Innovative drugs continue to drive growth. Hansoh has successfully transitioned from a traditional generic drug manufacturer to an innovative pharmaceutical company. The Company reported significant growth of sales for innovative drugs in recent years, reaching RMB6.87bn in FY23 (+37.1% YoY), accounting for 68% of Hansoh's total revenue, a substantial increase from 18% in FY20. This shift reflects Hansoh’s strong commitment to developing and commercializing innovative drug products. Looking ahead, we anticipate Hansoh's major innovative assets, such as Ameile (aumolertinib), Hengmu (tenofovir amibufenamide), Saint Luolai (pegmolesatide), and Hansoh Xinfu (flumatinib), will continue to drive sales growth. In 2024, we expect aumolertinib’s sales to remain robust, driven by volume growth following its inclusion in the NRDL for 1L NSCLC indication since Mar 2023, as well as stable pricing in 2024. Furthermore, we believe the Company’s generic medicines have navigated through the most challenging period, as its major generic medicines have been included into the VBP programs. We view generic drugs as a cash cow business for the Company.
Diversified innovative drug pipeline with global potential. Hansoh has consistently invested in R&D, with R&D expenses rose 24% YoY to RMB2.10bn in FY23, representing 21% of revenue. Beyond the ongoing development of Ameile for indication expansion, we recognize significant potential in Hansoh's innovative pipeline assets such as ADCs, GLP-1, TYK2 inhibitor, as well as others. In particular, Hansoh's ADC assets have garnered global recognitions from GSK, through two blockbuster out-licensing deals in late 2023, regarding HS-20093 (B7-H3 ADC) and HS-20089 (B7-H4 ADC). We see blockbuster potential in HS-20093 for the treatment of ES-SCLC and other solid tumors. GSK has registered global trials of these two ADCs in 2H24. Hansoh is also developing an EGFR/cMet ADC, which is projected to enter clinical studies by end-2024. In the GLP-1 franchise, Hansoh launched Fulaimei in China in May 2019 and is currently developing a weekly GLP-1/GIP dual agonist HS-20094, as well as an oral GLP-1 drug HS-10501. Hansoh is among the frontrunners in the GLP-1 field in China. We expect HS-20094 to enter Ph3 study for obesity in 2H24.
Solidifying the leading position through extensive global collaborations. Hansoh is solidifying its leading position through extensive global collaborations. Besides its robust internal R&D efforts, Hansoh actively seeks collaboration opportunities worldwide to strengthen its product pipeline. Hansoh has forged several in-licensing partnerships with both overseas and domestic entities, including Qyuns Therapeutics, Biotheus, KiOmed Pharma, and Atomwise, among others. Leveraging its R&D and commercialization capabilities, we envision Hansoh evolving into an integrated platform for biotech companies seeking partnerships in the Chinese market.
Initiate at BUY with TP of HK$22.06. In FY24E, we expect the Company’s total revenue to increase 19% YoY, reaching RMB12.0bn. We anticipate Hansoh’s total innovative drug sales to grow 37% YoY to RMB9.5bn in FY24E, accounting for 79% of the Company’s total revenue. Excluding the impact of collaboration payment from GSK in FY23 and FY24, we expect the Company’s organic revenue growth to reach 12%/ 14% YoY in FY24E/ 25E, respectively. We expect the Company’s attributable net profit to increase 24% and decrease 22% YoY in FY24E and FY25E to RMB4.1bn/ 3.2bn, respectively. We derived our DCF-based price target of HK$22.06 (WACC: 8.67%, terminal growth rate: 3.0%).