Hengrui Medicine maintains high-growth guidance for innovative drugs, with BD and core pipelines supporting medium- to long-term visibility

Overview

This report is a Goldman Sachs conference takeaways note on Hengrui Medicine following the China Healthcare Corporate Day. The report believes that, despite tighter anti-corruption measures disrupting short-term promotion, hospital access, and prescription behavior in lower-tier cities, the company has maintained its guidance for approximately 30%+ growth in innovative drug sales in 2026. Meanwhile, external partnerships with GSK and BMS provide visible revenue contributions over multiple years, while the internal innovative pipeline continues to receive external validation.

Core views

The core views include: first, short-term policy pressure mainly affects non-volume-based procurement generics, lower-tier cities, and the pace of hospital promotion, while the innovative drug growth target has not been lowered; second, BD momentum is strong, and the GSK and BMS transactions improve medium-term earnings visibility; third, HRS-1893 demonstrates differentiated clinical potential in HCM, and successful progression into global Phase 3 trials could strengthen its international positioning; fourth, the GLP-1 portfolio covers injectable, oral, obesity, and diabetes products, and, combined with the existing metabolic disease commercialization network, should help capture both hospital and out-of-hospital demand.

Analysis framework

The report uses a top-down conference-takeaways approach, combining management guidance, policy impacts, BD revenue recognition, cross-trial clinical data comparisons, pipeline commercialization capabilities, and the valuation model to support its rating and target price.

Methodology notes

• Valuation methodsSum-of-the-parts valuation: exit P/E for generics and risk-adjusted DCF for innovative drugs

  The generic drug business uses a 5-year exit P/E, while innovative drugs use a risk-adjusted DCF.

  The Rmb79.20 target price comprises two components: a Rmb40.4bn valuation for the generic drug business, based on a 5-year exit P/E of 10x; and a Rmb420.7bn valuation for innovative drugs, based on a 9.0% WACC and a 3% perpetual growth rate.

• Clinical comparisonCross-trial clinical data comparison

  HRS-1893 is compared with peer drugs such as aficamten on non-obstructive HCM endpoints.

  The report notes that HRS-1893 showed better cross-trial data than the first-mover aficamten on KCCQ and pVO2 improvements, but emphasizes that this was not a head-to-head trial and therefore requires cautious interpretation.

• Research disclosureGS Factor Profile

  The framework compares a stock's position relative to the market and peers across growth, financial returns, valuation multiples, and composite metrics.

  The framework uses Goldman Sachs analyst forecasts to standardize and rank sales, EBITDA, EPS, ROE, ROCE, CROCI, P/E, P/B, EV/EBITDA, and other metrics by percentile.

Asset mapping & comparison

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

• Hengrui Medicine / 600276.SS

  Core covered stock

  Strengths

  Stable innovative drug growth guidance, visible BD partnership revenue, global and commercialization potential for the HRS-1893 and GLP-1 pipelines, and strong hospital coverage and retail/online capabilities.

  Weaknesses

  Short-term impact from tighter anti-corruption measures, with disruption to academic promotion, hospital formulary access, and prescription behavior in lower-tier cities; some non-volume-based procurement generics are under pressure.

  Comparison

  The report compares HRS-1893 with comparable HCM assets such as aficamten and mavacamten in terms of cross-trial data and market potential, and believes it may have better-in-class potential.

  Risks

  Slower-than-expected uptake of innovative drugs, failure of key late-stage R&D programs, higher-than-expected R&D and management expenses from globalization, greater-than-expected price reductions for generic and innovative drugs, and slower-than-expected progress in license-out transactions or international expansion.

Key data

• Innovative drug sales growth guidanceApproximately 30%+ in 2026Management maintained this guidance despite short-term policy disruptions.
• Target priceRmb79.2012-month target price; the report maintains its Buy rating.
• Current priceRmb48.67Price stated in a company-specific regulatory disclosure.
• GSK upfront paymentUS$250mnExpected to be recognized in 2026.
• BMS-related cash paymentApproximately US$600mnExpected to be received in cash in 4Q, with a revenue recognition schedule similar to the GSK transaction; the larger upfront payments will be amortized over 4-6 years.
• HRS-1893 cross-trial KCCQ improvement+5.5 vs. +3.0Cross-trial comparison with aficamten data in non-obstructive HCM.
• HRS-1893 cross-trial pVO2 improvement+0.9 vs. +0.67 ml/kg/minThe report believes this indicates stronger functional benefit, but it is not a head-to-head comparison.
• Peak sales potential of mavacamtenUS$2-4bnUsed to illustrate the market opportunity for the cardiac myosin inhibitor class in HCM.
• Peak sales potential of aficamtenApproximately US$3bnUsed to illustrate the market potential of a comparable asset.

Impact & implications

The implication for investment judgment is that Hengrui Medicine faces short-term policy implementation disruptions and pressure on certain generic drugs, but innovative drug growth, BD revenue recognition, and global pipeline progress are improving medium- to long-term earnings visibility. If HRS-1893, the GLP-1 portfolio, and out-licensing activities continue to deliver, the valuation focus may shift further from generics toward the value of the innovative drug platform.

Risks

• Slower-than-expected uptake of innovative drugs after inclusion in the national reimbursement drug list.
• Failure of key late-stage R&D programs.
• Higher-than-expected R&D and management expenses resulting from global expansion.
• Greater-than-expected price reductions for generic and innovative drugs.
• Slower-than-expected progress in out-licensing and internationalization.
• Longer-than-expected disruption from tighter anti-corruption measures to academic promotion, hospital access, and prescription behavior in lower-tier cities.

What to watch

• Whether innovative drug sales achieve approximately 30%+ growth in 2026.
• Whether the impact of anti-corruption policies continues to improve at the margin after June.
• The pace of revenue recognition for the GSK upfront payment and BMS-related payments.
• The launch and regulatory progress of the global oHCM Phase 3 trial for HRS-1893 in 2H26.
• The progress of Chinese approvals for the GLP-1 obesity indication in 1H and diabetes indication in 2H.
• The contribution of hospital, retail, and online channels to the commercialization of the metabolic product portfolio.