CHINA/HK FIRST TO MARKET

Research evidence excerpt

CHINA/HK FIRST TO MARKET

Asia Pacific Equity Research

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China/HK First to Market 24 July 2026

Top Stories

Init | China AI-Driven Drug Discovery, Hong Kong (Yang Huang)

Drug Discovery Riding the Next Wave of AI; initiate on Insilico & XtalPi at OW

We initiate coverage of two China AI-driven drug discovery (AIDD) companies, Insilico (3696.HK) and XtalPi

(2228.HK), with Overweight (OW) ratings. China’s AIDD sector is shifting from business exploration to early

commercialization, supported by rising business development (BD) activities and clinical catalysts. Our

positive view on China AIDD rests on three pillars: 1) AIDD has materially improved drug R&D productivity

and could further increase success probability through “dry-wet lab” closed loop platforms; 2) AIDD coupled

with China's structural cost and R&D pace and regulatory advantages could make China a more attractive

hotbed for applying AIDD compared to overseas; and 3)The above factors have driven Big Pharma deal

flow, clinical milestones, and significant topline growth, providing early validation for AIDD companies. We

see a multi-year rerating opportunity, with Insilico and XtalPi offering complementary investment theses. We

like Insilico for its high-risk, high reward pipeline built through AIDD and like XtalPi for its diverse businesses

led by AIDD services and robotics wet lab. We rate both Insilico and XtalPi OW with PTs of HK$71 and HK

$10, respectively.

| HK Banks, Hong Kong (Jemmy S Huang)