Summary of Hansoh Pharmaceutical Conference Call Company Overview - **Company**: Hansoh Pharmaceutical - **Industry**: Pharmaceutical Key Points and Arguments - **Innovation Transformation**: Hansoh Pharmaceutical has significantly transformed into an innovative company, with innovative drug revenue expected to exceed 80% by 2025. Currently, 8 innovative drugs are listed and included in the medical insurance catalog, providing strong growth momentum for the company's performance [2][3] - **Ameitini Drug Performance**: Ameitini, a third-generation EGFR-TKI, has advantages in efficacy and safety, with multiple indications approved. It is expected to receive approval for postoperative adjuvant therapy in the first half of 2024, with peak sales projected to exceed 6.5 billion RMB [2][10] - **International Market Expansion**: The company actively expands overseas markets through licensing agreements, such as granting the oral GLP-1R agonist to Merck and ADCs B7H3 and B7H4 to GSK, generating substantial upfront payments and enhancing international visibility [2][5] - **Financial Position**: Hansoh Pharmaceutical has a strong cash reserve exceeding 20 billion RMB, supporting ongoing licensing transactions and the expansion of its innovative pipeline, as well as steady progress in early-stage R&D projects [2][6] - **Clinical Trials and Pipeline Progress**: The company has multiple ADC projects progressing well, with B7-H3 ADC entering Phase III trials for non-small cell lung cancer and BHH4 ADC starting Phase III trials for ovarian cancer [2][4] - **Revenue Projections**: Total revenue for 2024 is expected to be around 12 billion RMB, with innovative drug revenue exceeding 8 billion RMB. Peak sales for listed innovative drugs are anticipated to reach 15 billion RMB, while pipeline drugs could achieve peak sales of 15-16 billion RMB [2][18] - **Profit and Valuation Outlook**: Projected profit for 2025 is over 4.1 billion RMB, with a potential market capitalization of 130 billion RMB if valued at a 30x P/E ratio, indicating potential for historical highs [2][8][19] Additional Important Insights - **Sales Growth**: The company's internal operating revenue grew nearly 14% year-on-year in the first half of 2024, with innovative drug revenue accounting for 77% of total revenue [3] - **Market Dynamics**: The third-generation TKI market is expected to reach 15 billion RMB in 2024, with Ameitini's market share expected to grow significantly due to its competitive advantages [10][11] - **Clinical Development**: The company has several promising innovative drug pipelines in preclinical stages, including an oral GLP-1R agonist and dual-target ADCs, which are expected to lead to further overseas transactions [9] - **Upcoming Events**: Hansoh Pharmaceutical plans to hold a performance exchange and conference call next week, with expectations to meet or exceed the revenue guidance of 12 billion RMB for 2024 [21]

Core Insights - The study published in the journal "Kidney Medicine" demonstrates the effectiveness of the peptide, Pemolizumab, in treating EPO-induced Pure Red Cell Aplasia (PRCA) patients, indicating a promising innovative solution for this rare but serious complication [1] Group 1: Research Findings - The research led by Professor Fan Qiuling from Shanghai Jiao Tong University School of Medicine shows that Pemolizumab can effectively treat EPO-induced PRCA in a non-dialysis Chinese patient with type 1 diabetes nephropathy [1] - The study confirmed Pemolizumab's potential in treating EPO-induced PRCA, as evidenced by significant improvements in hemoglobin levels and anemia symptoms without notable adverse reactions [1] Group 2: Clinical Implications - The findings provide a new safe, effective, and convenient treatment option for EPO-induced PRCA, addressing a critical need in clinical practice [1] - The patient's clinical course, reticulocyte count reduction, and bone marrow biopsy results were consistent with EPO treatment-induced PRCA, reinforcing the study's conclusions [1]

Investment Rating - The investment rating for the company is "Buy" (maintained) [3] Core Views - The company has successfully completed several significant license-out transactions in the oral small molecule GLP-1 space, including a deal with Merck that involves an upfront payment of $112 million and potential milestone payments totaling up to $1.9 billion [3][14] - The company's innovative pipeline is robust, and its global expansion is progressing smoothly, leading to a maintained "Buy" rating [4] Financial Forecasts - The company is expected to achieve total revenues of RMB 119.07 billion, RMB 133.28 billion, and RMB 148.36 billion for the years 2024, 2025, and 2026 respectively [4][5] - Net profits are projected to be RMB 40.10 billion, RMB 41.80 billion, and RMB 43.17 billion for the same years, with corresponding P/E ratios of 25, 24, and 23 times [4] - The company reported a significant increase in innovative drug sales, with a revenue of RMB 50.32 billion in the first half of 2024, representing a year-on-year growth of 80.6% [15] Market Performance - The closing price of the company's stock is HKD 17.80, with a one-year high of HKD 22.80 and a low of HKD 11.18 [2] - The total market capitalization is approximately HKD 105.65 billion [2]

