Core Insights - Hansoh Pharma reported strong 1H25 results, with revenue and net profit increasing by 14.3% and 15.0% YoY, respectively, driven by a 24% YoY growth in core innovative drug sales and continued collaboration revenue [1][2] - Management raised its 2025 revenue guidance to high-double-digit growth, forecasting at least RMB10 billion from innovative drugs, with Ameile expected to contribute RMB6 billion [1][4] Financial Performance - 1H25 revenue reached RMB7.4 billion, while net profit was RMB3.1 billion, exceeding market expectations [2] - Innovative drug sales accounted for RMB4.5 billion, representing a 24% YoY growth and 78% of total drug sales, while generic drug sales fell 13% YoY to RMB1.3 billion [3] - Gross margin remained stable at 91.1%, and R&D expenses increased by 20% YoY to RMB1.4 billion, accounting for 19% of total revenue [3] Future Guidance - Management anticipates generic drug sales of RMB2.5 billion for 2025, gradually declining to RMB2 billion in the long term [5] - Key assets like B7H3/B7H4 ADCs and GLP-1 candidates are expected to advance in global trials in late 2025 and 2026 [1][5] Key Assets and Development - Ameile is projected to generate RMB6 billion in sales, with a peak sales target of RMB8 billion, and is undergoing pivotal trials for new indications [5] - Key timelines for other projects include Phase III trial initiation for HS-20093 and HS-20089 expected in 4Q25 and 2026, respectively [5] Valuation and Target Price - Following the results, the company adjusted drug sales forecasts for 2025-27 and incorporated an upfront payment from Regeneron of US$80 million [6] - The 12-month target price is set at HK$41.3, maintaining a BUY rating based on the potential for recurring business development revenue [6][7]

Summary of Hansoh Pharma Earnings Review Company Overview - **Company**: Hansoh Pharma (3692.HK) - **Industry**: Pharmaceuticals, specifically focusing on innovative drugs and collaborations Key Financial Highlights - **1H Sales**: Rmb7.4 billion, representing a **14.3% year-over-year increase** compared to the expected Rmb6.5 billion [1] - **Product Sales Growth**: Grew by **13.2% year-over-year**, driven by innovative drugs, particularly Ameile, which saw a **21% year-over-year increase** [1] - **Collaboration Income**: Exceeded expectations with Rmb853 million from Merck GLP-1 deal and Rmb804 million milestone payment from GSK [1] - **Earnings**: Rmb3.1 billion, up **15% year-over-year**, surpassing the expected Rmb2.1 billion [1] - **Core Earnings Growth**: Increased by **13% year-over-year**, slower than product sales due to a **20% year-over-year rise in R&D expenses** [1] Future Guidance - **Sales Guidance for 2025**: Management has raised the product sales growth forecast to **high-double-digit growth**, up from previous double-digit growth expectations [1] - **Ameile Sales Target**: Expected to achieve over Rmb8 billion by 2030, with a target of Rmb10 billion+ in 2025, driven by new indications and extended product life cycle strategies [2] Pipeline Developments - **Key Pipeline Assets**: - **HS-20093 (B7H3 ADC)**: Two phase 3 trials initiated in China for SCLC and osteosarcoma, with plans for pivotal stage advancement in 2025 [3] - **HS-20089 (B7H4 ADC)**: Pivotal study for ovarian cancer initiated in China, with global phase 3 trials expected by 2026 [3] - **HS-10535 (oral GLP-1)**: Global phase 1 studies to start by Merck in 2025 [3] - **HS-20094 (GLP-1/GIP)**: Moving to phase 3 stage by Regeneron in 2026 [3] Strategic Focus - **Collaboration Strategy**: Continues to be a key global expansion strategy, with efforts to self-run global phase 1 studies for selected oncology and immunology assets [8] - **Earnings Estimates Revision**: Earnings estimates for 2025, 2026, and 2027 have been revised up by **10.4%**, **8.9%**, and **6.3%** respectively, reflecting higher collaboration income and innovative drug sales [8] Valuation and Risks - **Price Target**: Increased to HK$39.93 from HK$34.83, based on a sum-of-the-parts (SOTP) valuation [9] - **Risks Identified**: - Generics sales may fall below expectations post VBP - Slower ramp-up of novel drugs - R&D risks in the innovative drug pipeline - Below-expected collaboration income from global expansion [10] Conclusion Hansoh Pharma shows strong financial performance in the first half of the year, with positive sales guidance and a robust pipeline of innovative drugs. The company's strategic focus on collaborations and self-running studies positions it well for future growth, despite identified risks in the generics market and R&D.

Investment Rating - The report assigns a "Buy" rating to Hansoh Pharma with a 12-month price target of HK$22.71, indicating a downside potential of 20.6% from the current price of HK$28.60 [8][9]. Core Insights - Management emphasizes encouraging progress in ex-China development for out-licensed assets, including B7H3 ADC, B7H4 ADC, and oral GLP-1, with a reiterated product sales guidance of double-digit growth in 2025 [1][2]. - The key product Ameile is projected to achieve peak sales of Rmb8 billion, with additional upside potential from combination therapies [1][3]. - The company anticipates deal-making opportunities from early-stage ADCs and next-generation disease modifiers for immunology diseases [1][7]. Summary by Sections Ex-China Development Progress - HS-20093 (B7H3 ADC) has received two breakthrough designations from the FDA for SCLC and osteosarcoma, with GSK planning pivotal studies by Q4 2025 [2]. - HS-20089 (B7H4 ADC) is set to commence pivotal trials in 2026 for gynecological cancers [2]. - HS-10535 (oral GLP-1) is expected to enter phase 1 trials in 2025, targeting multiple cardiovascular and metabolic diseases [2]. - HS-20094 (GLP-1/GIP) will focus on weight reduction strategies in combination with Regeneron's internal pipeline assets [2]. Sales Growth and Commercialization - Management guides for double-digit sales growth in 2025, driven by innovative drugs, particularly Ameile, which has a revised sales target of Rmb6 billion for 2025 [3][6]. - The potential for collaboration income is highlighted as a sustainable revenue driver, supported by a growing R&D pipeline with 8-10 new INDs each year [6]. Licensing and Deal-Making Opportunities - Potential licensing-out opportunities include early-stage pre-clinical assets and several ADCs that have entered clinical stages [7]. - Specific assets with deal-making potential include HS-20122 (EGFR/cMET ADC), HS-10370 (KRAS G12D), and others targeting immunology diseases [7].