Innovent’s 1H25 results marked a decisive turnaround: revenue of RMB5.95bn (+51% YoY), gross margin of 86%, IFRS net profit of RMB834m, driven by strong oncology and general biomedicine growth, coupled with licensing inflows. Looking ahead, with multiple NDAs expected in 2025, pivotal readouts in obesity, T2D, and oncology, and a solid cash base of US$2.0bn, the company is positioned for sustained profitability and accelerating pipeline progress. Maintain BUY.
　　Key Factors for Rating
　　Innovent delivered a decisive turnaround in 1H25, with revenue of RMB5.95bn (+51% YoY), a gross margin of 86%, and IFRS net profit of RMB834m, reversing a loss of RMB393m in 1H24. Growth was driven by both oncology and general biomedicine portfolios, supported by strong product sales, licensing inflows, and operational leverage. Product revenue reached RMB5.23bn (+37% YoY), underpinned by the continued momentum of sintilimab (PD-1) and contributions from new oncology launches including taletrectinib (ROS1), limertinib (EGFR) and pirtobrutinib (BTK). The general biomedicine portfolio, led by tafolecimab (PCSK9), teprotumumab (IGF-1R), and mazdutide (GLP-1/GCG), expanded steadily. License fee income surged ~5x YoY to RMB666m, mainly from the upfront payment from the Roche collaboration for IBI3009 (DLL3 ADC). R&D service fee income added RMB54m.
　　Gross profit rose 56% YoY, with GPM improving to 86.0% (vs. 82.9%), reflecting both solid revenue and licensing income. R&D expenses fell to RMB1.0bn (from RMB1.4bn), showing disciplined allocation, while selling and marketing expenses incresed to RMB2.4bn (from RMB1.9bn) but declined to 45.4% of product revenue (vs. 49.3% in 1H24). Management expects full-year R&D expenses to remain at US$300-400m, with SG&A ratio in 2H higher than 1H. Cash reserves of US$2.0bn provide ample funding for continued R&D, commercialisation, and global expansion.
　　Upcoming milestones: anticipated NDA approvals by YE25 include IBI112 (picankibart, IL-23p19) for psoriasis, IBI310 (ipilimumab, CTLA-4) for neoadjuvant MSI-H/dMMR colon cancer, and mazdutide (GLP-1/GCG dual agonist) for type 2 diabetes. Key PhIII readouts in 2H25 include mazdutide GLORY-2 (9mg dose for obesity) and DREAMS-3 (head-to-head vs. semaglutide in T2D with obesity). Global registrational studies ongoing for IBI363 (PD-1/IL- 2α-bias) in sqNSCLC, IBI343 (CLDN18.2 ADC) in PDAC, and IBI354 (HER2 ADC) in PROC. Additional first-in-class assets in earlier stages are progressing, including novel ADCs and T-cell engager programmes.
　　Key Risks for Rating
　　1) Delays or failures on clinical development of key assets; 2) breakdown of key partnerships; 3) Slower-than-expected product launch or market uptake.
　　Valuation
　　Post-results, we revised earnings to reflect higher-than-expected gross margin and enhanced operating leverage, while lowering the WACC from 11.1% to 10.7% due to reduced market risk premium. Our 10-year DCF model yields a new TP of HK$100. Maintain BUY.