Investment Rating - Maintain BUY rating for Hansoh Pharma with a target price raised to HK$25.24 from HK$24.11, indicating a potential upside of 37.6% from the current price of HK$18.34 [3][20]. Core Insights - Hansoh Pharma has successfully out-licensed its oral GLP-1 drug candidate HS-10535 to MSD, receiving an upfront payment of US$112 million and potential milestone payments up to US$1.9 billion, along with future sales royalties [1]. - The company has a robust pipeline of GLP-1 assets, including Fulaimei, HS-20094, and HS-10501, with ongoing clinical trials that position it competitively in the global oral GLP-1 drug development race [1][18]. - The safety profile of oral GLP-1 drugs is a critical differentiating factor, with various candidates showing promising weight loss data and varying safety concerns [1]. Financial Summary - Revenue is projected to grow from RMB 10,104 million in FY23A to RMB 12,301 million in FY24E, reflecting a year-on-year growth of 21.7% [2][23]. - Net profit is expected to increase significantly from RMB 3,277.5 million in FY23A to RMB 4,382.9 million in FY24E, marking a growth of 33.7% [2][23]. - The earnings per share (EPS) is forecasted to rise from RMB 0.55 in FY23A to RMB 0.74 in FY24E, with a P/E ratio decreasing from 31.1x to 23.3x [2][23]. Pipeline Development - Hansoh's HS-20094, a GLP-1/GIP dual agonist, has initiated a Phase 3 obesity study in China, with Phase 2 trial results expected next year [1]. - The company is also advancing HS-10501 through Phase 1 trials, further expanding its GLP-1 drug portfolio [1]. - The collaboration with MSD is anticipated to accelerate the development of HS-10535 and unlock its global potential [1].

Summary of the Conference Call Company and Industry Overview - The conference call focused on **Hansen Pharmaceutical**, a leading player in the **innovative pharmaceutical industry** in China, with over 30 years of experience in the sector [3][4]. Key Points and Arguments Industry Outlook - The pharmaceutical sector is gradually recovering from a downturn experienced over the past two to three years, with expectations of improvement starting from Q4 2023 [1]. - Recent discussions have highlighted the positive direction of medical insurance negotiations and the encouragement of commercial insurance policies, which are expected to support the industry [1]. Company Performance - Hansen Pharmaceutical achieved a revenue of **10.104 billion CNY** in 2023, marking a **7.7%** increase year-over-year, with a net profit of **3.278 billion CNY**, a **26.85%** increase [7]. - In the first half of 2024, the company reported revenues of **6.506 billion CNY**, a **44.21%** increase, and a net profit of **2.726 billion CNY**, a **111.47%** increase, largely attributed to the recognition of revenue from two ADC products licensed to GSK [7]. Product Portfolio and Innovation - The company has successfully transitioned to an innovation-driven model, with over **60%** of its revenue coming from innovative drugs [4][11]. - Key products include **Amatinib**, the first domestically developed third-generation EGFR TKI, which has seen increasing market share and sales [5][15]. - The company is also focusing on expanding its pipeline, with **50 innovative drug products** currently in clinical research, including treatments for diabetes and autoimmune diseases [12][30]. Research and Development - Hansen has significantly increased its R&D investment from **9.3%** in 2017 to over **20%** in 2023, aligning with international standards for innovative drug companies [8]. - The company maintains a dual strategy of self-research and business development (BD), with successful collaborations leading to substantial licensing revenues [10][21]. Financial Projections and Valuation - The company is projected to maintain a revenue growth rate of over **20%** for its innovative drug products over the next five years, with expected revenues reaching **7.984 billion CNY**, **9.653 billion CNY**, and **11.641 billion CNY** by 2026 [34]. - The estimated fair value of Hansen Pharmaceutical is approximately **123 billion CNY**, translating to a target price of **22.27 HKD** per share [38]. Other Important Insights - The oncology segment remains a strong revenue driver, accounting for nearly **70%** of total income, while other therapeutic areas contribute around **10%** [8]. - The company is optimistic about the future growth of its hepatitis B treatment, **Amitin**, and its innovative diabetes treatment, which is expected to capture significant market share [22][28]. - The overall market for GLP-1 drugs is projected to exceed **7 billion CNY** in 2023, with Hansen's products positioned to gain a substantial share [28]. This summary encapsulates the key insights from the conference call regarding Hansen Pharmaceutical's performance, strategic direction, and market outlook.

