On May 20 last year, 3SBIO (01530) entered into a major business development (BD) transaction with Pfizer, with a total potential value exceeding $6 billion. The deal set a new record for upfront payments in outbound licensing of domestic innovative drugs, featuring an upfront payment of up to $1.4 billion. Following the authorization agreement, Pfizer also subscribed to $100 million worth of 3SBIO's ordinary shares based on the 30-day volume-weighted average price. Recently, the positive impact of this significant BD transaction was reflected in 3SBIO's annual report.

The $6 billion BD deal emerged as a key driver of performance growth. On March 30, 3SBIO disclosed its annual results for 2025. The financial report showed that the company achieved annual revenue of 17.70 billion yuan, a year-on-year increase of 94.3%. Net profit attributable to shareholders reached 8.48 billion yuan, surging 305.8% compared to the previous year. Adjusted net profit attributable to shareholders was 8.45 billion yuan, up 264.6% year-on-year.

Alongside the impressive revenue and profit performance, 3SBIO's R&D expenses for the reporting period amounted to 1.52 billion yuan, an increase of 14.6% year-on-year. By the end of 2025, the company's financial resources had grown to 20.40 billion yuan, while the interest-bearing debt ratio decreased to 9.8%. Comprehensive financing costs contributed positively, reaching 230 million yuan, indicating further optimization of the asset-liability structure. Additionally, 3SBIO will maintain a stable dividend policy, distributing a 2025 annual dividend of 0.25 Hong Kong dollars per share.

A breakdown of 3SBIO's annual revenue details clearly shows the profound impact of the landmark BD deal with Pfizer on its finances: during the period, the company recognized licensing income of 9.425 billion yuan, primarily from the upfront payment made by Pfizer. This implies that, excluding licensing income, 3SBIO's revenue for the reporting period was approximately 8.271 billion yuan, a decrease of about 9.12% compared to 9.108 billion yuan in the same period last year. Regarding this, 3SBIO explicitly stated in its financial report that the decline in revenue from biological drugs was mainly due to price reductions from volume-based procurement and the impact of medical insurance policies.

A recently published research report from CICC also pointed out that 3SBIO's "organic revenue declined year-on-year." However, in the same report, CICC noted that in 2025, the company gained approval for the CLDT indication of Tipiao and the gastric cancer indication of Bairuisu. Furthermore, four products, including 613 (IL-1β monoclonal antibody) and 611 (IL-4R monoclonal antibody), submitted New Drug Applications (NDAs). The anticipated approvals of Xinbiao (long-acting erythropoietin) and 608 (IL-17 monoclonal antibody) in early 2026 are expected to contribute incremental revenue in the future. In November 2025, the company announced plans to spin off Mindi International for a Hong Kong listing, which the institution believes could help 3SBIO maintain focus on its core innovative businesses.

Regarding the BD collaboration with Pfizer, according to the company's financial report and CICC's research, Pfizer had already announced seven clinical projects for SSGJ-707 last year, including global multi-center Phase III trials for NSCLC and CRC. Plans for 2026 include initiating over 10 new indication trials and more than 10 innovative combination therapy clinical trials. Among these, three global Phase III registration trials for first-line combination chemotherapy in SQ & NSQ NSCLC and first-line combination chemotherapy in mCRC have already begun patient enrollment. As more clinical data is read out subsequently, this is expected to bring additional milestone payments to 3SBIO.

Based on the above factors, although CICC significantly lowered its 2026 net profit forecast for 3SBIO by 47% to 3.024 billion yuan due to adjustments in the timing of revenue recognition, it simultaneously maintained its target price of 36.5 Hong Kong dollars, expressing continued optimism about SSGJ-707's potential to become a next-generation foundational I/O drug. This target price implies an approximate 60% upside potential from the current price.

When Will the Stock Price Rebound Node Be Confirmed? Despite the impressive annual results, the secondary market's reaction has been somewhat intriguing. On the day following the earnings release, 3SBIO's stock price opened with a sharp decline: it fell nearly 8% within the first five minutes of trading. Although it briefly rallied close to the break-even line within half an hour, selling pressure clearly dominated, and the stock ultimately closed down 6.75% after an initial surge and subsequent retreat. While the stock price surged 11.84% on April 1, the subsequent "four consecutive days of decline" still reflected diverging views among existing shareholders post-earnings and a wait-and-see attitude among potential investors.

