Revenue rose 94.3% YoY to RMB17.7bn, mainly driven by RMB9.4bn of licensing revenue from the Pfizer deal, partially offset by soft drugs sale (-10% YoY). Excluding licensing income, underlying profit declined on decreased gross margin and higher operating expenses. On the other hand, SSGJ-707, positioned by Pfizer as a next-generation IO cornerstone product, should generate milestone income from Pfizer given trials that Pfizer has initiated and plans to initiate in 2026. Post results, we lowered our drugs sales forecast and increased licensing income forecasts, rolled over our DCF model, and derived new TP of HK$38.3. Reiterate BUY.
Key Factors for Rating
2025 results missed on soft drug sales and higher operating expenses: Revenue rose 94.3% YoY to RMB17.7bn, mainly driven by RMB9.4bn of licensing revenue from the Pfizer deal, while drug sales declined 10% YoY to RMB8.0bn, due to stricter reimbursement control and the impact of centralised procurement, missing our expectations. Excluding licensing revenue, gross margin declined 2.3ppts YoY to 83.7%. Selling, administrative and R&D expenses increased 8%, 30%, and 15% YoY, respectively, which led to a significant decline in underlying profit excluding licensing income. Reported attributable net profit reached RMB8.48bn, up 305.8% YoY. Year-end cash and cash equivalents was RMB20.4bn, leaving a stronger balance sheet position.
Updates on clinical development of SSGJ-707: Pfizer has already initiated three global Phase III studies for SSGJ-707, including 1L squamous NSCLC, 1L non-squamous NSCLC (both expected to read out around February 2029), and 1L metastatic colorectal cancer (expected to read out around March 2030). Pfizer also plans to initiate two additional registrational studies in 1L endometrial cancer (EC) and 1L urothelial carcinoma (UC) in 2026. Other ongoing studies span SCLC, NSCLC, HCC, and RCC. In addition, Pfizer has already registered further trials in 1L gastric cancer and ± Nectin-4 ADC in 1L UC, demonstrating its ambition to develop SSGJ-707 as a next-generation IO backbone product. Management also shared that several development milestones have already been triggered and are expected to generate income in 2026. At the upcoming ASCO meeting, management expects to present Chinese patient data for SSGJ- 707 in NSCLC and EC.
Other updates: Management expects sales ramp-up of newly approved products, including loncipoetin alfa (SSS06), paclitaxel oral solution, and Yisaituo (IL-17). 2026- early 2027 NDA approvals include DB1303 (HER2 ADC), 613 (IL- 1β), 611 (IL-4R), and 601A (VEGF). The company disclosed a pipeline of 27 molecules, including 13 in R&D/Phase I, 3 in Phase II, 5 in Phase III, and 6 approved products. Management also emphasised its broad innovation platforms spanning bispecifics, trispecifics, TCEs, fusion proteins, RNA, and cell therapy. Meanwhile, CDMO revenue reached RMB260m, up 46.3% YoY. Management said it had already completed the first batch of 707 drug substance supply for Pfizer in 2025, and expects second batch 707 supply to Pfizer in 2026.
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 trial.
Valuation
Following the results, we lowered our 2026–27 drug sales forecasts to reflect the weaker-than-expected 2025 product sales performance amid strict medical insurance fund control. At the same time, we raised our R&D forecasts in light of the company’s broad pipeline. For SSGJ-707, which is not only the company’s flagship out-licensed asset but is also being positioned by Pfizer as a nextgeneration IO cornerstone product, we raised our near-term milestone income assumptions to reflect the faster-than-expected pace of global clinical development. Rolling forward our DCF model, we derive a new target price of HK$38.3 and reiterate our BUY rating.