Investment Rating - The report upgrades the investment rating of the company to "Buy" with a target price of HKD 24.00, indicating a potential upside of 26.8% from the current closing price of HKD 18.92 [1][3][4]. Core Insights - The sales momentum for the drug Amelot is strong, with three major indications expected to be approved within a year. The company anticipates that these approvals will drive annual sales growth of over 20% from 2024 to 2025, reaching a sales target of RMB 6 billion by 2026 [1][2]. - The company is expected to benefit from compliance investigations affecting competitors, which may allow it to capture market share in first-line and second-line treatments [2]. - The company has a robust pipeline with several new products and indications expected to launch between 2025 and 2026, including an oral antifungal drug and multiple oncology products, supported by a cash reserve exceeding RMB 21 billion [2][3]. Financial Summary - Revenue projections for the company are as follows: RMB 12,704 million for 2024, RMB 13,334 million for 2025, and RMB 14,854 million for 2026, reflecting growth rates of 25.7%, 5.0%, and 11.4% respectively [5][11]. - Net profit estimates are RMB 4,364 million for 2024, RMB 4,052 million for 2025, and RMB 4,754 million for 2026, with corresponding growth rates of 32.9%, -7.1%, and 17.3% [5][11]. - The company’s earnings per share (EPS) are projected to be RMB 0.74 for 2024, RMB 0.68 for 2025, and RMB 0.80 for 2026, with a price-to-earnings (P/E) ratio of 23.9 for 2024 and 25.8 for 2025 [5][11].

Investment Rating - The report maintains a "Recommended" rating for the company with a target price of HKD 25.44 [1] Core Insights - The company achieved total revenue of HKD 6.506 billion, representing a year-on-year increase of 44.2%, and a net profit of HKD 2.726 billion, up 111.5% [1] - The sales revenue from innovative drugs and collaborative products reached HKD 5.032 billion, marking an 80.6% increase and accounting for 77.4% of total revenue, a new high [1] - The company has made significant progress in R&D, with several leading products in its pipeline, including approvals and ongoing clinical trials for various indications [1] - The ADC products in the pipeline show international potential, with breakthrough therapy designation from the FDA for one of the ADCs [1] Financial Summary - The company’s projected revenues for 2024, 2025, and 2026 are HKD 12.155 billion, HKD 12.439 billion, and HKD 14.470 billion, respectively, with year-on-year growth rates of 20.3%, 2.3%, and 16.3% [2] - The projected net profit for the same years is HKD 4.259 billion, HKD 3.945 billion, and HKD 4.669 billion, with growth rates of 29.95%, -7.39%, and 18.37% [2] - The company’s earnings per share (EPS) are expected to be HKD 0.55, HKD 0.72, HKD 0.66, and HKD 0.79 for the years 2024 to 2026 [2] Company Overview - The total market capitalization of the company is HKD 128.507 billion, with a total share capital of 593,565.01 million shares [4] - The company has a low debt ratio of 11.90% and a net asset value per share of HKD 4.70 [4]

Financial Performance - Revenue reached approximately RMB 6.506 billion, a year-on-year increase of 44.2%[5] - Revenue from innovative drugs and cooperative products reached approximately RMB 5.032 billion, a year-on-year increase of 80.6%, accounting for 77.4% of total revenue[5] - Profit reached approximately RMB 2.726 billion, a year-on-year increase of 111.5%[5] - Basic earnings per share were approximately RMB 0.46, a year-on-year increase of 111.4%[5] - Revenue for the first half of 2024 reached approximately RMB 6.506 billion, a year-on-year increase of 44.2%[9] - Net profit for the first half of 2024 was approximately RMB 2.726 billion, a year-on-year increase of 111.5%[9] - Earnings per share for the first half of 2024 were approximately RMB 0.46, a year-on-year increase of 111.4%[9] - Revenue from innovative drugs and partnered products reached approximately RMB 5.032 billion, accounting for 77.4% of total revenue, with a year-on-year increase of 80.6%[9] - Revenue from the anti-tumor segment reached approximately RMB 4.475 billion, accounting for 68.8% of total revenue[11] - Revenue from the anti-infective segment reached approximately RMB 701 million, accounting for 10.8% of total revenue[10] - Revenue from the central nervous system disease segment reached