JPMorgan: Hengrui — Solid Innovative Drug Growth in FY25
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JPMorgan notes Hengrui Pharmaceuticals delivered solid FY25 results, generating total revenue of CNY 31.63 billion, up 13% year-over-year. Innovative drug revenue surged 26.1% to CNY 16.34 billion, now comprising 58.3% of total pharmaceutical sales. Licensing revenue reached CNY 3.4 billion, bolstered by GSK/Braveheart deal milestone payments recognized in 4Q25. Net profit grew 21.7% to CNY 7.7 billion, slightly missing consensus due to an unrealized FX loss of CNY 210 million on USD funds.
Management guides for over 30% innovative drug sales growth in 2026, intentionally offsetting an anticipated decline in generic drug sales. Key growth catalysts include the inclusion of 20 new drugs or indications into the NRDL effective January 2026, alongside 12 anticipated product launches. The pipeline remains robust, with approximately 25 Phase 3 data readouts expected in 2026 across multiple ADC and metabolic assets, including SHR-A1811 and SHR-A2009. Furthermore, business development continues to serve as a structural pillar, with projected BD revenue of $250 million in 2026 from the GSK collaboration.
JPMorgan adjusts its models by lowering generic revenue forecasts and slightly raising R&D expenses. Consequently, the target price for Hengrui's A-shares is revised down to CNY 70.00, implying a 36% upside, with an Overweight rating maintained. The H-share target price is set at HKD 70.00, maintaining a Neutral rating due to relatively richer valuations compared to domestic peers.