Thanks to the moderate price cut on almonertinib, we expect it to maintain rapid growth in 2025, considering (i) the positive sales trend of 3rd-generation EGFR-TKIs seen, (ii) potential market share gains from AstraZeneca, and (iii) almonertinib’s label expansion. We favour Hansoh due to its strong sales growth from innovative drugs, the gradually diminishing impact from generics under VBP, and its robust portfolio of innovative drugs. Additionally, we believe that the potential out-licensing deals could serve as positive catalysts for the company.
　　We maintain our BUY rating and TP of HK$21.4.
　　Key Factors for Rating
　　Moderate price cuts from 2024 NRDL negotiation and expected rapid growth of almonertinib through label expansion: Hansoh has four products that have underwent NRDL renewal in late 2024, with price cuts of 8%, 4%, 26%, and 5% for almonertinib, flumatinib, loxenatide, and inebilizumab, respectively. We consider the impact of these price adjustments to be moderate.
　　Notably, almonertinib was successfully renewed with an annual treatment cost of RMB67,700, which is higher than that of its two key competitors, osimertinib (RMB59,594) and furmonertinib (RMB65,036). Although there are seven 3rd- generation EGFR-TKIs in the market, we expect almonertinib to maintain first- mover advantage due to its extensive hospital coverage and physician adoption.
　　Additionally, almonertinib is expected to receive sNDA approvals for adjuvant therapy and IIIB unresectable NSCLC maintenance therapy in 1H25, both of which may qualify for NRDL negotiation in YE25. Furthermore, Hansoh submitted sNDA for almonertinib +chemo for 1L NSCLC treatment in 4Q24, with approval expected by YE25. In comparison, the phase III trials for furmonertinib and befotertinib in adjuvant therapy are still in the patient follow-up and patient recruitment stages, respectively. As a result, we anticipate that almonertinib will continue to experience rapid growth driven by its label expansion.
　　Comprehensive GLP-1 pipelines built: Hansoh’s first GLP-1 product Fulaimei (loxenatide) was approved for diabetes treatment in 2019. The company has initiated a Phase III study for HS-20094 (a GLP-1/GIP dual agonist) in obesity in October 2024, with NDA approval in China expected in 2027. Data readouts from the Phase II trial of HS-20094 in obesity are anticipated in 2025.
　　Additionally, Hansoh is developing HS-10501, an oral GLP-1 agonist currently in Phase I studies, with plans to initiate Phase II trials in 2025. In December 2024, Hansoh further strengthened its GLP-1 portfolio by licensing out HS-10535, a pre-clinical oral GLP-1 drug, to MSD for an upfront payment of US$112m and potential milestone payment up to US$1.9bn. This out-licensing deal highlights Hansoh’s commitment to advancing its GLP-1 drug pipeline and underscores its strategic focus on innovation in this therapeutic area.
　　Key Risks for Rating
　　 (i) Unexpected price cut due to GPO and NRDL inclusion, (ii) slower-than- expected sales ramp-up of innovative drugs, and (iii) failure in key clinical trials.
　　Valuation
　　We fine tune 2024-26 drugs sales forecasts to reflect better-than-expected price cut on almonertinib and factor in the upfront payment from MSD in 2025.
　　Maintain BUY and TP of HK$21.4.