approximately RMB 733 million, accounting for 11.3% of total revenue[10] - Revenue from the metabolic and other diseases segment reached approximately RMB 597 million, accounting for 9.1% of total revenue[10] - The company's revenue for the first half of 2024 reached RMB 6,505.5 million, a significant increase from RMB 4,511.2 million in the same period of 2023[73] - Gross profit for the first half of 2024 was RMB 5,926.3 million, compared to RMB 3,975.8 million in the first half of 2023[73] - Net profit attributable to owners of the parent company for the first half of 2024 was RMB 2,725.5 million, a significant increase from RMB 1,288.8 million in the first half of 2023[73] - Basic earnings per share for the first half of 2024 were RMB 0.46, compared to RMB 0.22 in the same period of 2023[73] - The company's total comprehensive income for the first half of 2024 was RMB 2,810.2 million, up from RMB 1,752.8 million in the first half of 2023[75] - Total assets increased to RMB 28,239,914,000 as of June 30, 2024, compared to RMB 26,176,230,000 at the end of 2023[76] - Net current assets rose to RMB 23,973,895,000 from RMB 22,020,458,000 at the end of 2023[76] - Cash and bank balances decreased slightly to RMB 21,745,333,000 from RMB 22,434,691,000 at the end of 2023[76] - Total equity increased to RMB 27,903,275,000 as of June 30, 2024, up from RMB 25,794,773,000 at the end of 2023[77] - Profit for the period was RMB 2,725,525,000, a significant increase from RMB 1,288,848,000 in the same period last year[78] - The company declared dividends of RMB 768,760,000 during the period[78] - Property, plant, and equipment decreased to RMB 2,859,333,000 from RMB 3,045,060,000 at the end of 2023[76] - Trade receivables and bills decreased to RMB 2,938,415,000 from RMB 3,214,251,000 at the end of 2023[76] - Convertible bonds under current liabilities decreased significantly to RMB 40,255,000 from RMB 4,183,198,000 at the end of 2023[76] - The company's reserves increased to RMB 27,916,822,000 from RMB 25,903,350,000 at the end of 2023[77] - Operating cash flow increased to RMB 3,159,579 thousand in 2024, up from RMB 1,498,500 thousand in 2023, reflecting strong operational performance[79] - Net cash generated from operating activities rose to RMB 2,682,383 thousand in 2024, compared to RMB 1,146,167 thousand in 2023[79] - Investment activities generated a net cash flow of RMB 2,368,869 thousand in 2024, up from RMB 1,041,872 thousand in 2023, driven by higher proceeds from asset sales and reduced investments[80] - Cash and cash equivalents increased by RMB 854,923 thousand in 2024, reaching RMB 6,796,204 thousand at the end of the period[80] - Depreciation of property, plant, and equipment increased to RMB 198,163 thousand in 2024, compared to RMB 169,443 thousand in 2023[79] - The company redeemed convertible bonds worth RMB 4,183,198 thousand in 2024, significantly impacting financing cash flows[80] - Net cash used in financing activities was RMB 4,196,329 thousand in 2024, primarily due to the redemption of convertible bonds[80] - The company's cash and bank balances, unrestricted, stood at RMB 6,722,852 thousand in 2024, up from RMB 4,226,502 thousand in 2023[80] - Revenue from customer contracts for goods sales reached RMB 5,103,080 thousand, while cooperative income was RMB 1,402,421 thousand, totaling RMB 6,505,501 thousand for the six months ended June 30, 2024[88] - Investment income increased to RMB 84,646 thousand, up from RMB 42,090 thousand in the same period last year[88] - Government subsidies decreased to RMB 21,918 thousand from RMB 38,061 thousand in the previous year[88] - Bank interest income remained stable at RMB 374,011 thousand compared to RMB 372,218 thousand in 2023[88] - The fair value gain on financial assets at fair value through profit or loss rose significantly to RMB 55,777 thousand from RMB 18,020 thousand in 2023[89] - The company's tax expense is calculated at a rate of 25% for Chinese subsidiaries, with certain subsidiaries enjoying a preferential tax rate of 15% due to high-tech enterprise status[92] - The company's revenue from GSK plc accounted for approximately 20% of total revenue, with no other single customer contributing more than 10%[86] - The company's identifiable operating assets and liabilities are primarily located in mainland China, where approximately 80% of revenue is generated[85] - The