转型阵痛已过，创新利刃出鞘

Investment Rating - The report assigns a "Buy" rating to Hengrui Medicine (600276 SH) and upgrades its investment rating [3] Core Views - Hengrui Medicine has successfully transitioned from a generic drug company to an innovative drug leader, with 15 innovative drugs launched and innovative drug sales accounting for 44% of total revenue in H1 2023 [2] - The impact of centralized procurement is nearing its end, and the pressure from medical insurance price reductions has been gradually released [3] - The company's innovative products are entering a phase of rapid growth, with multiple blockbuster drugs in the pipeline providing long-term growth momentum [3] - The company's revenue and profit have returned to growth in the first three quarters of 2023, with innovative drug revenue expected to further increase [4] Business Overview - Hengrui Medicine's core businesses include anti-tumor drugs, anesthetics, and contrast agents, with anti-tumor drugs accounting for over 50% of revenue in recent years [17] - The company has invested nearly 30 billion yuan in R&D over the past decade, with R&D expenses accounting for 29 83% of revenue in 2022 [18] - The company has streamlined its sales force, reducing the number of sales personnel from 17,138 in 2020 to 10,392 in 2022, while increasing per capita sales output from 1 43 million yuan in 2018 to 2 05 million yuan in 2022 [19] Impact of Centralized Procurement - The impact of the fifth and seventh rounds of centralized procurement on the company's performance is significant, with sales of drugs involved in the fifth round dropping by 79% in 2022 and sales of drugs involved in the seventh round dropping by 48% [24] - The sales proportion of drugs involved in centralized procurement in sample hospitals has decreased from 59% in 2020 to 13% in Q1 2023, indicating that the impact of centralized procurement is nearing its end [25] - Key drugs not yet included in centralized procurement, such as Ioversol and Butorphanol, have fewer than four manufacturers with approval, and the company holds a dominant market position [28] Innovative Drug Pipeline - Hengrui Medicine has 16 innovative drugs on the market, covering multiple therapeutic areas including oncology, hematology, anesthesia, chronic diseases, and infections [33] - The second-tier innovative drugs, including Haitropag, Dalpiciclib, and Rezvilutamide, are in a golden period of sales growth and are driving the company's performance [34] - The company's R&D pipeline is rich, with multiple blockbuster products in the fields of oncology, autoimmune diseases, and chronic diseases, laying a solid foundation for long-term development [4] Financial Performance - The company's revenue and net profit returned to growth in the first three quarters of 2023, with revenue reaching 17 014 billion yuan (+6 70%) and net profit reaching 3 474 billion yuan (+9 5%) [14] - The company's gross margin and net margin improved in H1 2023, reaching 84 2% and 20 5%, respectively, compared to 2022 [21] Future Outlook - The company's innovative drug sales are expected to continue growing, with the proportion of innovative drug revenue expected to further increase [4] - The company's overseas market expansion is progressing, with 22 drug registrations approved in the US, Europe, and Japan, and three new drug applications submitted to the US and EU in 2022 [31]