Business sequentially recovered in 1Q. CSPC reported total revenue of
　　RMB7.0bn in 1Q25, including RMB718mn from out-licensing (BD) income.
　　Excluding the impact from BD, core revenue reached RMB6.3bn (+1% QoQ), representing 22% of our previous FY25 estimates. Excluding the BD impact, core net profit reached RMB868mn (+58% QoQ), accounting for 27% of our FY25 estimates. Sales of finished drugs (excluding BD income) declined 5% QoQ and decreased 37% YoY, mainly due to a 21% QoQ decline in CNS products. This was driven by channel compensation following NRDL price cuts for NBP. Management continues to guide for full-year stability in NBP sales in FY25. Oncology product sales were down 7% QoQ. In 1Q25, selling expenses declined by 19% QoQ to RMB1.7bn, mainly due to the VBP of core products such as Duomeisu and Jinyouli. Mgmt expects revenue from newly launched products to partially offset the decline in legacy products.
　　Three large-scale BD deals expected in 2025. Following the out-licensing
　　of two assets in late 2024-lipoprotein(a) and a MAT2A inhibitor-CSPC has completed two additional BD agreements in 2025, involving a ROR1 ADC and an irinotecan liposome. Mgmt indicated that three more large-scale out- licensing deals are expected in 2025, each with potential deal value exceeding US$5bn. These include an out-licensing of CSPC’s EGFR ADC and two key technology platforms, with deal anticipated as early as June. CSPC has eight core technology platforms, incl. nanoparticle formulation, ADC, siRNA, antibody/fusion proteins, etc. Backed by robust internal R&D capabilities, evidenced by RMB 5.2bn in R&D spending in FY24, CSPC has built a rich pipeline of 40-50 assets with BD potential, according to Mgmt. Notable candidates include EGFR ADC, PD-1/IL-15 bsAb, GFRAL mAb, ActRII mAb, and B7-H3 ADC, in our view. Thus, we expect sustainable BD income in the future.
　　EGFR ADC (SYS6010): a near-term BD catalyst. SYS6010, CSPC’s leading
　　ADC candidate, is currently in global Ph3 development. In China, two pivotal studies are ongoing: a Ph3 trial comparing SYS6010 to chemotherapy in 2L EGFR TKI-resistant NSCLC, and a Ph1b/3 trial evaluating SYS6010 + osimertinib versus osimertinib alone in 1L EGFR-mutant NSCLC, with the Ph3 portion expected to initiate by late 2025 or early 2026. In the US, CSPC plans to initiate two Ph3 trials in 2H25: one in 3L EGFR-mutant NSCLC (with ORR as primary endpoint), and another in 2L+ EGFR wild-type NSCLC, including IO-resistant patients, comparing SYS6010 to docetaxel. At AACR, SYS6010 monotherapy demonstrated a median PFS of 7.6 months in EGFR-mutant nsq-NSCLC patients post-TKI and chemotherapy, an encouraging signal in this treatment setting. Notably, in five IO-resistant EGFR wild-type NSCLC patients with moderate to high EGFR expression, SYS6010 (4.8mg/kg) achieved an 80% ORR (4/5 PRs).
　　Maintain BUY. CSPC’s BD deals will be a key sustainable driver of earnings growth. Considering the positive contribution of three potential large scale BD deals in near term, we expect CSPC’s revenue and net profit to grow by 5.8%/30.4% YoY in 2025. We revise our TP from HK$5.71 to HK$10.08 (WACC 9.49%, terminal growth 2.0%).