Summary of Fosun Pharmaceutical Conference Call Company Overview - **Company**: Fosun Pharmaceutical (2196.HK) - **Industry**: Healthcare, specifically pharmaceuticals and medical technology Key Financial Results - **1Q25 Revenue**: Rmb9.4 billion, a decrease of 7% year-over-year (y/y) [3] - **Recurring Net Profit**: Rmb942 million, down 33% y/y, below consensus estimates [3] - **Pharmaceutical Segment**: Revenue of Rmb6.7 billion and net profit of Rmb740 million, both down approximately 10% y/y due to the impact of the 10th national volume-based procurement (VBP) [3] - **Device Segment**: Revenue of Rmb1.7 billion, an increase of 2% y/y, with profit remaining flat y/y [3] - **Services Segment**: Revenue of Rmb945 million, down 2% y/y, driven by reduced scale of online business; profit of Rmb464 million compared to a loss of Rmb87 million in 1Q24 due to the disposal of Unicorn (United Family Healthcare) [3] Strategic Developments - **Divestment of Non-Core Units**: Continuing divestment expected to generate Rmb5 billion in cash from non-core equity investments, financial assets, and fixed assets [4] - **Increased Stake in Henlius**: Stake increased from 59.56% to 63.43% [7] - **Focus on Innovation**: Accelerating transformation with a focus on drug and medtech innovation and internalization [7] Pipeline and Future Outlook - **Pipeline Catalysts for 2025**: - Serplulimab (PD-1) BLA filing for first-line extensive-stage small cell lung cancer (ES-SCLC) to the US FDA - Approval for FCN437c (CDK4/6) for second-line breast cancer (BC) - Approval for FCN-159 (MEK1/2) for NF1-pediatric LCH and ECD-adult - 2025 ASCO data readouts for several drugs from Henlius [4] Risks and Challenges - **Impact of VBP**: Ongoing challenges from generics and biosimilars under VBP affecting revenue [7] - **Subpar Performance**: Issues with Gland Pharma and loss-making hospitals and CAR-T segments are weighing on near-term earnings [7] - **Market Conditions**: Government control over drug prices and potential pipeline setbacks pose risks [11][11] Valuation and Ratings - **Stock Rating**: Equal-weight with a price target of HK$14.20 [6] - **Valuation Methodology**: Discounted cash flow analysis with a WACC of 8.1%, terminal growth rate of 3%, and long-term ROE of 11.2% [9] Conclusion Fosun Pharmaceutical is navigating a challenging environment with declining revenues and profits in the first quarter of 2025. The company is focusing on strategic divestments and innovation in drug development while facing significant risks from market dynamics and regulatory pressures.