BOCOM International released a research report stating that Trump announced a 100% tariff on all branded/patented drugs starting in October, unless the manufacturer is constructing production facilities within the United States (including groundbreaking or under construction). This tariff policy does not apply to generic drugs, biosimilar drugs, and intermediates such as APIs.

BOCOM International believes this has limited impact on China's innovative drug industry chain and there is no need for excessive concern: 1) Innovative drugs: Most current self-exported varieties have either built their own production capacity in the US or have outsourced production to domestic US CMOs, while most domestic innovative drug exports adopt the BD model. 2) CXO: Export products are mainly APIs/drug substances, temporarily unaffected, with a relatively low proportion of formulation/finished drug exports. It will take time for downstream MNC clients to invest in building factories, so the direct impact on CXO orders in the short term is limited. In the long term, policy changes may also affect their factory construction pace.

Q4 2025 sector catalysts: 1) The ESMO conference will be held in mid-to-late October. The firm recommends focusing on companies with significant data readouts such as AKESO (09926), SKB BIO-B (06990), and REMEGEN (09995); 2) Medical insurance negotiation results and the first version of the commercial insurance innovative drug catalog will be announced in October-November.

Medium to long-term recommendations for the following sub-sectors: 1) Innovative drugs: 3SBIO (01530) and ANTENGENE-B (06996) have abundant short-term catalysts, with valuations not yet reflecting core blockbuster value; SIMCERE PHARMA (02096), Chi-Med (00013), and Legend Biotech are significantly undervalued with clear long-term growth logic; 2) CXO: Sub-sector leaders benefiting from downstream high prosperity and marginal financing recovery, such as WuXi XDC (02268).