From innovative drugs to NewCo, what new signals have Jiangsu Hengrui Pharmaceuticals (01276) released in its semi-annual report?

On August 19, Jiangsu Hengrui Pharmaceuticals (01276) released its semi-annual report for 2026. During the reporting period, the company achieved an operating income of 15.456 billion yuan, of which product sales accounted for 13.948 billion yuan, a year-on-year increase of 1.87%; the net profit attributable to the shareholders of the listed company was 4.465 billion yuan, a year-on-year increase of 0.34%. The company invested 4.605 billion yuan in R&D, an increase of 18.96% year-on-year, accounting for 29.80% of operating income, with capitalized R&D investment of 3.493 billion yuan, up 8.21% year-on-year. If one looks at financial indicators in isolation, the semi-annual report for Jiangsu Hengrui Pharmaceuticals for 2026 might not seem like a narrative of "high growth." Since 2026, the pharmaceutical manufacturing industry as a whole has still faced certain operational pressures. According to data from the National Bureau of Statistics released in June, the operating income of the pharmaceutical manufacturing industry from January to May decreased by 1.5% year-on-year, contrasting with an overall increase in operating income for larger industrial enterprises in the same period. Under the differentiated growth trend in the industry, the commercialization of innovative drugs, optimization of product structure, and internationalization capabilities have become key directions for pharmaceutical companies seeking new growth. Against this backdrop, Hengrui's highlights for the first half of 2026 lie not just in absolute growth rates but in the further evolution of its growth structure: the sales revenue from innovative drugs reached 8.809 billion yuan, a year-on-year increase of 16.38%, accounting for 63.16% of drug sales income; among these, the sales revenue from non-oncology innovative drugs grew by 73.97% year-on-year. Meanwhile, the R&D pipeline continues to enter a harvest phase, with a global strategic cooperation agreement with BMS involving a total potential transaction amount of $15.2 billion, and two NewCos successfully listing on NASDAQ. Behind these changes, Hengrui's growth logic is becoming clearercommercialization capabilities for innovative drugs, continuous R&D output, and the global value fulfillment of innovative assets are emerging as increasingly important dimensions for assessing the company's long-term value. The proportion of innovative drugs continues to rise, and growth is becoming more "substantial." In recent years, as innovative drugs enter a concentrated commercialization phase, the criteria for evaluating innovative drug companies are changing. While pipeline scale and R&D investment remain important, the ability to truly convert innovative outcomes into revenue, the diversity of product structure, and the sustainability of commercialization capabilities in supporting R&D outcomes are becoming closer to core operational indicators. China Securities Co., Ltd. pointed out in its mid-term investment strategy for the pharmaceutical and biotechnology industry that innovative drugs are currently in a "dual-driven" phase of commercialization and internationalization, with innovative companies breaking through through differentiation and achieving ongoing global value fulfillment. From this perspective, one important signal from Hengrui's first half of 2026 is the continued increase in the proportion of innovative drug sales. During the reporting period, Hengrui's innovative drug sales revenue grew by 16.38% year-on-year, accounting for 63.16% of drug sales revenue. Among these, the sales revenue from anti-tumor innovative drugs was 6.265 billion yuan, a year-on-year increase of 2.58%, accounting for 71.11% of innovative drug sales; the sales revenue from non-oncology innovative drugs was 2.545 billion yuan, experiencing a significant year-on-year growth of 73.97%, with its share further rising to 28.89%. This indicates that Hengrui, which has long excelled in oncology products, is forming new growth pivot points. In the non-oncology sector, fast growth has been achieved by products such as Metformin extended-release tablets, and Regorafenib in the metabolic area; products like Emmaxetine and Fucatinib in the autoimmune field have seen rapid growth after being included in the national medical insurance; meanwhile, products like Remimazolam and Tegirol have continued to grow in the anesthetic and analgesic field. Looking at industry trends, global R&D hotspots for innovative drugs are also consistently expanding into metabolic and immune fields. According to Citeline's "Pharma R&D Annual Review 2026," global immunology pipelines grew by 20.6%, while R&D pipelines in obesity grew by 30.7%. Data from Gongyan Network indicates that the market scale for autoimmune disease drugs in China will reach 54 billion yuan by 2026; additionally, according to Frost & Sullivan's forecast, China's GLP-1 market still