Hansoh announced 1H24 results with revenue/net profit up 44%/112% YoY to RMB6.5bn/ RMB2.7bn, respectively, in line with BOCIe. The management reiterated the guidance of (i) double-digit growth in drug sales in 2024, (ii) growth of 20% YoY in Ameile’ sales, and (iii) sales of RMB6bn of Ameile in 2026. Post results, we revised up the TP to HK$21.4 to factor in the revenue contribution of B7H3 ADC, etc. Maintain BUY rating.
Key Factors for Rating
1H24 results in line: Hansoh announced 1H24 results with revenue up 44% YoY to RMB6.5bn including drugs sales growing by 14% YoY to RMB5.1bn, in line with BOCIe, mainly driven by the collaboration revenue of RMB1.4bn and strong growth of innovative drugs (+32% YoY and accounting for 71% of revenue, excluding the impact of collaboration revenue). By segment, CNS/ oncology/ anti-infective/ and metabolic drug and other diseases changed +5%/ +72%/ +17%/ -9% YoY. Gross margin of drug sales stayed at 89%. Hansoh continuously increased its investments in R&D, with R&D expenses up 29% YoY and accounting for 23.4% of drugs sales. Net profit increased by 112% YoY to RMB2.7bn.The management reiterated the guidance of double-digit growth in drug sales in 2024 and expects the revenue from generic drugs to stay at RMB2bn-2.5bn in 2025 and beyond.
Reiterate Ameile targets sales of RMB6bn in 2026: as the key driver of Hansoh in 2024-26, the management expects Ameile to obtain sNDA approvals for adjuvant and IIIB unresectable, +chemo NSCLC in 1H25, both eligible for the NRDL negotiation in the YE2025. Besides, Hansoh will submit sNDA for +chemo in 1L NSCLC in 4Q24. For this year NRDL negotiation, Ameile is qualified for simplified renewal. The management also maintains the guidance of (i) at least 20% YoY sales growth of Ameile in 2024, and (ii) sales of RMB6bn in 2026.
Other R&D catalysts in the near-term include: i) XINYUE (Inebilizumab): Will submit NDA for igG4-related disease in 2H24, with data readout for gMG global phase III soon; ii) HS-20094 (GLP-1/GIP): phase 2b trial in T2D is currently enrolling, while phase 3 trial in weight loss will be kicked off in YE2024; both indications are expected to launch in 2027; iii) ADC assets: HS-20093 (B7-H3) has initiated 2 phase 3 trials in SCLC in China and expect launch as early as 2027; HS-20089 (B7-H4) will soon enter registration study; and GSK has initiated phase I studies for both B7-H3 ADC and B7-H4 ADC in overseas market; iv) HS-10374 (TYK2i): will initiate phase 3 study for psoriasis, with phase 2 readout expected in 2H24.
Key Risks for Rating
(i) Lower-than-expected price cut on GPO and NRDL inclusion, (ii) slower-than expected sales ramp-up of innovative drugs, (iii) failure in key clinical trials.
Valuation
Post results, we fine-tune 2024-26E revenue forecasts. We edge up our S&M expenses ratio, partially offset by increased R&D expenses ratio. We increased long-term revenues from 2027, considering the products to be approved in 2027 and beyond, such as 20094 (GLP-1/GIP), 20093 (B7H3 ADC), etc. Lift TP price to HK$21.4 and maintain BUY.