Citi is bullish on Hengrui Pharmaceuticals: BD momentum, 30% innovative drug sales target, and a rich pipeline support the Buy rating

Overview

This report is a company research flash note by Citi on Jiangsu Hengrui Pharmaceuticals, based on its visit to the company in Shanghai and discussions with executives responsible for oncology clinical research, AIDD, and investor relations. The report focuses on the company's BD partnership momentum, innovative drug sales growth, AIDD capabilities, oncology pipeline, and GLP-1 metabolic pipeline, while maintaining a positive view on the stock.

Core views

Citi's core view is that Hengrui Pharmaceuticals remains one of the top picks in China's pharmaceutical sector. Supporting factors include ongoing portfolio-style pipeline BD deals, management's maintenance of its 30% innovative drug sales growth target, rich oncology and GLP-1 pipelines, and an AIDD platform that can leverage the company's internal real experimental data to improve early-stage discovery efficiency.

Analysis framework

The report mainly uses management interviews, pipeline progress review, commercialization and policy impact assessment, BD partnership model analysis, and a DCF valuation framework. The research covers the full value chain from early discovery and clinical development to commercialization and overseas licensing.

Methodology notes

• Valuation methodsDCF

  Discounted cash flow valuation

  Citi believes Hengrui is a mature pharmaceutical company with relatively stable cash flows, and therefore uses DCF to assess fair value; the target price of Rmb123 is based on a 4% terminal growth rate and 7.9% WACC.

• Pipeline analysisClinical stage and commercialization assessment

  Assess R&D assets by indication, stage, efficacy, and commercial potential

  The report focuses on key pipelines such as KRAS, c-MET ADC, and GLP-1, emphasizing that the company maintains low-cost and flexible exploration in Phase 1/2 and conducts sufficient commercial assessment before entering pivotal Phase 3.

• Strategic analysisBD partnership model analysis

  Assess internationalization and R&D efficiency through portfolio-style pipeline partnerships

  The report believes Hengrui's BD strategy is shifting more toward portfolio-style deals, which helps the company jointly develop and commercialize assets with overseas partners while enhancing international team capabilities.

• Technology platform analysisAIDD

  AI drug discovery platform

  Hengrui's AIDD platform combines multi-omics data, small-molecule and large-molecule structural information, and is trained using the company's own real experimental data, with the goal of improving candidate molecule discovery and new target identification capabilities.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Jiangsu Hengrui Pharmaceuticals (600276.SS)

  Direct research subject

  Strengths

  BD momentum continues, the innovative drug sales growth target is maintained, the company has rich oncology, GLP-1, and AIDD positioning, and management emphasizes that hospital access has not been materially affected.

  Weaknesses

  Commercialization of innovative drugs still faces rising expense ratios, uncertainty in clinical progress, and policy constraints; AIDD is still currently limited by dataset breadth and cross-target experience transfer.

  Comparison

  Compared with pure AI drug discovery companies, the advantage of Hengrui's AIDD platform lies in its use of the company's own real experimental data and its ability to connect to the full internal value chain.

  Risks

  R&D or clinical failures, tendering and GPO price-cut pressure, slower-than-expected product launches, intensified competition, overseas sales execution or regulatory risks, and overseas tariff risks.

• China innovative drug and GLP-1 tracks

  Related industry exposure

  Strengths

  Although policy and commercialization conditions are constrained, hospital channels, diabetes indications, and overseas expansion can still provide room for growth.

  Weaknesses

  Online sales for obesity indications are restricted, competition in the track is intense, and commercialization scale-up requires coordination among indications, channels, and the payment environment.

  Comparison

  Management believes Hengrui can partially offset restrictions on online sales for obesity indications through its existing hospital distribution network.

  Risks

  Further policy tightening, competition from similar drugs, delayed approval timelines, and weaker-than-expected overseas market execution.

Key data

• Report date2026-06-15The report cover page date is 15 Jun 2026.
• Ticker600276.SSThe research subject is Jiangsu Hengrui Pharmaceuticals A-shares.
• Investment ratingBuyThe report shows a Buy rating.
• Target priceRmb123Citi assigns Hengrui an A-share target price based on DCF.
• DCF assumptionsTerminal growth rate 4%; WACC 7.9%Used to derive the target price.
• Innovative drug sales growth targetAbout 30% in 2026Management reiterated the full-year target and said the impact of normalized anti-corruption measures is limited.
• Selling expense ratioExpected to increase by about 100bps annually from 2026 to 2028Management's estimate for the selling expense ratio.
• BD team sizeMore than 30 peopleThe team is led by senior executives with overseas industry backgrounds and is divided into domestic and international sub-teams.
• GLP-1 product cadenceTargeting approval of one new product per year in China during 2026-2030Overseas launches are expected to lag China by 1-2 years.
• HRS9531Expected domestic approval in early 2027 and overseas approval in 2029Injectable GLP-1 product.
• HRS-7535Phase 2 obesity data showed 15% weight loss at 36 weeksAn oral small-molecule candidate with good safety performance; global Phase 2 started in April 2026.
• HRS-4729Phase 1 data showed 16% weight loss at 12 weeksA GLP-1/GIP/GCG agonist expected to be approved around 2030.
• SHR-4642Phase 3 enrollment ongoing for 1L pancreatic cancer in combination with chemotherapyA KRAS G12D inhibitor expected to become Hengrui's first commercialized KRAS asset.
• HRS-7058Phase 3 in lung cancer has been initiatedA KRAS G12C inhibitor with encouraging early data signals.
• SHR-1826Granted Breakthrough Therapy designationA c-MET ADC; a single-arm registrational study in squamous NSCLC has been launched.

Impact & implications

If Hengrui can continue delivering innovative drug sales growth, recognition of BD partnership revenue, and clinical progress in key pipelines, support for its valuation will increasingly depend on innovative drugs and internationalization capabilities rather than the traditional generics logic. Clinical progress in the GLP-1 and oncology pipelines, execution of overseas partnerships, and changes in the policy environment will directly affect the market's assessment of growth and risk premium.

Risks

• R&D or clinical failures may prevent achievement of the target price.
• Future pricing pressure from tenders, volume-based procurement, or GPO.
• Product launch progress may be slower than expected.
• Industry competition may intensify.
• Overseas sales growth may be slower than expected due to regulatory or execution issues.
• Overseas tariff risks.
• Restrictions on online sales of GLP-1 products for obesity indications may affect some commercialization channels.
• Rising selling expense ratios may affect profit elasticity.

What to watch

• The timing of subsequent portfolio-style pipeline BD deal execution and recognition of licensing revenue.
• Recognition of transaction income related to GSK and BMS deals in future years.
• Whether innovative drug sales can achieve the approximately 30% growth target in 2026.
• Whether the selling expense ratio rises by about 100bps annually during 2026-2028 as management expects.
• Progress of new targets discovered by AIDD from PCC advancement to clinical validation.
• Enrollment and data progress of SHR-4642 in the Phase 3 trial for 1L pancreatic cancer in combination with chemotherapy.
• Progress of the HRS-7058 lung cancer Phase 3 study and the SHR-1826 squamous NSCLC registrational study.
• Approval timing of GLP-1 products in China and overseas, especially HRS9531, HRS-7535, and HRS-4729.
• The impact of normalized anti-corruption measures, GPO, tenders, and online sales policies on promotion and pricing.