2025-08-31 16:21Summary of Hengrui - A Conference Call Company Overview - Company: Hengrui - Industry: Pharmaceuticals - Market Cap: Approximately $57.83 billion [11] Key Financial Highlights - 1H25 Performance: Strong fundamentals with solid innovative product sales and out-licensing deals [2] - Revenue Estimates: - FY24A: Rmb 27,985 million - FY25E: Rmb 32,366 million - FY26E: Rmb 35,285 million [24] - Adjusted EPS Growth: - FY25E: Rmb 1.35 (up from Rmb 1.23) - FY26E: Rmb 1.46 [7][12] - Price Target: Increased to Rmb 69 (from Rmb 52) based on a 48x P/E for FY26E [2][5] Core Business Insights - Innovative Pipeline: - 4 innovative drugs under NDA review in China - 18 new molecules in Phase 3 development (6 in oncology) - Approximately 30 in Phase 2 (16 in oncology) [2] - Out-Licensing Strategy: - Licensing income expected to become a recurring revenue component, estimated to reach ~Rmb 6 billion by 2033 [19] - Management highlighted successful global development of out-licensed assets, including trials by partners like GSK and IDEAYA [9] - Global Expansion: - Strategy to conduct clinical development and commercialization overseas independently [18] - Establishment of a global commercial and strategy team to evaluate market opportunities [18] Operational Efficiency - R&D and S&M Expenses: - R&D expense ratio expected to remain below 30% - S&M expense ratio anticipated to decline as product sales increase [19] - Efficiency Improvements: Focus on improving operational efficiency rather than expanding the S&M team significantly [19] Valuation and Risks - Valuation Methodology: DCF valuation with a terminal growth rate of 4% and WACC of 9.6% [21] - Key Risks: - Downside risks include potential rejection of PD-1 marketing application by the FDA and underperformance of ADC program clinical data [22] - Upside risks include stronger-than-expected sales growth and earnings [22] Market Performance - Stock Performance: - Year-to-date increase of 41.6% - 12-month relative performance of 13.6% [11] Conclusion - Investment Rating: Neutral due to high current valuation compared to peers, despite strong fundamentals and growth potential [12][20]