Interim report on Jiangsu Hengrui Pharmaceuticals (01276): The growth momentum of innovative drugs is prominent, and the unlocking of stock plans shows the confidence in the development of innovative drugs.

On August 20, Jiangsu Hengrui Pharmaceuticals (stock code: 600276.SH;01276) released its semi-annual report for 2025. The financial report shows that the company achieved operating income of 15.761 billion yuan in the current period, an increase of 15.88% year-on-year; net profit attributable to shareholders of the listed company was 4.45 billion yuan, an increase of 29.67% year-on-year. At the same time, the company's operating cash flow for the period reached 4.3 billion yuan, an increase of 41.80% year-on-year. Both revenue, net profit, and operating cash flow have reached new highs for the same period in previous years, and performance has entered a period of explosive growth. The holding plan highlights the expectation of continued high growth in innovative drug revenue In order to enhance team cohesion and the company's core competitiveness, and fully utilize long-term incentive mechanisms, Jiangsu Hengrui Pharmaceuticals also announced the repurchase of 1 to 2 billion yuan worth of shares to implement a new employee holding plan, with an incentive scale of up to 14 million shares in 2025. In terms of performance evaluation, the innovative drug revenue target in the 2024 holding plan was based on a pre-tax basis, while the 2025 plan was adjusted to a post-tax basis. By comparing the two holding plans (i.e. 165 billion yuan (pre-tax) vs. 153 billion yuan (post-tax) for 2025, and 208 billion yuan (pre-tax) vs. 192 billion yuan (post-tax) for 2026), a tax rate of approximately 8% can be calculated. Based on this, it can be inferred that the post-tax innovative drug revenue target in the 2024 plan should be around 12 billion yuan, compared to 153 billion yuan (post-tax) in the new plan, indicating a 27% increase in the post-tax innovative drug revenue target for 2025, consistent with the pre-tax target. Although the sales revenue of innovative drugs, as one of the assessment indicators, appears to have changed, the actual growth rate remains consistent with the previous plans: the holding plan shows that the revenue from innovative drugs in 2024-25 will increase by 27%, 25-26 will increase by 26%, and 26-27 will increase by 25%, maintaining a high compounded growth rate of 25%+, indicating strong growth momentum. Another aspect worth observing is the upper limit of the repurchase price. The announcement shows that the repurchase price will not exceed 90.85 yuan per share. However, on August 20, the closing price of Jiangsu Hengrui Pharmaceuticals' A shares was 62.85 yuan. This means that the company's set maximum repurchase price is more than 40% higher than the market price at that time. Nonetheless, the A-share price of Jiangsu Hengrui Pharmaceuticals has already increased by over 40% since the beginning of the year. Even so, the company still chose to repurchase at a high premium, sending a clear signal to the market: Jiangsu Hengrui Pharmaceuticals' intrinsic value still has a high potential for upward movement. Fundamentally, launching a new round of employee holding plans amidst the company's strong performance demonstrates Hengrui management's confidence in the company's long-term value and is expected to form a positive cycle of "performance growth-stock price appreciation-employee benefits". Considering the financial growth performance, Hengrui's strong innovative strength has clearly been validated and recognized by the market, supplemented by long-term incentive mechanisms such as holding plans, providing strong momentum for the continuous transformation and implementation of innovative achievements, thereby adding strong revenue growth certainty to the company in the medium to long term, driving its valuation to further increase. Accelerated conversion of innovative achievements leads to promising future In the first half of 2025, the company's sales and licensing income from innovative drugs reached 9.561 billion yuan, accounting for a high proportion of 60.66% of total revenue. Specifically, excluding licensing income, the main business income (drug sales income) was 13.693 billion yuan, with innovative drug sales reaching 7.57 billion yuan (here, the innovative drug sales income calculation has also been adjusted to a post-tax basis, consistent with the innovative drug revenue growth target in the holding plan), with innovative drug sales accounting for 55.28% of main business income. The growth of innovative drug sales leads the performance contribution, becoming the absolute core source of the company's performance growth. During the reporting period, Jiangsu Hengrui Pharmaceuticals also obtained approval for 6 Class 1 innovative drugs and 6 new indications, accelerating the landing of innovative achievements. At the same time, Hengrui continues to increase its innovation efforts, with high R&D investment enabling high-level transformation. During the reporting period, the company's overall R&D expenditures amounted to 3.871 billion yuan, with expense-based R&D investment of 3.228 billion yuan. On the R&D front, the company has established a diversified advanced technology platform including PROTAC, monoclonal antibodies, bispecific antibodies, ADC, radioligand therapy, AI drug development, among others. Notably, the Hengrui-Lingshu platform and bioinformatics platform established by the company can simplify various R&D processes including drug discovery, molecular design, drug prediction, and optimization, further enhancing innovation R&D efficiency. With the support of the innovation platform, Hengrui has proactively laid out a diverse innovative product portfolio covering multiple targets. The financial report shows that the company has obtained approval for 23 Class 1 innovative drugs and 4 Class 2 new drugs in China, with over 100 independent innovative products in clinical development and over 400 clinical trials conducted domestically and internationally. The innovative drug R&D has essentially formed a virtuous cycle of listing a batch, conducting clinical trials for a batch, and developing a batch, establishing strong independent R&D capabilities, with plans to launch over 40 innovative achievements in the next three years. Conclusion This time, Hengrui once again introduced an employee holding plan, with a three-year compound annual growth rate of innovative drug revenue growth keeping above 25%, fully demonstrating the company's unwavering confidence in the continued high-speed growth of the innovative drug business. As Jiangsu Hengrui Pharmaceuticals' innovative achievements continue to accelerate, the proportion of innovative drug revenue will reach new heights, with promising prospects ahead. Since listing in Hong Kong, Jiangsu Hengrui Pharmaceuticals' stock price has accumulated a growth of over 70%, with the market value in Hong Kong surpassing 20 billion Hong Kong dollars and the total market value exceeding 500 billion Hong Kong dollars. In terms of A and H-share performance, Hengrui's H-share stock price has seen a rare premium compared to A-shares, reflecting international capital market's high recognition and confidence in the company's solid operation, growth potential, and investment value. Investors are visibly driving the continuous release of Jiangsu Hengrui Pharmaceuticals' intrinsic value at a rapid pace, reflecting the valuation space supported by the strong innovative strength of the company.