Investment logic companies inject new vitality through major asset restructuring: the company's major asset restructuring transactions have passed, listed companies have placed loss-making assets in the coal business, and invested in booming CRO assets, and the company has injected new vitality through major asset restructuring. Invested in assets Warwick Pharmaceuticals is a leading CRO company in China: Warwick Pharmaceuticals previously focused on pre-clinical CRO business, which has led to high growth in the company's historical performance; currently, it has strategically entered the clinical CRO sector and CMO sector, and the expansion of the industry chain has brought diversification of revenue structures. With the improvement of the industrial chain layout, the company will have the ability to provide customers with “one-stop service”, which is in line with the development context of leading international CRO companies. Generic drug consistency evaluation brings new development opportunities to the company: generic drug consistency evaluation brings a historical opportunity to double the space for the CRO industry. As a leading CRO company, the company has the advantage of accepting consistency evaluation orders. Strategic investors will help the company's platform-based development: the company's two major strategic investors, Lilly Asia Fund and Ruidong Capital, are well-known PE institutions in the industry. Strategic investors promise that in the future, they will promote high-quality pharmaceutical projects invested by their funds in a market-based manner, prioritize the loading of listed companies, or use market-based methods to seek high-quality biomedical projects at home and abroad, and choose the opportunity to install them in listed companies. The commitment of the two major strategic investors to listed companies will help listed companies carry out mergers and acquisitions and implement platform-based development. It is also in line with our judgment on the development path of leading CRO companies. The CRO industry is a segment where we are optimistic about increasing prosperity: the CRO industry is a segmented industry in the medical service sector where we are optimistic about future prosperity. For industry views, please refer to our in-depth CRO industry report “The Rise of CRO Industry Integration, Emerging Opportunities, and New Opportunities for the Chaoyang Industry” published earlier. Profit forecast We expect the net profit attributable to the parent company of Warwick Pharmaceuticals from 2016 to 2018, respectively, to be 110 million yuan, 130 million yuan, and 155 million yuan, respectively. If the profit of the new assets is estimated, the corresponding EPS of the listed company is 0.24 yuan, 0.29 yuan, and 0.34 yuan (based on the share capital for supporting financing after this transaction). Considering that the company's major asset restructuring has already passed, and the company's merger of CRO assets has potential for growth, we have given the company coverage a “ownership increase” rating. Profit forecast description: (1) The company's statements for the past three years reflect the original asset situation and losses occurred. For the next three years, we used invested assets as the forecast benchmark, so there was a big difference between before and after. (2) Since the transaction has not yet been completed, the performance of listed companies in 2016 may still be hampered by losses of assets placed, so the performance of listed companies in 2016 cannot be completely replaced by Warwick Pharmaceuticals. We will make weighted adjustments based on the actual completion time of the transaction. (3) Since the historical financial data of the assets purchased have not been fully disclosed, we make reasonable assumptions about the profit predictions of the invested assets based on industry experience, but the actual situation may differ from those assumptions. After full disclosure of financial data on invested assets, we will retroactively adjust the company's historical statements and correct future profit forecasts. Risks indicate the risks associated with profit forecasting; transaction approval risks; the new classification of chemical drug registrations classifying Class 3.1 drugs as generic drugs; progress in asset integration; future multi-party management risks; and uncertainty about the CRO platform integration process.