Northeast Securities Co.,Ltd. has released a research report stating that the capital environment for the pharmaceutical industry is showing marginal improvement, with innovation drug R&D activity remaining high. Upstream CXO (Contract Research, Development and Manufacturing Organization) companies are expected to benefit from the recovery in R&D investment and the advancement of clinical projects. Meanwhile, midstream innovative biopharma companies, driven by high disease burdens in areas like oncology and unmet clinical needs, are entering a phase of value re-evaluation centered on clinical data, regulatory progress, commercial scale-up, and business development (BD) execution. The main views of Northeast Securities are as follows.

Global and Chinese healthcare industry investment and financing are gradually stabilizing and recovering after a previous decline, suggesting the innovative drug industry chain may enter a new phase. On one hand, global healthcare investment and financing amounts have been rising continuously since bottoming out in 2023, with the total financing volume in the first half of 2026 maintaining a relatively high level, indicating a recovery in industry capital confidence. On the other hand, Chinese healthcare investment and financing rebounded significantly in 2025, coupled with a continuous increase in the transaction value of innovative drug License-out deals. This demonstrates a significantly enhanced ability for domestic innovative biopharma companies to secure external funding through upfront payments, milestone payments, and sales royalties. Simultaneously, the number of new Investigational New Drug (IND) applications and clinical trial registrations remains high, reflecting that the R&D activity of pharmaceutical companies is still increasing. The improvement in funding and the expansion of demand from the R&D side are resonating. As the essential service providers, or "water sellers," for the innovative drug industry chain, CXO companies are expected to be among the first to benefit from the recovery in R&D investment and the progress of clinical projects.

Oncology remains the most significant source of clinical demand for innovative drugs in China. The annual number of new cancer cases and cancer deaths in China are among the highest globally, with major cancers such as lung cancer, colorectal cancer, breast cancer, liver cancer, and gastric cancer constituting the primary disease burden. With an aging population, improved diagnostic capabilities, and changes in lifestyle, China's cancer spectrum is undergoing a structural shift: the burden of traditionally high-incidence cancers like esophageal cancer, gastric cancer, and liver cancer is declining, while the burden of cancers more common in high-income countries, such as lung cancer, colorectal cancer, breast cancer, and prostate cancer, continues to rise. At the same time, there is still room for improvement in the early diagnosis rates for major cancers in China. Although the overall five-year survival rate continues to improve, a gap remains compared to mature overseas markets. This implies that the demand for cancer treatment in China will remain high for a long time, necessitating both the improvement of early screening and diagnosis systems and the development of more efficient, precise, and accessible innovative treatment options.

Domestic innovative assets such as Antibody-Drug Conjugates (ADCs) and bispecific antibodies are gradually transitioning from the early concept validation stage to a value verification stage focused on the advancement of registrational clinical trials, the readout of key data, and the potential execution of BD deals. The firm believes that subsequent focus should be on companies with the following characteristics: First, core pipelines have entered or are about to enter the registrational clinical trial stage, and preliminary clinical data has provided initial validation of efficacy and safety, suggesting a relatively higher probability of Phase III success and greater certainty in clinical development. Second, assets possess differentiation in target selection, molecular design, indication strategy, or combination therapy approach, enabling them to establish a relatively clear clinical positioning and commercial potential in increasingly competitive fields like ADCs and bispecific antibodies. Third, based on meeting the first two conditions, the global rights to the relevant assets have not yet been fully licensed out, retaining significant flexibility for external partnerships. For such assets, their value stems not only from post-domestic-launch commercial revenue but also from potential overseas licensing, co-development, milestone payments, and global sales royalties.

At the current stage, it is recommended to focus on Mabwell, Junshi Biosciences, Zhejiang ZJ Pharmaceutical, Haisco Pharmaceutical Group, Sichuan Kelun Pharmaceutical, Gan & Lee Pharmaceuticals, KeyMed Biosciences, Beijing Hotgen Biotech, and Sinovac Biotech. Subsequent key clinical data, regulatory progress, commercial scaling, and BD collaboration developments for these companies are worth continuous tracking.

Risk warnings include: Investment and financing recovery falling short of expectations, R&D failure risks, worsening competitive landscape, and commercialization underperformance risks.