Summary of Jiangsu Hengrui Pharmaceuticals Conference Call Company Overview - **Company**: Jiangsu Hengrui Pharmaceuticals - **Industry**: Pharmaceuticals - **Market Position**: Ranked among the global top-50 pharmaceutical companies since 2019, leading in revenue from new molecular entity (NME) drugs in 2023 [8][12] Key Points Innovative Drug Sales - **Sales Growth**: Innovative drug sales reached Rmb7.6 billion in 1H25, representing a 23% year-over-year increase and contributing 55% of total drug sales [2][3] - **Future Projections**: Minimum sales targets for innovative drugs are set at Rmb15.3 billion, Rmb19.2 billion, and Rmb24.0 billion for 2025, 2026, and 2027 respectively, indicating a required compound annual growth rate (CAGR) of over 25% [2][3] Business Development (BD) Revenue - **Recurring Revenue**: Hengrui achieved Rmb2.0 billion in BD revenue in 1H25, supported by a robust innovative pipeline and three out-licensing collaborations with MSD, Merck KGaA, and GSK [3][4] - **Pipeline Progress**: Partners are advancing pipeline candidates, with multiple clinical trials initiated, including Phase 3 studies for HRS9531 and Phase 2 trials for SHR-1905 [3][7] Globalization Strategy - **Management Guidance**: Hengrui plans to maximize globalization through out-licensing, a Newco strategy, and proprietary overseas trials [1][3] - **Clinical Trials**: The company is conducting over 20 proprietary overseas clinical trials, enhancing its global presence [3] Financial Projections - **Earnings Forecasts**: FY25E/26E/27E EPS forecasts have been raised by 9%/1%/0% due to higher BD revenue and a lower expense ratio, while revenue forecasts have been trimmed by 2%/4%/3% [3][4] - **Target Prices**: Target prices for Hengrui A/H shares are set at Rmb123 and HK$134, respectively, based on discounted cash flow (DCF) analysis [10][14] Risks - **Potential Risks**: Key risks include R&D failures, pricing pressures from tenders, slower product launches, competition, and regulatory issues affecting overseas sales [11][15] Investment Strategy - **Rating**: Hengrui A/H shares are rated as "Buy," with expectations of enhanced domestic leadership and significant global innovation potential [9][13] - **Out-licensing Potential**: The company has conducted 14 out-licensing transactions since 2018, with a potential value of US$32 billion for upcoming molecules [9][13] Regulatory and Market Dynamics - **NRDL Inclusion**: Hengrui expects strong volume growth following the inclusion of 12 new drugs in the preliminary National Reimbursement Drug List (NRDL) for negotiation [7] Conclusion Jiangsu Hengrui Pharmaceuticals is positioned for strong growth driven by its innovative drug pipeline, strategic collaborations, and globalization efforts. The company faces risks typical of the pharmaceutical industry but remains a top pick in the sector due to its robust financial outlook and market position.