Hansoh out-licensed oral GLP-1 drug to MSD. Hansoh has granted MSDa global exclusive license for HS-10535, a preclinical stage oral small molecule GLP-1R agonist. Under the agreement, Hansoh will receive an upfront payment of US$112mn, with potential milestone payments up to US$1.9bn, plus future sales royalties. Under specific conditions, Hansoh may co-promote or exclusively commercialize HS-10535 within Greater China. Merck will evaluate the potential of HS-10535, particularly its potential in providing additional cardiometabolic benefits beyond weight reduction. We believe the substantial total deal value reflects MSD’s high commitment for developing this drug candidate.
　　Hansoh has built extensive GLP-1 pipelines. Fulaimei (PEGylatedloxenatide, GLP-1) was approved for diabetes treatment in 2019. Following closely behind industry leaders like Eli Lilly's tirzepatide, Hengrui's HRS9531, and BrightGene’s BGM0504, Hansoh’s HS-20094, a GLP-1/GIP dual agonist, has initiated a Ph3 obesity study in China as of Oct 2024 (CTR20243973). Results from the Ph2 trial of HS-20094 in overweight participants are expected next year. Another oral GLP-1 drug, HS-10501, is currently undergoing Ph1 trials. The out-licensing of HS-10535 further underscores Hansoh’s commitment to developing its GLP-1 drug portfolio.
　　The global race of oral GLP-1 drug development. The development oforal GLP-1 drugs continues to attract significant attention globally. These drugs are favored for their ease of use and scalability in production, drawing interest from major pharmaceutical companies and biotech firms. Several oral GLP-1 small molecules are at Ph3 clinical stage, including Eli Lilly's orforglipron, Hengrui's HRS-7535, and Vincentage's VCT220, among over a dozen others in Ph2. Among the oral GLP-1 candidates, Orforglipron, TERN- 601, GSBR-1290, CT-996, and VK2735 Oral have released promising data in weight loss, in our view.
　　Safety profile is a key differentiating factor for oral GLP-1 drugs, in ourview. LLY’s Orforglipron (45mg) demonstrated 12.4% placebo-adjusted weight loss at week 36, which was satisfying compared to semagalutide’s 12.4% at week 68 in STEP1 trial, while the 15% rate of Orforglipron related discontinuation raised safety concerns. Multiple Ph3 trials of Orforglipron are ongoing with the earliest Ph3 obesity data expected in 2H25. Pfizer has discontinued the twice-daily danuglipron mainly due to safety concerns, continuing with a once-daily formulation expected to release data in 1Q25.
　　Roche’s CT-996 achieved 6.1% placebo-adjusted weight loss at week 4, compared to TERN-601’s 4.9% and GSBR-1290 tablet’s 5.5%, although comparisons are difficult at this early stage due to small sample sizes and short follow-up periods. The zero discontinuation rate of TERN-601 highlighted its safety advantage, in our view. Notably, Viking’s oral GLP- 1/GIP drug VK2735 delivered a 6.8% weight loss at week 7, with a seemingly superior safety profile. Overall, besides the weight loss efficacy, we think the safety profile of small-molecule GLP-1 drugs is a critical differentiating factor.
　　Maintain BUY. We believe that Hansoh has successfully developed a robust pipeline of GLP-1 assets. The collaboration with MSD will accelerate the development of HS-10535 and unlock its global potential. We raise our DCF- based TP to HK$25.24 from HK$24.11 (WACC: 8.52%, terminal growth rate: 3.0%).