Taking a longer-term view, after the $6 billion BD deal with Pfizer was announced on May 20 last year, 3SBIO's stock price surged 32.28% in a single day. Driven by the subsequent bull market for Hong Kong-listed innovative drug stocks, 3SBIO's stock price soared 314.75% for the full year 2025. Calculating from the annual high of 36.8 Hong Kong dollars, the stock's peak gain during the year reached 531.22%. However, after hitting a peak last September, 3SBIO's stock price exhibited a clear trend of volatile decline. Although there were three rebounds towards the upper Bollinger Band during this period, the stock has predominantly trended downwards, oscillating between the middle and lower Bollinger Bands from September last year to the present.

Looking at monthly performance, 3SBIO's stock price declined for three consecutive months from December last year to February this year, only halting the slide with a 3.19% rebound in March this year.

Analyzing broker trading data, over the past 20 days, the top five sellers by net selling volume for 3SBIO were The Hongkong and Shanghai Banking Corporation Limited, Citigroup, Standard Chartered Bank, Bank of China, and BNP Paribas, with net sales of 32.1883 million, 26.9353 million, 16.0055 million, 6.6246 million, and 2.6483 million shares, respectively. This indicates a clear trend of foreign capital outflow among the selling seats, with the top three institutions accounting for 89% of the net selling. This pattern aligns with the recent trend of foreign capital repositioning in Hong Kong stocks under the influence of external factors.

In contrast, under the same investment environment, domestic capital has taken the opposite stance. The top five buyers by net buying volume for 3SBIO during the same period were Southbound Trading (Shenzhen), Southbound Trading (Shanghai), Morgan Stanley, Goldman Sachs, and Industrial and Commercial Bank of China, with net purchases of 50.3725 million, 23.7235 million, 5.6733 million, 3.0575 million, and 2.2005 million shares, respectively. Southbound capital channels collectively purchased 74.096 million shares, accounting for 90.30% of the total net buying from the top five seats.

Examining the changes in Southbound holdings of 3SBIO, the trading strategy of Southbound capital this year has shown a preference for momentum or "right-side" trading. After the stock price confirmed a rebound trend on March 11 this year, the proportion of shares held via Southbound channels has continued to rise despite short-term price fluctuations, increasing from 38.27% on March 11 to 41.37% on April 9. This demonstrates relatively strong buying interest from domestic capital in 3SBIO.

In essence, the recent divergence in trading strategies between foreign and domestic capital regarding 3SBIO stock reflects domestic investors' firm confidence in Hong Kong-listed biopharmaceuticals and the broader Chinese biopharmaceutical sector. From a macro perspective, the 2026 Government Work Report for the first time listed biopharmaceuticals as a "national emerging pillar industry," placing it on par with integrated circuits and aerospace, effectively upgrading it from a "livelihood industry" to a "national strategic scientific and technological force." At the industry level, China's biopharmaceutical sector has officially transitioned from the "R&D investment phase" into a profit cycle driven by both "product sales and licensing income."

Statistical data shows that in the first quarter of 2026, the total value of domestic innovative drug BD transactions exceeded $60 billion, nearly half of the full-year 2025 total ($135.7 billion). The average deal size was $2.7 billion, with an average upfront payment of $184 million, both setting new historical records. This reflects, to some extent, the increasing influence of China's pharmaceutical innovation capabilities within global pharmaceutical innovation.

Compared to foreign capital, which is often more sensitive to external geopolitical factors, domestic capital, benefiting from a stable investment environment, can more confidently bet on the development direction of China's innovative drug industry. In the short term, besides the aforementioned heat in domestic innovative drug BD transactions, over 100 Chinese pharmaceutical companies are set to present nearly 400 research findings at the AACR annual meeting in April, covering hot areas like ADCs, bispecific antibodies, and small nucleic acids. Companies such as Hengrui, Kelun-Botech, and Innovent will disclose key clinical data for major indications like NSCLC and breast cancer. Furthermore, Chinese innovative drug companies will have a concentrated presence at the ASCO annual meeting in May. At this critical juncture, taking early positions in leading stocks from the previous Hong Kong innovative drug bull market aligns with current market investment themes and provides a potential signal for investors on the sidelines holding cash.