Core Insights - The recent share reduction by Sun Jieping, a senior executive at Heng Rui Medicine, raises concerns about the company's future despite its current performance recovery and innovation drug growth [1][2][6] - The significant drop in operating cash flow, despite increased revenue and net profit, indicates potential underlying issues within the company's financial health [3][7] Group 1: Executive Actions - Sun Jieping, a veteran with 27 years at Heng Rui, reduced his holdings by 476,700 shares, valued at over 25 million yuan, which is 25% of his personal shares [1][2] - This is not the first time Sun has sold shares, as he has repeatedly cited "personal financial needs" since 2018, suggesting a pattern that may reflect his cautious outlook on the company's future [2] Group 2: Financial Performance - In Q1 2025, Heng Rui reported a revenue of 7.206 billion yuan, a year-on-year increase of 20.14%, and a net profit of 1.874 billion yuan, up 36.90% [3] - However, the operating cash flow plummeted by 55.75% to 555 million yuan, raising questions about the sustainability of the company's profitability [3] Group 3: Innovation Drug Dependency - Heng Rui's innovative drug revenue reached 13.892 billion yuan in 2024, accounting for over half of its total revenue, with a growth rate of 30.60% [4] - The company faces challenges due to its heavy reliance on medical insurance negotiations, with key products not included in the insurance list, limiting market expansion [4] Group 4: International Expansion Challenges - Heng Rui's ambitions for international expansion have faced setbacks, particularly with the FDA rejecting its liver cancer treatment due to compliance issues at its Suzhou facility [5] - This marks the second failure for the same treatment due to similar production deficiencies, highlighting significant gaps in meeting international regulatory standards [5] Group 5: Market Sentiment - Sun Jieping's share reduction coincides with Heng Rui's A+H dual listing, prompting the market to reassess the company's long-term stability [6] - The company's stock price has rebounded from its 2022 lows but remains significantly below its historical highs from 2021, indicating ongoing market skepticism [6][7]

Core Viewpoint - Heng Rui Medicine, a leading Chinese innovative pharmaceutical company, is set to launch its global IPO on the Hong Kong Stock Exchange, aiming to raise up to HKD 130.8 billion, marking the largest IPO in the Hong Kong pharmaceutical sector in the past five years [1][4]. Group 1: Financial Performance - In 2024, Heng Rui Medicine reported revenue of CNY 27.985 billion, a 22.63% increase, and a net profit of CNY 6.337 billion, up 47.28%, returning to 2020 levels [4]. - The core driver of growth is innovative drugs, with 19 Class 1 new drugs launched, generating CNY 13.892 billion in revenue, a 30.6% increase, accounting for 46.3% of total revenue [4]. - The proportion of generic drugs decreased from 60.3% to 42% [4]. Group 2: Research and Development - Heng Rui Medicine's R&D investment reached CNY 8.3 billion in 2024, representing 29.4% of revenue, maintaining a position among the top two globally for R&D pipeline scale for four consecutive years [4]. - The company has engaged in 14 licensing agreements totaling USD 14 billion, collaborating with major firms like Merck and IDEAYA, with upfront payments of CNY 2.7 billion [4]. Group 3: IPO Details - The IPO price range is set at HKD 41.45-44.05, reflecting a 19.3% discount compared to the average price on the A-share market [4]. - A strong cornerstone investor base, including GIC and Hillhouse Capital, has committed to purchasing 43% of the shares, injecting HKD 4.1 billion, indicating international capital's recognition [4]. Group 4: Market Sentiment and Trends - The average first-day gain for new pharmaceutical stocks in Hong Kong in 2024 was 11.8%, with Heng Rui expected to attract long-term capital due to its unique position as a leading player [5]. - The oversubscription rate for Heng Rui's IPO reached 143.47 times, with predictions of it potentially reaching 186.51 times, increasing the likelihood of price appreciation in the dark market [11]. Group 5: Risks and Challenges - The company faces challenges from policy pressures, including the impact of the ninth batch of centralized procurement, which led to a decline in generic drug revenue by CNY 844 million [13]. - Heng Rui's overseas revenue is significantly lower than competitors, with only CNY 700 million, highlighting the need for improved international market penetration [13].