has significant growth potential. At the same time, the fundamental support in the oncology field continues to contribute to growth, with core products like Rivoceranib and DaxibotulinumtoxinA maintaining growth, and newly included drugs like Trastuzumab rapidly increasing sales after being added to the national medical insurance directory. As Hengrui evolves from being a "leader in oncology innovative drugs" to a platform enterprise with innovations across multiple treatment areas, the sources of its growth are expanding further. For innovative drug companies that already have substantial commercialization volume, the diversification of growth sources also provides greater support for the sustainability of performance. R&D enters a dense harvest period, with the next growth curve beginning to take shape. For innovative drug companies, todays sales income determines current performance, while later pipelines determine growth space for the coming years. In the first half of 2026, Hengrui had a total of 7 innovative achievements approved, including 2 Class 1 innovative drugs, Relapamune injection, and Reznore sodium tablets, 1 Class 2 innovative drug, Cyclosporine eye drop solution (IV), and 4 newly approved indications for already marketed innovative drugs. As of the end of the reporting period, the company had 9 listing applications in China accepted by the NMPA, with 17 clinical projects advancing to Phase III, 22 advancing to Phase II, and another 10 innovative products entering Phase I clinical trials for the first time. More notably, a number of potential big products are entering the later stages of development. In the metabolic field, the 2 Phase III studies of GLP-1/GIP dual receptor agonist injection in China for type 2 diabetes have yielded positive top-line results, and plans are underway to submit an NDA; the HRS-7535 (oral GLP-1) China Phase III weight loss study reached all primary and key secondary endpoints at week 44, with average weight loss of 11.1% by week 50, with plans to submit an NDA for relevant indications. In the oncology field, the Phase III clinical study of HER3 ADC innovative drug, SHR-A2009, for EGFR mutant advanced non-small cell lung cancer has achieved its primary endpoint, and an NDA has been accepted. From external evaluations, Citeline's "Pharma R&D Annual Review 2026" shows that Jiangsu Hengrui Pharmaceuticals continues to rank second in the world for the number of self-developed pipelines. For Hengrui, which already has substantial commercialization volume, the number of pipelines is no longer the only focus. More importantly, an increasing number of assets are moving from R&D reserves into Phase III, NDA, and even commercialization stages. Whether R&D investment can continuously convert into new products and sources of income is an important dimension for observing the quality of its next stage of growth. From single licensing to diversified cooperation, global value continues to be realized. While the commercialization of innovative drugs and the continuous advancement of R&D outcomes are ongoing, Hengrui's global cooperation is further deepening. In recent years, BD transactions for Chinese innovative drugs have remained active, with cooperation models evolving from single asset licensing to more diversified forms like combination licensing, joint R&D, and NewCos. For innovative drug companies, the value of global cooperation is no longer merely reflected in the amount of single transactions but is more characterized by the continuous expansion of global development and value realization paths for innovative assets. Sinolink also pointed out in its 2026 annual strategy report on the innovative drug industry chain that BD cooperation has steadily grown into an important channel outside the investment and financing system for innovative drug enterprises to obtain funding support and accelerate R&D and commercialization processes. Hengrui is also continuously exploring diversified global cooperation modes. During the reporting period, the company confirmed income from external licensing cooperation for innovative drugs at 1.422 billion yuan. Since 2023, Hengrui has completed 13 overseas business expansion transactions, including various models like licensing, NewCo, and strategic alliances, with a potential total transaction value of about $42 billion, including global leading pharmaceutical companies like BMS and GSK as counterparties. In the exploration of diversified global cooperation models, NewCo has also made further progress this year. In April 2026, Kailera Therapeutics listed on NASDAQ, becoming one of the largest biotech IPOs globally at the time. Kailera is Hengrui's first attempt at the NewCo model. In May 2024, Hengrui licensed exclusive rights for the global development, production, and commercialization of its self-developed GLP-1 innovative drug product portfolio outside the Greater China region to Kailera. In this transaction, Hengrui not only received an upfront payment and potential