CICC's research report stated that, due to the increase in performance due to increased cooperation down payment, hansoh pharma's (03692) profit forecast for 2024 was raised by 30.5% to 4.472 billion yuan, and the profit forecast for 2025 was raised by 17.8% to 4.19 billion yuan. Maintaining an "outperform industry" rating, based on the SOTP valuation method, taking into account the upward revision of profit forecasts and the temporary pressure on the company's generic drug sector, the target price was raised by 18.6% to 21.12 Hong Kong dollars. The company's revenue for the period was 6.506 billion yuan, a year-on-year increase of 44.2%; the net profit attributable to the parent company was 2.726 billion yuan, a year-on-year increase of 111.5%, performing better than the bank's expectations, mainly due to the upfront payment for product out-licensing.

CICC's main points are as follows:

The proportion of revenue from innovative drugs continues to increase.

In the first half of 2024, the company's revenue from innovative drugs and collaboration products was 5.032 billion yuan, an 80.6% year-on-year increase, accounting for 77.4% (+15.6pct YoY), of which revenue from collaboration products was approximately 1.3 billion yuan, mainly from the upfront payment for B7H3ADC authorized to GSK. Excluding this upfront payment, the company's revenue was approximately 5.2 billion yuan, an increase of approximately 15% year-on-year. By segment, 1) oncology business revenue was 4.475 billion yuan (+75.2% YoY), with the bank expecting 20% year-on-year growth for Amelix in the first half of 2024; 2) anti-infective business revenue was 0.701 billion yuan (+16.8% YoY), central nervous system business revenue was 0.73 billion yuan (+4.6% YoY), and other business revenue was 0.597 billion yuan. Sales expenses in the first half of 2024 were 1.72 billion yuan (+3.1% YoY), management expenses were 0.35 billion yuan (+3.1% YoY), and R&D expenses were 1.2 billion yuan (+28.7% YoY).

The R&D pipeline is progressing rapidly.

The company's core product, Amelix, has received new indications for adjuvant treatment of NSCLC and maintenance treatment for stage III inoperable NSCLC patients after synchronous radiotherapy; the company's GLP-1/GIP dual-target drug has announced positive phase IIa results, with the bank expecting it to start phase III clinical trials in the second half of 2024. In terms of early-stage projects, the company has 4 key innovative drugs approved for clinical trials, namely HS-10501 (type 2 diabetes and adult obesity), HS-10398 (immunoglobulin A nephropathy and membranous nephropathy), HS-10504 (advanced NSCLC), and HS-20137 (psoriasis). In terms of external cooperation, in 2024, the company expanded its cooperation with the EGFRxcMET dual antibody with Pumis, introducing Quantex Biologics' HS-20137 and Lucence Bio LP-168 (BTKi) non-oncology indications to the greater china region.

Focus on the further increase in the volume of innovative drugs in 2024 and the early clinical pipeline data.

In 2023, the company's 7 approved innovative drugs have been included in the national medical insurance catalog. The company expects that the proportion of innovative drug revenue in 2024 will exceed 70%. The bank believes that in 2024, the company will continue to improve its per capita efficiency based on its existing commercial team. The company has a rich pipeline of innovative drugs to support future revenue growth. The core indications of the oncology sector are still in the expansion stage, and the GLP-1/GIP dual-target clinical phase III trial is about to be initiated. At the same time, the central nervous system and metabolic pipeline products are actively progressing. It is recommended to pay attention to the release of clinical data.