SBP GROUP (01177) Interim Report Observation: All in AI and Globalization Dual Engines Started

For a traditional pharmaceutical company that already possesses a large commercial scale, the real challenge has never been about increasing revenue, but rather about finding the next source of growth. SBP GROUP (01177) is entering such a critical phase. In recent years, the company has significantly enhanced its innovation drug pipeline through continuous investment in R&D, thereby establishing a prominent innovation identity. By the first half of 2026, with the approval of innovative products such as Lurazepam, Pelacarsen, and Nadimustine, along with further expansions of core product indications like Anlotinib, Kumosi, and Zongaitai, the company's innovation business is entering a concentrated realization period. Meanwhile, two overseas licensing deals with Sanofi and AstraZeneca, totaling up to $3.43 billion, have marked the transformation of "internationalization" from strategic planning to tangible performance increments. On August 19, SBP GROUP officially announced its mid-year results for 2026, demonstrating a rare high-growth trend. Not only did revenue reach a historic high of 19.44 billion yuan, reflecting a year-on-year increase of 10.6%, but the adjusted net profit attributable to the parent company for its core business also achieved a robust growth of 3.34 billion yuan, with a year-on-year growth rate of 92.3%. After successfully branding itself as an "innovative" player over the past decade, this long-established pharmaceutical company, managed by the young team led by Xie Qirun and Xie Chengrun, delivered a report in the first half of 2026 characterized by a dual-engine approach of "AI deep empowerment" and "comprehensive elevation of internationalization." Evolving into AI Native, from enhancing R&D efficiency to restructuring the entire industry chain If "innovation" was the keyword for the past decade of ZHONGSHENG, then "All in AI" is the strategic starting point set by the Xie siblings for the group's next decade. It has been revealed that at this mid-year performance meeting, ZHONGSHENG disclosed its substantial achievements in the field of artificial intelligence for the first time: over the past three years, it has cumulatively invested around 600 million yuan in AI infrastructure and platform construction, ranking among the top in domestic pharmaceutical companies. As CEO Xie Chengrun stated, AI within ZHONGSHENG is not an independent business or project but rather an "ability layer" that overlays R&D, production, and commercialization. This "AI Native" concept is converting the vast scale of the groups pipeline and specialized data into tangible productivity. On the R&D front, the AI-assisted drug development platform established by ZHONGSHENG now covers six major platforms: small molecules, ADCs, siRNA, OAPD, molecular glue, and TME, spanning multiple therapeutic areas, including oncology, cardiovascular/metabolic, respiratory/immunology, and surgical/pain relief. It deeply empowers the early development of 25 Pre-IND and clinical stage pipelines. Among these, the efficiency improvements brought by AI in R&D are revolutionary: in the small molecule domain, the number of compounds needed during the PCC discovery phase has plummeted from several hundred to 50-100; in the oral protein degradation agent (OAPD) platform, development time has been significantly shortened from two years to as little as eight months. The commercial value realization through AI is not only evident in the laboratory. Recently, the innovative COPD drug TQC3721 (PDE3/4 inhibitor), licensed to AstraZeneca for a total price of $1.9 billion, deeply utilized AI technology throughout its clinical development process. By deploying its self-developed model for patient screening at a certain clinical center, the model matched 30 subjects in the first week, equivalent to the enrollment numbers of the past two months at that center. At the same time, smart centralized monitoring through RBQM and SDR/SDV agents reduced the manual monitoring workload by 35% and saved about 30% in costs. The application of AI has shortened the Phase III clinical trial time of TQC3721 by 10%-15%, while the Phase I development of the dry powder inhaler was expedited by several months through AI empowerment to yield results early. The company disclosed that, during the clinical stage, the leap in efficiency brought by AI is expected to reduce Phase III trial durations from the previous 2-3 years to 1.8-2.5 years, significantly accelerating the market entry process for blockbuster drugs. Xie Qirun pointed out that ZHONGSHENG's vast data accumulation is a core barrier that enhances the accuracy of its self-developed models. In the future, the company will continue to explore cutting-edge fields such as the central nervous system (CNS), leveraging AI to break through the "non-druggable" ceiling that traditional pharmaceuticals cannot reach. In addition to R&D, AIs transformation of production operations has also shown remarkable results. In the production of strategic products like Andevet, the application of AI tools in cell culture monitoring and purification risk assessment has increased antibody yields by 20% and reduced biopharmaceutical manufacturing costs by 20%, directly boosting product gross margins. On the management front, by breaking down processes