Hengrui Pharma(SH:600276)2025-08-14 02:44Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the healthcare industry in China, particularly the pharmaceutical and biotech sectors, highlighting recent license-out events and deals in the first half of 2025. Company-Specific Insights Hengrui Medicine - License Agreement with GSK: On July 28, 2025, Hengrui licensed out global rights (excluding Greater China) for HRS-9821 and up to 11 other products to GSK for an upfront payment of US$500 million and potential milestone payments totaling US$12 billion [1][8][19]. - Clinical Stage: HRS-9821 is a PDE3/4 inhibitor currently in Phase-I clinical trials, aimed at treating COPD as an auxiliary maintenance treatment [1]. - Financial Impact: The upfront payment is included in the DCF model, resulting in a 51.3% increase in the 2025 EPS forecast [2][7]. The updated price objective for Hengrui is raised to RMB56.8 from RMB51.5 [2]. - Market Capitalization Comparison: Hengrui's market cap is approximately 74% of GSK's, while its revenue is only about 10% of GSK's projected revenue for 2024, indicating a potential 10+ years for Hengrui to reach GSK's revenue level assuming a 20% CAGR [2]. 3SBio - License Agreement with Pfizer: On July 24, 2025, 3SBio announced a license agreement with Pfizer for the development and commercialization of SSGJ-707 in mainland China, with a non-refundable option fee of up to US$150 million [3]. Industry Trends - License-Out Deals Growth: In the first half of 2025, the total value of license-out deals by Chinese firms reached US$60 billion, a 135% year-over-year growth, surpassing the total for the entire year of 2024 [4][12]. - Upfront Payments: Upfront payments for Chinese firms grew 196% year-over-year to US$2.6 billion in 1H25, with the number of deals increasing by 71.4% to 72 [4][13][15]. - R&D Capability: The surge in deals indicates that Chinese pharma/biotech firms possess world-leading R&D capabilities, leading to significant financial rewards through licensing [4]. Financial Metrics - Hengrui's Financial Estimates: - Total Revenue for 2025 is estimated at RMB33.266 billion, a 12.1% increase from previous estimates [7]. - Net Income is projected at RMB9.305 billion, reflecting a 51.3% increase [7]. - Basic EPS is expected to be RMB1.47, up from RMB0.97, marking a 51.3% increase [7]. Risks and Considerations - Downside Risks for Hengrui: Include setbacks in drug development, slow sales ramp-up of new products, increasing pricing pressures, and competition in the PD-1 market [22]. - Upside Risks: Higher-than-expected net profit margins and faster progress of pipeline candidates could positively impact the price objective [22]. Conclusion - The healthcare sector in China, particularly the pharmaceutical industry, is experiencing significant growth in licensing activities, with Hengrui Medicine and 3SBio leading notable deals. The financial outlook for Hengrui has improved significantly due to recent agreements, although risks remain that could impact future performance.