ABBISKO-B(02256): The annual report released signals sustained profitability, marking the first year of commercialization and opening up new growth opportunities.

Net profit increased by nearly 100% year-on-year, achieving annual profit for the second consecutive year. With the support of innovative research and development and BD transactions, ABBISKO-B (02256) once again delivered impressive annual performance in 2025, confirming expectations of sustained profitable scale and further conveying positive signals for market allocation. Recently, the 2025 annual performance of Heyu has been released. The financial report shows that in 2025, Heyu achieved a total annual comprehensive income of approximately 722 million yuan, an increase of 19% year-on-year; the company's net profit for the period reached 55.247 million yuan, a significant increase of about 95% year-on-year; the adjusted net profit for the period reached 87.855 million yuan, a substantial increase of about 79% year-on-year. This is the second consecutive year that the company has achieved annual profit after first achieving annual profit in 2024. While realizing sustainable scale innovative revenue and profit, Heyu's cash flow on hand is increasingly abundant. The company's current cash and bank balance reached 2.027 billion yuan, providing substantial financial security for the company's medium and long-term innovative research and development. As one of the few innovative pharmaceutical companies in Hong Kong's 18A category that continues to repurchase stocks with "real money" to reward investors, after spending 68.7 million Hong Kong dollars to repurchase 22.594 million shares of stock in 2024, in March 2025, the board of directors of the company approved the use of 200 million Hong Kong dollars to repurchase shares in the market. By the end of 2025, the company had repurchased a total of 10.229 million shares, accounting for 1.51% of the total shares issued at the beginning of the year, involving a total capital of 84.67 million Hong Kong dollars. In the secondary market, Heyu's stock price in 2025 increased by 182.83% annually, reflecting market confidence and increased shareholder value. Looking ahead to 2026, with the global first new drug market application for the core product Beijemai (pemetrexed hydrochloride capsules) approved domestically, Heyu will usher in the first year of commercialization, entering a new value cycle of "hardcore innovation - commercialization realization - performance verification." With strong commercial expectations for Beijemai, Heyu's substantial net cash position in the future is also promising, which will drive the company's innovative research and development to a new level, laying a solid foundation for the continuous upward trend of the company's valuation in the future. Commercialization of "billion-dollar molecules" brings high investment certainty In the current environment, an important sign of high investment certainty for an innovative pharmaceutical company is to switch the company's cash flow pillar from financing cash flow to operational net cash flow. This requires the pharmaceutical company to have a "phenomenal" cash cow product as support. With the official approval of Beijemai, Heyu's investment value steadily increases. As a result of Beijemai's outstanding potential as a "billion-dollar molecule," Heyu reached a high down payment, high milestone, and high revenue-sharing BD transaction with a well-known multinational pharmaceutical company, Merck, at the end of 2023, and received a first payment of 70 million US dollars in early 2024. As Beijemai's research and commercialization process continues, on April 1, 2025, Merck once again announced the exercise of its global commercialization option, paying 85 million US dollars to secure the global rights to pemetrexed. This was also one of the driving factors for Heyu's second year of annual profit in 2025. In fact, with the exercise payment made by Merck, the BD cooperation between the two parties has brought Heyu more than $150 million in cash. According to previous agreements, Heyu will also receive research milestone payments and sales milestone payments from Merck in the future, with potential payments totaling up to 606 million US dollars, not including double-digit net sales royalties. These funds will become the company's continued cash flow, bringing clear profit realization for Heyu in the 2026 financial year and beyond. In addition to the revenue brought by the exercise of Merck's options, the greater impetus driving Heyu's high investment certainty in the future comes from the global commercialization value realization of the core product, Beijemai's "billion-dollar molecule." On December 22 last year, Heyu announced that, based on the positive data from the global Phase III MANEUVER study, the China National Medical Products Administration (NMPA) approved the global first new drug marketing application for Beijemai. Then on January 13 this year, Heyu announced that the new drug application (NDA) for Beijemai for the systemic treatment of tenosynovial giant cell tumor (TGCT) patients has been officially accepted by the US FDA, and approval is imminent. With Beijemai being marketed in both China and the U.S., this "billion-dollar molecule" is set to take a crucial step towards global commercialization, marking a key milestone for Heyu's transition from pioneering innovative research to the commercialization of its first product. From a market perspective, pemetrexed is mainly used to treat TGCT patients who are not suitable for surgery. The National Organization for Rare Disorders in the United States reports that the incidence of TGCT is approximately 43 per million. Currently, the main competitor in the market is the first pharmaceutical product Pexidartinib (pexidatinib) for the TGCT by Daiichi Sankyo. Approved for sale in the U.S. in 2019 as a systemic therapy for severe TGCT that cannot be improved by surgery, the drug carries a serious liver toxicity warning from the FDA. However, even so, the drug's 2023 revenue still exceeded 5.3 billion yen. In comparison, pemetrexed has continuously proven to be highly