3SBio reported revenue of RMB17.7bn (+94.3% YoY) in 2025, driven by the RMB9.4bn out-licensing income from Pfizer for 707. However, product sales declined by 10.3% YoY to RMB8.0bn amid China's VBP and reimbursement control headwinds. Excluding the licensing income, R&D and administrative expense ratios rose ~4ppts and ~2ppts, respectively, reflecting accelerated clinical investments and one-off share-based compensation. We expect 3SBio will maintain high R&D investment to accelerate pipeline progress. While commercialized products, particularly TPIAO, are likely to remain under pressure in 2026E, we view 707 as the primary valuation anchor, driven by Pfizer’s aggressive global development progress.
Pfizer is rapidly advancing 707 globally. Pfizer has registered ten global trials for 707 (as shown in Fig.4) and started enrollment in seven, including the Phase 3 studies in 1L NSCLC and 1L mCRC. Two additional Phase 3 trials are planned for 2026E, including 1L mUC and 1L EC, according to Pfizer. We expect the rapid clinical progress will trigger near-term milestone payments, significantly driving 3SBio's earnings. Beyond milestones, 3SBio is also benefiting from supplying drug substance for Pfizer’s clinical studies, which drove CDMO revenue growth of 46.3% YoY in 2025. Near-term catalysts include the updated China Phase 2 data in NSCLC and EC at ASCO 2026.
Enriched pipelines to support future BD potential. 3SBio has built a broad pipeline of 27 candidates, with several candidates already obtaining the US FDA INDs, such as SSS67 and SSS68. SSS67 targets both ActRIIA and ActRIIB receptors to regulate fat metabolism and muscle synthesis pathways and thereby achieving the dual effects of reducing fat and increasing muscle mass. SSS68 is a long-acting April/BAFF BsAb targeting IgA nephropathy. We think these candidates with FDA INDs demonstrated 3SBio’s global R&D strategy and may support 3SBio’s future out-licensing deals.
New products may help offset traditional products headwinds. Recent approvals, including NuPIAO (long-acting rhEPO), 608 (IL-17A), and SSS20 (eltrombopag), alongside NRDL inclusion for oral paclitaxel, are expected to generate revenue in 2026E and help partially offset traditional product declines, in our view.
Maintain BUY. We lower our near-term product sales forecast to reflect ongoing pressure on traditional products, particularly ahead of TPIAO's final NRDL renewal negotiations in late 2026E. However, given Pfizer’s rapid global development progress, we raise our milestone payments forecast in 2026E. Totally, we lower our 2026E revenue forecast by 4%. Therefore, we revise our target price to HK$34.87 (WACC: 10.11%, terminal growth rate: 2.0%), based on a 10-year DCF. However, we think 707's global blockbuster potential remains the dominant upside driver and thus maintain BUY.