China's AI drug discovery (AIDD) industry has reached a commercialization turning point, with Insilico and XtalPi increasing their holdings for the first time (J.P. Morgan)
J.P.
J.P. Morgan covered Chinese AIDD companies Insilico (3696.HK) and XtalPi (2228.HK) for the first time, giving them both an "positive rating" rating and target prices of HK$71 and HK$10 respectively. The report points out that China's AIDD industry is shifting to early commercialization, and its core competitiveness comes from improved R&D efficiency, local cost and regulatory advantages, and verification of cooperation with large pharmaceutical companies. Insilico and XtalPi provide complementary investment targets: the former builds its own high-risk and high-return pipeline with generative AI, and the latter provides diversified services with quantum physics and robotics wet laboratories. One sentence conclusion: China's AIDD industry is at a critical turning point from concept verification to commercialization. As industry leaders, Insilico and XtalPi have significant platform value and growth potential. Their valuations are at a discount compared to overseas peers, and they are worthy of simultaneous allocation. Positive/negative: Positive for Insilico Medicine (3696.HK) and XtalPi (2228.HK). The market may not have enough understanding of the commercialization prospects of the AIDD industry, and initial coverage is expected to bring incremental funding attention. Catalysts: 1) Clinical data readout of core pipelines under development; 2) BD cooperation with large pharmaceutical companies and revenue recognition; 3) Specific cases of improving new drug R&D efficiency.