company's pre-tax profit for the six months ended June 30, 2024, was impacted by a net impairment loss on property, plant, and equipment of RMB 27,667 thousand[90] - Employee benefit expenses, including wages and salaries, increased to RMB 970,726 thousand from RMB 882,199 thousand in the previous year[90] - Total tax expense increased to RMB 392,661 thousand in 2024, up from RMB 211,035 thousand in 2023, with current tax expense rising to RMB 396,930 thousand from RMB 307,238 thousand[93] - The company declared a dividend of 14.22 HK cents per share for 2023, totaling approximately RMB 768,760 thousand, compared to 5.00 HK cents per share and RMB 268,852 thousand in 2023[94] - Basic earnings per share (EPS) for 2024 increased to RMB 0.46, up from RMB 0.22 in 2023, with diluted EPS also rising to RMB 0.46 from RMB 0.22[97] - The weighted average number of ordinary shares used for calculating basic EPS was 5,925,786,074 in 2024, slightly up from 5,923,743,166 in 2023[97] - Property, plant, and equipment (PPE) net book value decreased to RMB 2,859,333 thousand in 2024 from RMB 3,122,191 thousand in 2023, with additions of RMB 60,409 thousand and disposals of RMB 19,416 thousand[98] - Right-of-use assets increased to RMB 449,140 thousand in 2024 from RMB 246,494 thousand in 2023, with additions of RMB 225,805 thousand and depreciation expenses of RMB 11,713 thousand[100] - Lease liabilities decreased to RMB 79,417 thousand in 2024 from RMB 90,661 thousand in 2023, with new leases of RMB 6,137 thousand and payments of RMB 9,417 thousand[101] - Trade receivables decreased to RMB 2,904,048 thousand in 2024 from RMB 3,209,633 thousand in 2023, with 90.7% of receivables aged within 90 days[103][104] - Trade receivables and bills receivable increased significantly to RMB 34,367 thousand as of June 30, 2024, compared to RMB 4,618 thousand as of December 31, 2023[105] - The provision for impairment losses on trade receivables increased to RMB 37,547 thousand as of June 30, 2024, up from RMB 30,604 thousand at the beginning of the period[105] - The expected credit loss rate for trade receivables over 90 days past due increased to 5.80% as of June 30, 2024, compared to 0.94% for receivables within 90 days[106] - The company's financial assets at fair value through profit or loss decreased to RMB 320,875 thousand as of June 30, 2024, from RMB 512,409 thousand as of December 31, 2023[107] - Non-current financial assets at fair value through profit or loss increased to RMB 743,409 thousand as of June 30, 2024, up from RMB 684,706 thousand as of December 31, 2023[107] - The company's cash and bank balances decreased slightly to RMB 21,745,333 thousand as of June 30, 2024, from RMB 22,434,691 thousand as of December 31, 2023[110] - Trade payables and bills payable increased to RMB 174,562 thousand as of June 30, 2024, compared to RMB 163,763 thousand as of December 31, 2023[111] - The company's other payables and accrued expenses increased to RMB 2,410,159 thousand as of June 30, 2024, up from RMB 2,375,680 thousand as of December 31, 2023[112] - The company redeemed USD 590,622 thousand (RMB 4,183,198 thousand) of convertible bonds on January 22, 2024[113] - Convertible bonds as of June 30, 2024, consist of a debt portion of RMB 37,495 thousand and an embedded derivative portion of RMB 2,760 thousand, totaling RMB 40,255 thousand[114] - The company issued 2,300,000 new ordinary shares under the Restricted Share Unit (RSU) plan on April 19, 2024, with a purchase price of HKD 2.60 per share[116] - As of June 30, 2024, the company had 27,512,890 unvested RSUs, with 11,397,590 RSUs granted during the period[118] - The company recognized share-based payment expenses of RMB 67,587 thousand for the six months ended June 30, 2024[119] - The fair value of RSUs granted on June 27, 2024, was estimated at HKD 13.10 per share using a binomial model[120] - Treasury shares as of June 30, 2024, amounted to 1,315,065 shares, valued at RMB 13,599 thousand[123] - Capital commitments for property, plant, and equipment as of June 30, 2024, totaled RMB 67,609 thousand[124] - Transactions with related parties included RMB 17,151 thousand from the sale of property, plant, and equipment to Jiangsu Hengrui Pharmaceuticals[128] - The total compensation paid to key management personnel was RMB 83,904 thousand, a decrease from RMB 95,502 thousand in the