and allowing AI to take over repetitive tasks, the clearly defined, repetitive, and verifiable aspects are handed to AI, while humans focus on judgment, collaboration, and responsibility. The digitization-driven "cost reduction and efficiency increase" is translating into concrete profit increments. Brand renewal and a bi-directional BD cycle: SBP Group begins its globalization year In June 2026, the global R&D headquarters of Chia Tai Tianqing, located in Minhang, Shanghai, was officially completed and put into use, marking a new transformation from local deepening to global layout. The year 2026 is also defined by ZHONGSHENG as the "new year of fully commencing internationalization," with a symbolic action being the formal establishment of SBP Group as a unified global brand image. SBP represents "Science, Breakthroughs, Patients," symbolizing the company's leap from a leading innovative pharmaceutical company in China to a global participant in the innovation ecosystem. Supporting this vision are approximately $3.5 billion worth of extraordinary external licensing deals achieved in the first half of the year, as well as an increasingly mature bi-directional BD cycle. In the first half of the year, ZHONGSHENG continued to win endorsements from top global pharmaceutical companies through innovative originating research. In March, it licensed global rights for the world's first JAK/ROCK dual-target inhibitor Lurazepam to Sanofi, with a total amount of $1.53 billion, breaking the domestic record in the transplant field. Subsequently, the overseas rights deal for TQC3721 with AstraZeneca, valued at $1.9 billion, set a near three-year domestic record for a single product transaction in the respiratory field. To date, the group has completed a total of four significant external licenses, with a total transaction scale exceeding $7 billion and an upfront payment of over $1 billion, indicating that ZHONGSHENG's R&D strength and production quality control have received comprehensive recognition from top international MNCs, and BDs outbound strategy is becoming "normalized." While news of "going out" has been frequently positive, the "bringing in" aspect has also entered a harvest phase, with deep strategic cooperation between ZHONGSHENG and GSK being another highlight of the first half of the year. It has been observed that in May and July, the company successively secured the mainland commercialization rights of GSK's functional cure product for hepatitis B, bepirovirsen, as well as two significant respiratory products, Quanzh Railway and Olasizumab. Bepirovirsen is expected to be the world's first approved functional cure for hepatitis B, demonstrating excellent functional cure rates in the B-Well series Phase III trials. Quanzh Railway and Olasizumab, mature products projected to have a combined global sales exceeding 3.5 billion by 2025, will count their entire revenue towards ZHONGSHENGs earnings, directly bolstering performance. Now, this "high globalization + high localization" dual-high layout constitutes a unique internationalization path for ZHONGSHENG: at the product level, it builds a foundational global innovation asset base through "self-research + BD + mergers," such as the acquisition of Lixin and Hejiya, which filled in dual antibodies, ADC, and small nucleic acid platforms; At the operational level, the company relies on its Shanghai R&D center as the global headquarters, meticulously selecting partners based on regional localization capabilities to achieve an "efficiency-first" new narrative of internationalization. As multinational giants like Sanofi, AstraZeneca, Merck, Boehringer Ingelheim, and GSK continuously vote with real capital for ZHONGSHENG, the certainty of its second growth curve in internationalization is exceedingly high. Summary As of now, under the two strategic banners of AI and internationalization, ZHONGSHENGs pipeline density in the four core therapeutic areas of oncology, liver disease/cardiovascular metabolism, respiratory/immunology, and surgical/pain relief is translating into dense commercialization results. The company has already accumulated 20 national Class 1 or Class 2 innovative drugs approved for market entry, with an expectation to reach nearly 50 innovative drugs by 2030. Looking at the mid-year report for 2026, SBP GROUP is displaying a "rare vitality." Following the successful completion of a generational transition at the management level, the company has not only maintained its foothold in the existing market but has also gained a favorable position in the competition of innovative drug exports and technological advancement through its comprehensive "All in" approach to AI technology and "deep elevation" of internationalization paths. While the market still measures a pharmaceutical company through traditional financial metrics, ZHONGSHENG has transformed AI into genuine value chain output and established a circular value-sharing mechanism with top global pharmaceutical companies. With the normalization of revenue contributions from external licensing and the accelerated rollout of several FIC/BIC products, the internationalization story of SBP Group is only just beginning. This long-established pharmaceutical company, deeply committed to innovation and fully embracing AI, may very well be one of the noteworthy targets within the current Hong Kong pharmaceutical sector.