Core Viewpoint - The valuation logic of Fosun Pharma is undergoing a silent reconstruction following a significant licensing deal for its innovative drug XH-S004, which has led to a notable increase in its stock price and market recognition [1][3]. Group 1: Licensing Deal and Market Reaction - Fosun Pharma announced a global licensing agreement for its oral DPP-1 inhibitor XH-S004 with Expedition Therapeutics, with a potential total transaction value of $645 million (approximately 4.6 billion RMB) [1]. - Following the announcement, Fosun Pharma's H-shares surged by 9.4% and A-shares rose by 5.6%, indicating strong market approval of the deal [1]. - XH-S004 is currently in Phase II clinical trials for non-cystic fibrosis bronchiectasis and Phase Ib trials for chronic obstructive pulmonary disease (COPD) in China [1]. Group 2: Strategic Partnerships and Market Position - Expedition Therapeutics focuses on innovative therapies for autoimmune diseases and has a management team with extensive experience in drug development and commercialization [2]. - The collaboration aims to expand the global reach of XH-S004 for treating non-cystic fibrosis bronchiectasis and COPD patients [2]. - The DPP-1 inhibitor market is becoming increasingly competitive, with major pharmaceutical companies like Merck and GSK investing in this area, highlighting the growing demand for treatments for chronic lung diseases [2]. Group 3: Financial and Market Performance - Fosun Pharma's strategic transformation is reflected in its recent issuance of 1 billion RMB in technology innovation bonds, which received a favorable interest rate of 2.70%, showcasing market confidence in its innovative capabilities [3]. - The stock price of its subsidiary, Fosun Pharma's subsidiary Hanhai, has increased by nearly 235% year-to-date, with a total market capitalization of 43.1 billion HKD [3]. - Hanhai's stock performance is closely linked to its innovative product pipeline, particularly in the lung cancer treatment space, with multiple products gaining recognition at major conferences [3][4]. Group 4: Valuation and Investment Strategy - The innovative pipeline, including HLX43, is expected to drive further stock price increases for Hanhai, although it is not yet included in the Hong Kong Stock Connect, limiting direct investment opportunities for some domestic investors [5]. - Investors are advised to consider holding Fosun Pharma to indirectly benefit from Hanhai's innovation while enjoying the stability and risk mitigation from the parent company's diversified business ecosystem [5]. - As of the latest closing on August 14, Fosun Pharma's H-shares were priced at 19.96 HKD, representing a 34% discount compared to its A-share price of 27.97 RMB, indicating a significant valuation gap [5].

Core Viewpoint - The valuation logic of Fosun Pharma is undergoing a silent reconstruction following a $645 million licensing deal for its innovative drug XH-S004, which has seen a 235% year-to-date increase in its subsidiary, Fosun Hani. [1][3] Group 1: Licensing Deal and Market Reaction - Fosun Pharma announced a global licensing agreement (excluding China and Hong Kong) for its small molecule oral DPP-1 inhibitor XH-S004 with Expedition Therapeutics, with a potential total deal value of $645 million (approximately 4.6 billion RMB) [1] - Following the announcement, Fosun Pharma's H-shares surged by 9.4% and A-shares rose by 5.6%, indicating strong market approval for the deal [1] - XH-S004 is currently in Phase II clinical trials for non-cystic fibrosis bronchiectasis and Phase Ib trials for chronic obstructive pulmonary disease (COPD) in China [1] Group 2: Strategic Partnership and Market Position - Expedition Therapeutics focuses on innovative therapies for autoimmune diseases and has a management team with extensive experience in drug development and commercialization [2] - The partnership aims to expand the global reach of XH-S004 for patients with non-cystic fibrosis bronchiectasis and COPD [2] - The global demand for DPP-1 inhibitors is increasing due to the growing population of chronic lung disease patients, with major pharmaceutical companies like Merck and GSK intensifying their focus on this segment [2] Group 3: Innovation and Financial Performance - Fosun Pharma's licensing deal reflects the market's recognition of its pipeline value and the success of its strategic transformation [3] - The company recently issued 1 billion RMB in technology innovation bonds, marking the first mid-to-long-term technology innovation bond in China's private pharmaceutical sector, showcasing strong capital market support for its innovation efforts [3] - Fosun Hani's stock has increased by nearly 235% year-to-date, with a market capitalization of 43.1 billion HKD, driven by multiple innovative products [3] Group 4: Product Development and Clinical Advancements - HLX43, a PD-L1 ADC, is the first of its kind to enter Phase II clinical trials globally, demonstrating high response rates in specific patient groups [4] - The dual mechanism of HLX43, combining immune checkpoint blockade and cytotoxic payload, addresses treatment challenges for PD-1/L1 resistant patients, making it a notable innovation in lung cancer therapy [4] Group 5: Investment Strategy and Valuation - With the progress of HLX43 and other innovative pipelines, Fosun Hani's stock price is expected to continue rising, although it is not yet included in the Hong Kong Stock Connect, limiting direct investment opportunities for some domestic investors [5] - Investors can benefit from holding Fosun Pharma to indirectly gain from Fosun Hani's innovation value while enjoying the stability and risk mitigation from the parent company's diversified business ecosystem [5] - As of the latest closing on August 14, Fosun Pharma's H-shares were priced at 19.96 HKD, representing a 34% discount compared to its A-share price of 27.97 RMB, highlighting a significant valuation gap [5]

Investment Rating - The investment rating for the company is "Buy" with a target price of HKD 23.2, indicating a potential upside of 19.5% from the current price of HKD 19.34 [4][5]. Core Insights - The company has entered into a licensing agreement with Expedition for the development, production, and commercialization of the investigational product XH-S004 outside of China and Hong Kong, with potential revenues of up to USD 650 million [5][6]. - The DPP-1 small molecule drug XH-S004 has significant market potential, targeting conditions such as non-cystic fibrosis bronchiectasis and chronic obstructive pulmonary disease, with a growing global interest in DPP-1 inhibitors [6][10]. - The company has adjusted its profit forecasts upwards due to the recent business development transaction, projecting net profits of RMB 34.3 billion, RMB 39.2 billion, and RMB 46.1 billion for 2025-2027, representing year-over-year growth rates of 24%, 14%, and 17% respectively [6][8]. Financial Summary - The company’s projected net profit for 2025 is RMB 34.35 billion, with an EPS of RMB 1.29, and a corresponding H-share PE ratio of 14X [8][11]. - Revenue forecasts for the company are set at RMB 44.87 billion for 2025, with a steady increase expected in subsequent years [11]. - The company’s dividend per share (DPS) is projected to grow from RMB 0.39 in 2025 to RMB 0.52 by 2027, reflecting a dividend yield increase from 1.44% to 1.93% [8][11].