previous period[130] - The fair value of financial assets measured at fair value through profit or loss was RMB 1,064,284 thousand, down from RMB 1,197,115 thousand at the end of 2023[131] - The fair value of debt investments measured at fair value through other comprehensive income was RMB 33,964 thousand, up significantly from RMB 4,596 thousand at the end of 2023[131] - The fair value of convertible bonds was RMB 40,255 thousand, a sharp decrease from RMB 4,222,940 thousand at the end of 2023[132] - The company declared a final dividend of HKD 14.22 cents per ordinary share, totaling RMB 768,760,000, on July 17, 2024[140] - The company entered into a licensing agreement with Guangzhou Lupeng Pharmaceutical for LP-168, with potential payments of up to RMB 729 million, plus royalties up to double digits based on future net sales[140] - The fair value of trade receivables was estimated using a discounted cash flow model with annual discount rates ranging from 3.28% to 3.62%[135] - The fair value of financial assets measured using significant unobservable inputs (Level 3) increased to RMB 777,373 thousand from RMB 689,302 thousand at the end of 2023[137] - The fair value of embedded derivatives in convertible bonds increased slightly to RMB 2,760 thousand from RMB 2,743 thousand at the end of 2023[139] - The company issued $600 million zero-coupon convertible bonds due in 2026, listed and traded on the Hong Kong Stock Exchange with bond code 40546[142] - The report period covers the six months from January 1, 2024, to June 30, 2024[144] - The company's restricted share unit (RSU) plan was conditionally approved and adopted on May 27, 2019, with details provided in the prospectus[144] - The company is involved in the development of antibody-drug conjugates (ADC) and BCR-ABL tyrosine kinase inhibitors (TKI)[141] - The company has a strategic focus on chronic kidney disease (CKD) and central nervous system (CNS) therapies[141] - The company collaborates with Amgen and GSK, indicating potential partnerships in drug development[141][143] - The company's ESG (Environmental, Social, and Governance) initiatives are overseen by a dedicated committee under the board of directors[142] - The company's shares are listed and traded on the Hong Kong Stock Exchange Main Board[141] - The company's financial reporting adheres to the Hong Kong Stock Exchange Listing Rules and Corporate Governance Code[143] - The company's operations include subsidiaries in the British Virgin Islands and China, with significant investments in pharmaceutical R&D[141][143] R&D and Clinical Trials - R&D expenses were approximately RMB 1.196 billion, a year-on-year increase of 28.7%, accounting for 18.4% of revenue[5] - The company obtained clinical trial approval for HS-10501 tablets for the treatment of type 2 diabetes and adult obesity[6] - The company obtained clinical trial approval for HS-10398 capsules for the treatment of IgA nephropathy and membranous nephropathy[6] - Seven innovative drugs and nine corresponding indications have been included in the National Reimbursement Drug List[12] - Ameile® (Aumolertinib) has been included in eight national-level clinical guidelines and won the 24th China Patent Gold Award[13] - Hengmu® (Aimitenofovir Tablets) achieved a 48-week, 96-week, and 144-week data release in Phase III clinical trials, demonstrating long-term efficacy and safety for chronic hepatitis B treatment[16] - Hengmu® was included in the 2023 National Reimbursement Drug List (NRDL) and received an A-level recommendation in the 2024 Primary Liver Cancer Diagnosis and Treatment Guidelines[16] - Xinyue® (Inebilizumab Injection) achieved primary clinical endpoints in a Phase III trial for IgG4-related diseases (IgG4-RD) in June 2024[17] - Xinyue® was included in the 2022 NRDL and received an A-class recommendation in the 2021 Chinese Guidelines for Diagnosis and Treatment of Neuromyelitis Optica Spectrum Disorders[17] - Shengluolai® (Pegmolesatide Injection) was approved for two indications in June 2023 and included in the 2023 NRDL, offering a monthly dosing regimen for improved patient compliance[18] - Shengluolai® was included in the 2024 Chinese Expert Consensus on Long-Acting Erythropoiesis-Stimulating Agents for Renal Anemia[18] - Mailinda® (Morpholinyl Nitroimidazole Sodium Chloride Injection) was successfully renewed in the NRDL in December 