CICC: Maintain HANSOH PHARMA (03692) at "outperform" rating with a target price of HK$21.12.

CICC Research Report: Maintaining HANSOH PHARMA (03692) "Outperform" Rating, optimistic about the company's future overseas expansion and maintaining a target price of HK$21.12. Due to the first payment of the authorization cooperation may be confirmed in 2025, the bank reduced its expectations for the 24-year authorized income and maintained its expectations for the 25-year authorized expenses, thus lowering the profit forecast for 24-year by 9.7% to HK$4.04 billion, while maintaining the profit forecast for 25-year unchanged. On December 18, 2024, the company announced the granting of an exclusive global license agreement to Merck HS-10535 (oral GLP-1 receptor agonist). Key points of CICC: Reached a GLP-1 cooperation agreement with MSD, with a total transaction amount exceeding USD 2 billion. According to the agreement, Merck gains the global exclusive license rights to develop, manufacture, and commercialize HS-10535; the company will receive a first payment of USD 1.12 billion, up to USD 1.9 billion in milestone payments and royalties based on product sales. Under certain conditions, the company may jointly promote or exclusively commercialize HS-10535 in China. The bank expects that this transaction is expected to increase the company's performance in 2025. Multiple GLP-1 product layouts, leading progress among domestic companies. The company has laid out in the GLP-1 field, including polyethylene glycol liraglutide injection (GLP-1 weekly regimen, Type II diabetes, launched in 2019), HS-20094 (GIP/GLP-1R dual-target weekly regimen, diabetes/weight loss Phase II), HS-10501 (oral GLP-1R agonist, obesity/diabetes Phase I), and HS-10535 (oral GLP-1R agonist, preclinical) authorized this time. The bank believes that this cooperation represents MSD's high recognition of the company's GLP-1 research and development capabilities. Global sales of GLP-1 drugs in 1-3Q24 have exceeded USD 30 billion, and are in a high-growth phase. Various clinical studies have shown the efficacy or compliance advantages of dual/multi-target and oral GLP-1RA drugs. The bank is optimistic about the company's existing GLP-1 pipeline layout. In recent years, the company's BD rhythm has accelerated, continuously expanding the research and development pipeline. After reaching two major cooperation agreements with GSK on HS-20089 (B7-H4 ADC) and HS-20093 (B7-H3 ADC) at the end of 2023, the company continued to efficiently execute its BD strategy in 2024: 1) Expanded cooperation with Pumis on HS-20117 (EGFR/c-Met ADC), with Pumis developing ADC based on this drug; 2) Obtained the rights to development and commercialization of Taige Biopharma HS-20137 (IL-23p19) in Greater China; 3) Obtained the rights to development and commercialization of Lyupeng Pharmaceutical LP-168 (BTKi) for non-oncology indications in Greater China. As of now, the company has accumulated over 20 BD projects, and has accelerated its overseas expansion through licensing. Risks: Commercialization of products falls short of expectations; intensified competitive landscape; clinical data falls short of expectations.