effective against TGCT, while significantly improving safety, as such, after being approved for sale, as treatment in various indications continues to be explored, its global commercial hematopoietic potential is likely to accelerate. A report released by CMSC International previously stated that pemetrexed developed by Heyu is among the best CSF-1R small molecules in the world. The firm is optimistic about Merck's high expectation for this molecule, which is expected to achieve sales revenue close to a peak of nearly 1.5 billion US dollars globally, further unleashing its potential as a "billion-dollar molecule" and becoming a "heavy bomb" for future increases in Heyu's global income and profit, increasing the company's investment certainty. Accelerating Differentiated Innovation, FIC/BIC Product Potential Highlights The financial report shows Heyu's R&D investment in 2025 reached 5.08 billion yuan, a 13% increase year-on-year. It is evident that strong revenue growth and cash flow reserves are providing strong support for the company's innovative research and development. With strong research and development, Heyu is currently accelerating differentiated innovation, with the potential of several FIC/BIC product varieties in its innovative pipeline becoming apparent. In recent years, Heyu Pharmaceutical has focused on precision oncology and immunotherapy, covering popular targets such as EGFR, FGFR, CSF-1R, and PMRT5, and has established a competitive differentiated innovative R&D pipeline consisting of 22 globally competitive innovative drugs, many of which have the potential to be "best in class" or "globally first in class." For example, the second "billion-dollar molecule" in Heyu's pipeline, Ipagoethinib (ABSK011), has already taken the lead in the global small molecule pipeline and is expected to become a global FIC/BIC drug with outstanding efficacy and safety. On May 26th last year, Heyu announced that Ipagoethinib was included in a breakthrough therapy category, intended for the treatment of advanced hepatocellular carcinoma patients with FGF19 overexpression who have failed prior treatment with immunotherapy checkpoint inhibitors (ICIs) and multi-target tyrosine kinase inhibitors (mTKIs). This, after pemetrexed, became the second heavyweight variety to be included in a breakthrough therapy in Heyu. Then in December of the same year, Ipagoethinib was awarded FTD by the US FDA. GlobalData predicts that the global liver cancer market will be approximately $5.3 billion by 2029, with immunotherapy accounting for 72.2% of the market share, reaching $3.8 billion. Referring to the small molecule kinase inhibitor sorafenib, which is approved for liver cancer indications with an ORR of less than 20%, even so, its global sales still exceeded $500 million in 2021, reflecting the huge unmet treatment demands in the current market. In this market context, Ipagoethinib's potential to become Heyu's second "billion-dollar molecule" is due to its high commercial certainty, as a small molecule with compliance and economic advantages over other FGFR4-targeted drugs, putting it in a leading position within the competitive landscape. Following the first patient dosed with Ipagoethinib for the treatment of patients with HCC who have previously undergone systemic therapy and have FGF19 overexpression, Heyu dosed the first American patient in the expansion stage of the global Phase I study in February of this year. Ipagoethinib has achieved a "shortcut" at the R&D level, with the potential to become the first breakthrough drug for the treatment of patients with FGF19 overexpressin HCC, and has the potential for significant BD value. In addition to the two core varieties with the potential of "billion-dollar molecules" mentioned above, Heyu's innovative pipeline also includes several potential FIC/BIC products. Observing that since last December, several innovative varieties in the company's pipeline have successively achieved R&D milestones. Heyu has disclosed the latest R&D progress of its oral small molecule PD-L1 inhibitor ABSK043, oral small molecule KRAS G12D inhibitor ABSK141, and FGFR2/3 inhibitor ABSK061. In 2025, Heyu's early-stage candidate drugs continue to maintain strong momentum. During the period, the company obtained 6 new drug IND approvals, with ABSK141 (KRAS G12D inhibitor) receiving approvals from both the US FDA and China's NMPA; in addition, the company's three preclinical candidate drugs ABSK211 (Pan-KRAS), ABSK191 (CDK4/2 inhibitor), and ABSK192 (brain-permeable CDK4 inhibitor) have entered the IND preparation stage; the double ADC project P020 has progressed to the lead optimization stage; and in the fields of autoimmune and cardiovascular metabolism, the company has also laid out projects P151, P022, and P023, expanding its early research pipeline beyond oncology, further enriching its innovative R&D pipeline. It is evident that the favorable R&D environment is accelerating the release of Heyu's internal value and accumulating strong momentum. In conclusion It is clear that with the commercialization of core varieties and abundant cash flow support, Heyu is accelerating its transition towards the direction of Biopharma in global research and development, overseas registration, and international commercialization, with a continuously improving integrated innovation ecosystem. Based on the optimistic outlook for Heyu's future growth, including CICC, Shenwan Hongyuan Group, and Zhongtai, among other institutions, have updated their research reports and reiterated "buy" or "outperform industry" ratings for the company. Among them, CICC maintains an "outperform industry" rating for the company and recommends focusing on the progress in the U.S. listing of pemetrexed, the 2L registration clinical progress and 1L clinical programs for Ipagoethinib, potential data reading opportunities for ABSK061 and ABSK043, and the development progress of early-stage molecules including ABSK131 and ABSK141. According to the DCF model, the firm maintains an "outperform industry" rating and a target price of 20 Hong Kong dollars, representing nearly 60% upside potential from the current stock price.