatively quick strengthening approach.

Furthermore, the firm expects transaction sellers to increasingly come from China, as small nucleic acid drug development has strong platform characteristics that can fully leverage Chinese pharmaceutical companies' engineering advantages, particularly in chemical synthesis. Chinese companies can rapidly iterate based on leading technologies to achieve differentiated advantages in knockdown effects, dosing intervals, and injection methods.

Platform characteristics are prominent; focus on indication positioning and extrahepatic delivery breakthroughs

The current industrialization process for siRNA drugs centers on commercializing common diseases with clear targets and biological mechanisms. While siRNA drugs can achieve very rapid molecular proof-of-concept (PCC) speeds after establishing underlying technology platforms, given their long-acting characteristics, the firm believes drugs using this mechanism still maintain first-mover advantages (longer clinical timelines). Companies that position themselves early can still achieve favorable commercialization returns or external collaboration opportunities.

Due to the high efficiency and specificity of the GalNAc delivery system and patent breakthrough opportunities, the firm believes competition will be intense for drugs targeting diseases with clear pathogenic genes or mechanisms and hepatic targets. Future breakthroughs may depend on exploring new disease areas, particularly previously undruggable targets, and advancements in extrahepatic delivery systems.

Relevant domestic companies include: 1) Listed companies: Yabao Pharmaceutical, Hengrui Biopharmaceuticals, CSPC Pharmaceutical Group, Junshi Biosciences, Frontier Biotechnologies, Fuyuan Pharmaceutical, ChemPartner, Sirnaomics 2) Unlisted companies: Boan Biotech, RiboBio, Kinetor Pharma, Saint Biotech, Duality Biologics, Voyage Biotechnology

Risk factors include risks of R&D progress falling short of expectations, intensifying competition risks, and commercialization falling short of expectations.