BMS record US$15.2bn alliance strengthens Hengrui's global co-creation transformation

Overview

This report focuses on Hengrui's record US$15.2bn multi-asset global alliance with BMS. J.P. Morgan believes the transaction not only brings near-term cash and long-term milestone and royalty potential, but also strengthens the investment narrative of Hengrui's transition from a pure licensor to a global strategic co-creator. The report also assigns different ratings to the A-share and H-share listings: A-shares are rated Overweight because the valuation is more digestible after the pullback, while H-shares are rated Neutral because the relative valuation versus peers is higher and upside is limited.

Core views

The core views are as follows: first, the BMS deal spans 13 projects and three collaboration modules, significantly improving visibility on Hengrui's global BD and co-development capabilities; second, the US$600mn upfront payment and two anniversary payments will not be recognized all at once, but will create a multi-year revenue tail based on project progress, with the earliest profit contribution expected in 4Q26; third, Hengrui retains options for co-development and co-commercialization on some assets, which may generate economics beyond milestones and royalties; fourth, ASCO’26 data and multiple phase III readouts over the next 12 months are key near-term catalysts.

Analysis framework

The report combines event-driven analysis with fundamental valuation: it first breaks down the asset scope, regional rights, payment structure, revenue recognition, and co-creation mechanism of the BMS collaboration, then assesses the impact within Hengrui's R&D pipeline, sales capabilities, global BD potential, and valuation level, and finally uses a DCF methodology to derive Dec-26 target prices for the A-share and H-share listings respectively.

Methodology notes

• Valuation methodsDCF valuation

  discounted cash flow valuation

  J.P. Morgan uses DCF valuation to forecast Hengrui's free cash flow through 2033, assuming 3% terminal growth and 9.6% WACC, deriving Dec-26 target prices of Rmb70 for the A-share and HK$70 for the H-share.

• event_analysisalliance economics analysis

  global collaboration economics decomposition

  The report breaks down the BMS collaboration by upfront payment, anniversary payments, milestones, sales sharing, regional rights, and co-development options, and assesses its impact on revenue recognition, long-term returns, and global strategic positioning.

Asset mapping & comparison

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

• Hengrui-A (600276.SS)

  covered_equity

  Strengths

  A large Chinese pharmaceutical company with a strong R&D portfolio, China sales capabilities, and continuing global BD potential; valuation is more digestible after the pullback.

  Weaknesses

  Still exposed to overseas PD-1 approval risk and ADC clinical data risk.

  Comparison

  Compared with the H-share, the report views the A-share as more attractive after the pullback.

  Risks

  FDA rejection of the PD-1 marketing application, ADC data below expectations, and sales and earnings below expectations.

• Hengrui-H (1276.HK)

  covered_equity

  Strengths

  Also benefits from a strong R&D portfolio, sales capabilities, and global BD potential.

  Weaknesses

  Current valuation is higher than many peers, limiting future upside.

  Comparison

  Rated below the A-share, as Neutral rather than Overweight.

  Risks

  FDA rejection of the PD-1 marketing application, ADC data below expectations, and deterioration in H-share market sentiment.

• BMS alliance assets

  strategic_partnership

  Strengths

  The 13 projects cover Hengrui-origin assets, BMS-origin immunology assets, and brand-new joint development projects, with FIC/BIC potential and co-development options.

  Weaknesses

  Management has not yet disclosed which assets may adopt a Co-Co structure; detailed disclosure will have to wait until the 1H26 interim report.

  Comparison

  More strategically collaborative and platform-like than a single-asset licensing transaction.

  Risks

  R&D failure, milestone non-achievement, lower-than-expected sales-sharing monetization, and revenue recognition slower than the market expects.

Key data

• Total potential deal valueup to US$15.2bnIncludes up to US$950mn in near-term consideration and up to US$14.3bn in development, regulatory, and commercialization milestones.
• Upfront paymentUS$600mnAllocated across the 13 projects based on relative fair value and recognized progressively as project R&D is completed.
• Anniversary paymentsUS$175mn in 2027 and conditional US$175mn in 2028The two anniversary payments follow the same project-allocation and progress-recognition framework as the upfront payment.
• Earliest P&L contribution4Q26Management expects the earliest profit and loss contribution in 4Q26.
• Number of collaboration projects13 projectsIncludes 4 Hengrui-origin oncology/hematology assets, 4 BMS-origin immunology assets, and 5 brand-new joint development projects.
• A-share rating and target priceOverweight; Rmb70.00Current price is Rmb56.11, and the target price is based on Dec-26 DCF valuation.
• H-share rating and target priceNeutral; HK$70.00Current price is HK$69.25, and the higher valuation versus many peers limits upside.
• Valuation assumptionsterminal growth 3%; WACC 9.6%Used for the A-share and H-share DCF target prices.

Impact & implications

The significance of this alliance lies not only in its financial scale, but also in the upgrade of the collaboration structure from a traditional license-out model to a cross-asset, cross-region co-development model that starts from the discovery stage. If execution goes smoothly, Hengrui's global R&D platform, its ADC and oncology/immunology pipeline, and its option to participate in co-commercialization in BMS territories could all enhance long-term valuation elasticity. However, because revenue recognition is spread over multiple years, short-term profit contribution will not be reflected all at once, and the market will need to monitor development progress, disclosure details, and key clinical data.

Risks

• FDA rejection of the PD-1 marketing application.
• ADC project clinical data below expectations.
• Deterioration in H-share market sentiment.
• Collaboration project development, regulatory, or commercialization milestones are not achieved.
• Revenue recognition is released gradually according to project progress, so near-term financial contribution may fall short of the market's expectation for one-time recognition.

What to watch

• More detailed disclosure on the BMS collaboration in the 1H26 interim report.
• Whether the earliest P&L contribution starts to be recognized in 4Q26.
• Updates at ASCO’26 on SHR-A2102, SHR-A1811, camrelizumab gastrointestinal tumor data, and SHR-3821.
• Phase III readouts over the next 12 months for SHR-A1811 in ovarian cancer and biliary tract cancer, SHR-A2009 in multiple indications, and HRS-7535 in T2D.
• Which assets in the BMS collaboration enter a Co-Co co-development or co-commercialization structure.