China Galaxy Securities Co., Ltd. has released a research report stating that following a significant correction in the pharmaceutical sector in the first half of the year, valuations for both innovative and non-innovative drugs have fallen to historically low levels. The focus for the second half of the year is on variables in national medical insurance reimbursement and the delivery of clinical data for innovative drugs. In terms of investment strategy, the report suggests seeking out hard-tech medical innovations while also considering a company's cash value. Recommendations include focusing on innovative drugs (leaders in best-in-class and first-in-class pipelines), the innovative drug supply chain (CXO, life science upstream), innovative medical devices going global (imaging, high-value consumables, consumer devices, etc.), and medical AI. It also advises monitoring the recovery of medical services and third-party independent clinical laboratories.
Key Points from the Report
Inclisiran is expected to see significant volume growth by 2026, and multiple small nucleic acid drug candidates are entering a period of data readouts and validation.
From an industry perspective, the small nucleic acid drug sector is poised for multiple catalysts in 2026: new drug approvals, capital inflows, technological breakthroughs, and mergers & acquisitions are occurring in succession, indicating strong momentum. On the demand side, the market is large with rapid growth potential, and business development deal values are reaching record highs. On the supply side, the emergence of blockbuster drugs like Inclisiran with annual sales potential of over $1 billion, new drug launches, breakthroughs in delivery technologies, and an expanding pipeline are key factors.
On the R&D front, GSK's bepirovirsen (GSK836) is expected to announce positive Phase III data by the end of May 2026: after 24 weeks of treatment, nearly one-fifth of chronic hepatitis B patients achieved a functional cure, with a cure rate of 25%-28% in populations with low baseline HBsAg levels. The commercial prospects for small nucleic acid drugs in treating chronic diseases are opening up, with pipelines for hepatitis B, kidney disease, metabolism, and others entering the NDA or Phase III stages. Further validation of data could significantly expand the market potential for siRNA drugs, potentially making them the next blockbuster drug class following GLP-1 agonists.
China's innovative small nucleic acid assets are transitioning from "importing" to "exporting," with an increase in IPOs for related companies, greatly expanding the investable universe. It is recommended to focus on domestic listed companies in the small nucleic acid field such as Ribo Life Science, Jiangsu Hengrui Medicine Co., Ltd., Frontier Biotechnologies, and Youcare Pharmaceutical Group Co., Ltd..
CAR-T for Solid Tumors: China Takes the Lead
All over ten CAR-T therapies currently approved globally are limited to hematological cancers. Overseas giants like Novartis, Gilead, and Bristol-Myers Squibb have their solid tumor pipelines still in pre-Phase II stages. Carsgen Therapeutics Holdings Limited's CT053 (seprecabatagene autoleucel) has taken the lead by completing a confirmatory Phase III clinical trial and gaining approval, making it the first globally pioneering and leading heavy-weight product in China's cell and gene therapy field.
Beyond autologous/universal CAR-T, in vivo CAR-T is rapidly moving from concept to reality and is gradually becoming a mainstream trend in future cell therapy development. Major multinational corporations are collectively making significant investments and acquisitions in this area. The core rationale for in vivo CAR-T is being validated in clinical stages: it eliminates the need for leukapheresis, ex vivo cultivation, lymphodepletion, or weeks of waiting; it is lower cost; and its efficacy and safety are approaching that of ex vivo methods. Against the backdrop of expanding CAR-T indications, in vivo CAR-T holds significant market potential.
The global CGT sector is currently in a period of R&D fruition. 1) In terms of R&D innovation, focus on companies with mature pipelines, strong clinical trial data, and breakthrough progress, such as Carsgen Therapeutics Holdings Limited, Legend Biotech Corporation, Shanghai Fosun Pharmaceutical (Group) Co., Ltd., and JW (Cayman) Therapeutics Co., Ltd.. 2) The outsourcing ratio in CGT is relatively high, and the market is highly concentrated, suggesting contract research organizations may benefit first, such as WuXi AppTec Co., Ltd., Asymchem Laboratories (Tianjin) Co., Ltd., Pharmaron Beijing Co., Ltd., GenScript Biotech Corporation, Porton Pharma Solutions Ltd., and GeneQuantum Healthcare (Suzhou) Co., Ltd..
Risk Warnings
The report highlights several risks: macroeconomic pressures leading to insufficient growth in healthcare consumption capacity; policies such as innovative drug reimbursement falling short of expectations; risks of global order shifts due to geopolitical factors; and risks that centralized procurement or price reductions may exceed market expectations.
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