milestone payments but also acquired equity in Kailera. Based on the closing price on the first day of trading, Hengrui's related shareholding has an estimated market value of about $300 million. With Kailera's entry into the capital market, Hengrui successfully landed its NewCo model overseas. After the reporting period, Hengrui's other NewCo partner, Braveheart Bio, also listed on NASDAQ. Braveheart Bio's closing price on its first day reached $29.80, a rise of 65.6% from its issuance price, with Hengrui's related shareholding valued at about $220 million based on the closing price on the first day of trading. Unlike the product combination licensing for Kailera, Braveheart focuses on a single core asset, HRS-1893 (BHB-1893). In September 2025, Hengrui licensed the exclusive rights for the global development, production, and commercialization of its self-developed next-generation cardiac myosin small molecule inhibitor, HRS-1893, outside the Greater China region to Braveheart. This transaction involved both cash and Braveheart equity in the upfront payment, allowing Hengrui to receive licensing transaction revenue while also participating in the future value creation of the asset through equity. As such, Hengrui has successfully entered the international capital market with two NewCos. Compared to traditional license-out, the biggest difference in the NewCo model is that the global development value of innovative assets is not released all at once during the transaction. Through arrangements like holding NewCo equity, the original innovator still has the opportunity to share the incremental value generated from subsequent development, financing, and capital market growth. The sequential listings of Kailera and Braveheart Bio also signify that the NewCo model for Hengrui has progressed beyond merely innovative transaction structures and has now entered the verification and value realization phase in the capital markets. According to the "Economic Reference Daily," since 2026, BD transactions for Chinese innovative drugs have progressed from "scale going abroad" to "value going abroad," with new cooperation models represented by Co-Co and NewCo continuing to emerge. More importantly, License-out, NewCo, and strategic alliances are not mutually exclusive, but together constitute a diverse array of methods for the global development and value realization of innovative assets. In terms of autonomous global development, the application for the European listing of innovative drug Rivoceranib tablets has been accepted by the EMA; in July, the SH-4375 ADC innovative drug obtained FDA orphan drug designation for pancreatic cancer. From "how much growth" to "where growth comes from." The innovative drug industry is entering a new evaluation stage. As the industry gradually transitions from early pipeline expansion to commercialization and global competition, the questions the market truly needs to answer are no longer just "how much income growth this year," but rather where the growth comes from, how long it can be sustained, and whether todays R&D investment can be transformed into tomorrow's products and cash flow. From this perspective of Hengrui's semi-annual report for 2026, a relatively clear main thread is emerging: the sales proportion of innovative drugs continues to rise, non-oncology business is growing rapidly, further diversifying endogenous growth momentum; subsequent R&D pipelines are continuously being filled, providing reserves for upcoming product cycles; collaboration with BMS and the successful listings of Kailera and Braveheart Bio reflect the global development and value realization of innovative assets through different paths. The BD income in the financial statements may show annual fluctuations due to transaction and confirmation rhythms, but changes in innovative capabilities, commercialization capabilities, and global cooperation capabilities should be observed over a longer cycle. For Hengrui, as innovative drug sales, later pipelines, and global value realization all begin to trend upward, its growth logic is shifting from a previously singular "innovative drug leader" to a platform pharmaceutical enterprise with sustained R&D output, commercialization capabilities, and global innovative asset operational capabilities. Institutions in the secondary market predict that the first batch of overseas Phase III clinical data for domestic innovative drugs will be released in the second half of 2026, and it is expected that starting in 2027, more Chinese innovative drug companies will formally enter the value realization stage of "earning dollars," driving a reallocation of overall sector valuation. According to media reports, the high achievements of 94 oral presentations and 12 LBAs from Chinese studies at ASCO 2026 also confirm that local innovations are transitioning from market underestimation to value reassessment. With Hengrui's three growth trends aligning, it stands at a critical window for this round of industry revaluation.