Lyons: China's innovative drug sector returns to Alpha dominance, and macro fluctuations may provide buying opportunities.

Lyon has released a research report stating that the Chinese innovative drug sector is returning to a market dominated by company fundamentals and stock-specific excess returns (Alpha), with the influence of specific company fundamentals, particularly business development (BD) and Phase III clinical progress, increasing relative to macro factors (Beta). The analysis by the firm shows that the explanatory power of fundamentals for pharmaceutical stock price movements was 82.7% from 2015 to 2021, dropped to about 32.7% from 2021 to 2024, and has since rebounded to over 54% since 2025, partly supported by BD advancements and key overseas Phase III trials. The firm anticipates that as market confidence in the clinical and BD execution of innovative drug companies improves, the role of fundamentals will become increasingly important; short-term macro fluctuations may provide opportunities for bottom-fishing and validating this view. The firm pointed out that the industry is entering a period of intensified catalysts. Historically, the fourth quarter accounts for about 35% of the total annual BD transactions, and in the first half of 2026, China has already seen 81 related outbound licensing deals, with a total transaction value of approximately $99.7 billion, nearly double the total for the entire year of 2024, making BD activities in the fourth quarter of 2026 noteworthy. The World Conference on Lung Cancer (WCLC) will be held in South Korea from September 12 to 15, where HANSOH PHARMA (03692)/GSK and MediLink/Roche will present Phase III data on their respective Chinese-origin B7-H3 ADC treatments for relapsed small cell lung cancer, along with several other Chinese-origin assets in oral presentations; the European Society for Medical Oncology (ESMO) annual meeting will follow closely from October 23 to 27. The firm believes that significant clinical readouts and accelerated BD activities are opening a positive catalyst window.