Hengrui Medicine: 1Q26 Results Incorporated, Revenue Forecasts Largely Unchanged
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Morgan Stanley updated its risk-reward analysis on Jiangsu Hengrui Medicine, incorporating first-quarter 2026 results into its financial model. Revenue forecasts remain essentially unchanged, with the firm still expecting innovative drug sales to grow by over 30% in 2026. Ongoing business development activities are projected to fully offset anticipated declines in generic drug sales.
Net profit estimates experienced minor adjustments, with forecasts for 2026 to 2028 shifting by +2%, -1%, and +1%, respectively. These revisions primarily reflect updated assumptions regarding fair value gains. The discounted cash flow target price is maintained at Rmb81.00 for A-shares and HK$92.00 for H-shares, underpinned by a WACC of 8.2% and a terminal growth rate of 3.5%. The stock retains an Overweight rating.
Morgan Stanley views Hengrui as a benchmark within the Chinese biopharmaceutical industry, citing its leading pipeline breadth, research capabilities, and commercial strength. The firm anticipates five new drug approvals in 2026 and eleven in 2027, including potential blockbuster assets in ADC and GLP-1 classes. A strategic priority remains out-licensing products to multinational pharmaceutical companies to generate recurring revenue.
A sum-of-the-parts analysis indicates that the market currently undervalues the company's global expansion potential. Key upside drivers include successful out-licensing deals, commercial traction from new launches, and positive late-stage clinical data. Conversely, downside risks encompass intensified competition, drug procurement pricing pressures, and clinical setbacks.