MorganStanley|REseARcH,ASIAPACIFICINSIGHTMay28,202608:00PMGMTChina BiotechnologyJack Lin+8523963-3746Innovation Dawn2.0:FromMORGANSTANLEY&CO.LLCSeanLaaman,Ph.D.Wholesale to Bespokeman@morganstanley.con+1212761-4947TerenceCFlynn,Ph.DChina biotech's first re-rating proved global relevance. The nextTerenceFlynn@rrorganstanley.con+1212761-2230leg should reward innovators with the risk capacity and assetiscarcity needed to retainmore plobal risk adiusted net oresentMORGANSTANLEYASIALIMTFED+Alexis Yan,CFAvalue.exitsYan@morganstanley.com+8522239-7953VanessaLiaoKevTakeawaysssa.Liao@morganstanley.com+8523963-0115躇 Progress remains on track: Licensing, global trials and regulatory progress remainin line with,or ahead of,our Innovation Dawn expectations.CHINAHEALTHCAREI Innovation Dawn 2.0;The debate now hiftsto who captures value,as rskViewAttractiveTECHNOLOGYallocation and innovation scarcity increasingly dictate retained economics.1 Wihy he dsountpersists.0n y .25% of Cin Iersng als ar aestagelAttractiveMAJORPHARMACEUTICALScommercalysc.50% forUSbiotechM&Atransactions.IndustryViewIn-LineWhy now:.Betterfunding, pivotal MRCT readout,harmonization and Aledasset quality can liftretained value;Newcolco-cocanliftNPVbvc35-419Galapagos NV in relation to itsbindingagreement withGileadSclencesfollowingGilead'sdefinitive agreement to acquire alloftheChina biotecth's frst re-rating came from global relevance: Outbound icensing,outstanding equity interests of OuroMedicinesos anouncedonMardh3,2026.Theproposedproved China-originated assets belong in the global innovation pool. The next phasetransaction is subject to customary closinginto stronger terms.Byour estimate, NewCo/co-development structures could lftretained NPV by c.35-41% vs traight licensing when risk, dilution and obligationsaremanageable.includingtransactonfesthat are contigentThe mechanism isrisk allocation plus scarcity premium: Chinalicensing remains,earlier-stage than US biotech M&A, with only c.25% late-stage?commercial evs c50% forUSM&A. Thatleaves MNCs absorbing more development. regulatonCMC, translatability and commercialization risk, making the discount rational bRiskcapacity isrising.Licensingnlicensingincome,commercial eny companies cary assetsfurther and negotiatefor more retained HNPV. Geoltic,and US commercialization stl cao neartermcanture Be selective., Favor repeat monetizers with risk capacity and scarce assets. Keymedtests NewCo repeatability beyond upfront licensing, Innovent tests co-development economics through US proft share, ex-US rovalties and retainedinfluence Abbiskotestslicensing-led value capture throughpimicotinib andMerckKGaAvalidationublic appearances
MorganStanley|aeseancn,ASIAPACIFICINSIGHTExecutive SummaryCoreMessage: Inovation Dawn remains broadly on track: Globalization of Chinaoriginated assets continues, with out-licensing momentum, fundraising,Societal Shiftsclinical development, and regulatory progress broadly consistent with ourprior assumptions and forecasts.AMorgan StanleyResearch.Thenextphaseisfrom volume to value:The fi...