2023 and recommended in the 2019 Chinese Guidelines for Diagnosis and Treatment of Abdominal Infections[19] - The company submitted 21 domestic patent applications and 49 overseas patent applications, with 29 domestic and 20 overseas patents granted as of June 30, 2024[20] - Over 50 ongoing clinical trials for more than 30 innovative drug products were conducted as of June 30, 2024[21] - Key new drugs approved for clinical trials include HS-10501 (for type 2 diabetes and obesity), HS-10398 (for IgA nephropathy and membranous nephropathy), and HS-10504 (for advanced NSCLC)[21] - HS-20094, a GLP-1 and GIP receptor dual agonist, demonstrated good safety, tolerability, and efficacy in reducing blood sugar and weight in a Phase IIa study for type 2 diabetes patients[22] - HS-20093, a B7-H3 targeted ADC, showed strong anti-tumor activity in recurrent or refractory bone and soft tissue sarcoma, surpassing existing clinical standards, and received

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company has successfully transformed through innovation, achieving significant revenue and profit growth. In the first half of 2024, the company reported revenue of 6.506 billion RMB, a year-on-year increase of 44.2%, and a net profit of 2.726 billion RMB, up 111.5% [4] - The company has established a leading position in major unmet medical needs, particularly in the oncology sector, with product revenue reaching approximately 4.475 billion RMB, accounting for 68.8% of total revenue [4][5] - The company is actively pursuing international expansion and has enriched its pipeline through business development (BD) collaborations, including a significant agreement with GSK [6][7] Summary by Sections Market Performance - The company's stock has shown a relative increase of 18.38% over one month and 30.97% over three months compared to the market [2] Financial Performance - For the first half of 2024, the company achieved a revenue of 6.506 billion RMB, with a gross margin of 89.80% and a net profit margin of 32.44% [4][15] - The projected revenue for 2024-2026 is 12.25 billion, 12.64 billion, and 14.885 billion RMB, with year-on-year growth rates of 21.24%, 3.21%, and 17.73% respectively [7][15] Product Development - The company has over 50 ongoing clinical trials for more than 30 innovative drug products, with several products already included in the national medical insurance directory [4] - The company’s innovative drugs, particularly in the oncology and metabolic disease sectors, are showing promising results in clinical trials [5][6] Business Development - As of June 30, 2024, the company has introduced 11 collaborative projects, with 9 in clinical stages and 2 in commercialization [6] - The company has signed multiple BD agreements, including a notable one with GSK that includes an upfront payment of 185 million USD [6][7]

Investment Rating - The report upgrades the investment rating for the company from "Hold" to "Buy" [3][4]. Core Views - The company reported a strong performance in the first half of 2024, with revenue exceeding expectations, driven primarily by the oncology drug segment, which saw a revenue increase of 75.1% year-on-year [2]. - The forecast for revenue and net profit for 2024-2026 has been adjusted upwards due to the strong performance in the oncology segment, with expected revenue growth from 61.6 billion RMB in 2023 to 90.8 billion RMB in 2026, representing a CAGR of 13.8% [2][3]. Summary by Sections Financial Performance - The company's revenue for the first half of 2024 increased by 44.2% to approximately 6.506 billion RMB, with the core pharmaceutical sales rising by 13.8% to 5.1 billion RMB after excluding project prepayments [2]. - The net profit attributable to shareholders surged by 111.5% to 2.73 billion RMB, driven by a 3.0 percentage point increase in gross margin and a 3.5 percentage point decrease in the sales expense ratio [2]. Earnings Forecast - The revenue forecast for 2024 has been raised by 2.2%, while the forecasts for 2025 and 2026 have been slightly lowered by 4.1% and 0.1%, respectively [2]. - The net profit forecasts for 2024, 2025, and 2026 have been increased by 5.5%, 0.1%, and 4.6%, respectively, reflecting the strong growth in the oncology drug segment [2]. Target Price - The target price has been raised to 23.40 HKD, reflecting the upward adjustments in profit forecasts [3][5].