CITIC Securities issued a research report maintaining a "Buy" rating for CMS (00867), projecting revenues of RMB 8.31 billion, RMB 9.48 billion, and RMB 11.35 billion for 2025-2027, representing year-over-year growth of 11%, 14%, and 20% respectively. The firm expects net profit attributable to shareholders of RMB 1.67 billion, RMB 1.89 billion, and RMB 2.53 billion, with year-over-year growth of 3%, 13%, and 34% respectively. Currently, the company is advancing five innovative drugs into commercialization, with three in the NDA stage and over 20 self-developed products progressing systematically, establishing a solid foundation for future growth. The dermatology segment Dermatological Medicine has emerged as a leader in the dermatology subdivision, with H1 2025 revenue growing 104% year-over-year. With the anticipated approval and launch of ruxolitinib cream and steady progress of subsequent innovation pipelines, further growth potential is expected to be unleashed.

Event: On August 18, the company announced its interim results for 2025. In the first half of 2025, the company achieved operating revenue of RMB 4.002 billion, up 10.8% year-over-year, or RMB 4.670 billion calculated on a pharmaceutical sales basis, up 8.9% year-over-year. Net profit reached RMB 932 million, up 3.1% year-over-year. Basic earnings per share was RMB 0.39, up 4.2% year-over-year. The company plans to distribute 40% of profits as dividends, with interim dividend per share of RMB 0.1555, up 3.2% year-over-year.

CITIC Securities' main viewpoints are as follows:

**Centralized Procurement Impact Cleared, Comprehensive Recovery Across Business Lines**

The company achieved operating revenue of RMB 4.002 billion in H1 2025, up 10.8% year-over-year, or RMB 4.670 billion on a pharmaceutical sales basis, up 8.9% year-over-year, with revenue and profit meeting expectations. The impact of centralized procurement products has been fully absorbed in H1 2025, with products like Ursofalk recovering sales volumes to pre-centralized procurement levels. Three centralized procurement products (Plendil, Deanxit, Ursofalk) retained approximately 50% of sales compared to their 2022 peak on a pharmaceutical revenue basis. Combined with accelerated volume growth of major exclusive products and innovative products, H1 2025 sales reached RMB 2.9 billion, up 20.6% year-over-year, helping the company's operations return to an upward trajectory.

By business segment, cardiovascular and cerebrovascular business achieved sales of RMB 2.22 billion, up 6% year-over-year, ending the previous declining trend with core products gradually stabilizing. Digestive and autoimmune business achieved revenue of RMB 1.41 billion, up 4.9% year-over-year, with exclusive products like Yihuo and Kangbishen continuing to contribute stable income. Dermatology (Dermatological Medicine) achieved sales of RMB 500 million, up 104% year-over-year, with significant volume growth in products like Hirudoid and Yiluqu. Ophthalmology business achieved revenue of RMB 360 million, up 17% year-over-year.

**Innovation Transformation Progressing Steadily, Business Structure Continuously Optimizing**

The company's innovation transformation results are accelerating, with business structure completing a key transition from "centralized procurement dependence" to "innovation-driven." In H1 2025, exclusive brands and innovative drug business grew 20.6% year-over-year, with revenue accounting for 62% of total pharmaceutical revenue, up 6% year-over-year. Since 2023, five innovative drugs including Vituko, Meitaitong, Weiruifei, Laifuolan, and Yiluqu have received approval and launched. The company has laid out approximately 40 innovative pipeline products, with daprodustat tablets for renal anemia, ruxolitinib cream for vitiligo, and ZUNVEYL for Alzheimer's disease currently in NDA review stage.

Among these, ruxolitinib cream has entered the final stage of pharmaceutical review and is expected to receive approval in H2 2025. The company has initiated first-batch commercial production. Benefiting from excellent clinical efficacy, over 6,000 patients have sought treatment through Boao's pilot program, with 17 hospitals in the Greater Bay Area having introduced it. Current sales have exceeded RMB 100 million, and accelerated volume growth is expected following domestic approval and launch.

Regarding products in critical clinical stages, Y3 injection for treating acute ischemic stroke has completed Phase III clinical trials and can subsequently be used in combination with thrombolytic drugs. Phase II data showed that the 40mg dose group demonstrated significantly superior neurological recovery compared to the control group, potentially becoming the first dual-function drug for "stroke treatment + post-stroke depression and anxiety prevention." ABP671 for treating gout/hyperuricemia, as a URAT1 inhibitor, showed in Phase II data that a 2mg dose could reduce serum uric acid below 6mg/dL, with efficacy superior to benzbromarone or febuxostat 80mg dose and better safety profile. It has currently entered Phase III clinical trials. MG-K10 for treating asthma/seasonal allergic rhinitis, as China's first long-acting IL-4Rα monoclonal antibody (Q4W), has completed 16-week data for AD indication and is expected to submit NDA in H2 2025.

**Dermatological Medicine Spin-off Progressing, Dermatology Business Line Expected for Value Revaluation**

Dermatological Medicine's spin-off listing work is progressing systematically. The spin-off scheme adopts a distribution-in-kind format without involving financing. Before listing, Dermatological Medicine's ESOP platform equity ratio is approximately 9.2%, with CMS holding 90.8%. In H1 2025, Dermatological Medicine achieved revenue of RMB 498 million, up 104% year-over-year.

According to Frost & Sullivan data, China's dermatological treatment and care market size was RMB 89.9 billion in 2024, expected to grow at a 10.4% CAGR to RMB 267.1 billion by 2035. Among Chinese innovative pharmaceutical companies, Dermatological Medicine ranks first in both dermatological indication coverage and dermatological prescription drug revenue, with a professional sales team of 650 people covering over 10,000 hospitals and 100,000 offline pharmacies. Through a dual approach of independent R&D and collaborative development, it focuses on unmet clinical needs.

Among dermatological prescription drugs, Yiluqu, Hirudoid, and Anshuxi are all marketed products, while ruxolitinib cream is in NDA stage. The research pipeline also includes MG-K10, povorcitinib (JAK1 inhibitor, vitiligo/hidradenitis suppurativa indication IND accepted), CMSD001 (self-developed TYK2 target product for psoriasis and atopic dermatitis) and other products. The research pipeline will continue to enrich the company's dermatology product matrix, achieving comprehensive coverage of major dermatological diseases and providing comprehensive solutions for patients with different diseases and disease stages, expected to further strengthen its leading position in the subdivision track.

**H2 2025 Outlook: Continued Volume Growth of Innovative Products, Ruxolitinib Expected to Receive Approval and Launch**

In H2 2025, the company will reach critical junctures for commercialization of multiple blockbuster products and business spin-off. Exclusive products/innovative drugs are expected to continue maintaining high-speed growth. Ruxolitinib cream (vitiligo indication) is in the final stage of pharmaceutical review and expected to receive approval and launch in H2 2025. Daprodustat tablets (renal anemia) NDA is progressing simultaneously, targeting clinical needs of non-dialysis CKD patients and expected to fill market gaps. The launch of these two products will further consolidate the company's advantages in autoimmune and nephrology fields. Meanwhile, Dermatological Medicine's spin-off listing work will proceed as planned, adopting distribution-in-kind format without involving financing. After spin-off, its independent valuation as a dermatology leader is expected to be released.