Fosun Pharma's second-quarter results were soft, but innovative drug resilience, overseas expansion, and the AR1001 catalyst remain the key medium-term themes

Overview

The report reviews Fosun Pharma's 2Q26 operating performance and identifies innovative drug growth, overseas operations, the R&D pipeline, and non-core asset disposals as the key variables for future earnings and valuation. Second-quarter revenue was broadly in line with expectations, but higher R&D expenses and delayed asset disposals weighed on earnings; Goldman Sachs therefore lowered its 2026 forecast and target prices while raising its 2027—2028 forecasts to reflect the deferral of certain disposal gains.

Core views

2Q26 revenue was Rmb10.4bn, up 3% YoY and below Goldman Sachs' Rmb10.8bn forecast, but still broadly in line with expectations overall. Mature products continued to face pricing pressure, but innovative drugs remained resilient: 1H26 innovative drug revenue increased 14% YoY, achieving approximately 44% of the company's FY26 innovative drug target, mainly driven by Hannaijia (HER2 TKI), Hanbeitai (bevacizumab biosimilar), and Akynzeo (netupitant/palonosetron). By business segment, 1H26 medical device revenue declined 5% YoY due to weak medical aesthetics demand and slower surgical robot installations; healthcare services grew 4% YoY as the rehabilitation business continued to expand, although the segment remained loss-making. Group earnings declined 9% YoY to Rmb851mn, below Goldman Sachs' Rmb926mn forecast. The main drags included a 22% YoY increase in R&D investment and slower-than-expected non-core asset disposals: approximately Rmb500mn has been realized to date, versus an FY26 target exceeding Rmb2bn. Management maintained its FY26 targets of Rmb11.2bn in innovative drug revenue and Rmb3.96bn in earnings, but Goldman Sachs believes achieving the earnings target will depend more heavily on the pace of future asset disposals, meaning the realization of investment gains beyond operating growth remains an important variable for the full-year outcome. The key medium-term growth theme is management's target of Rmb25bn in innovative drug revenue by 2029, with approximately half expected to come from marketed products and the other half from new products over the coming years. Drivers in 2H26 include continued sales growth of core products such as Hansizhuang and Sukexin through indication expansion; overseas growth driven by biosimilars and the Gland business, with international revenue currently accounting for 31% of total sales; and launches of new oncology products represented by BCMA CAR-T HLX1803, which management expects to receive approval before the end of 2026. Management believes that innovative drug growth and overseas expansion are likely to outweigh the drag from industry pricing pressure over the long term. R&D investment continues to focus on three core therapeutic areas—oncology, immunology, and neurodegenerative diseases—while expanding into cardiovascular and metabolic diseases, anti-infectives, and rare diseases. Additional investment in 2026 is primarily directed toward the Phase III trials of AR1001 and the global Phase III trial of HLX43, as well as nuclear medicine, siRNA, peptides, and next-generation technology platforms. R&D catalysts in 2H26 include Phase III results for AR1001 in Alzheimer's disease, Phase I data for SRT-007—the first nuclear medicine molecule—for prostate cancer, progress on HLX43, and multiple presentations at global conferences including WCLC and ESMO. The company also reiterated that it will terminate lower-priority projects and redirect resources toward assets with global registration and commercialization potential. Management views AR1001 as the most important near-term value driver. Its global Phase III trial has completed enrollment and the last patient’s last visit, with database lock expected around late September and the primary results planned for presentation in a late-breaking session at CTAD in November. The Phase III trial uses CDR-SB as its primary endpoint, which management believes is more suitable for assessing mild Alzheimer's disease than ADAS-Cog13, used in Phase II, and is also consistent with endpoints accepted for recent global approvals of related drugs. Regulatory and commercialization decisions will consider the full body of evidence from both primary and secondary endpoints rather than relying solely on a single measure of statistical significance. The company has begun commercial preparations, including evaluating partnership opportunities in the US and building an Alzheimer's disease ecosystem in China covering diagnosis, patient identification, treatment, and long-term management. Following the results, Goldman Sachs lowered its 2026E earnings forecast by 8.2% due to softer product sales and lower investment income; it also deferred some asset disposal gains to 2027—2028, raising its 2027E and 2028E earnings forecasts by 5.9% and 6.5%, respectively. Accordingly, the 12-month H-share target price was lowered from HK$27.31 to HK$26.05, and the A-share target price from Rmb35.32 to Rmb33.70; relative to the stated prices of HK$16.56 and Rmb22.89, these imply upside of 57.3% and 47.2%, respectively. The target prices are based on a sum-of-the-parts valuation: Rmb19.8bn for the pharmaceutical business excluding the Henlius portfolio, based on a five-year exit P/E multiple of 8.0x; Rmb33.9bn for Fosun Pharma's equity interest in Henlius; Rmb1.3bn for medical devices; Rmb5.5bn for healthcare services; and Rmb13.1bn for its equity interest in Sinopharm Group. This framework values the core pharmaceutical operations, listed or associate equity interests, and other businesses separately, then aggregates them to derive the H/A-share target prices.

Analysis framework

Goldman Sachs first compares second-quarter revenue and earnings against its own forecasts, then breaks down operating changes across innovative drugs, medical devices, and healthcare services. It subsequently assesses management's 2026 and 2029 targets, overseas expansion, and R&D pipeline catalysts, with a particular focus on AR1001's trial design and commercial preparations. Finally, the report incorporates product sales and the pace of asset disposals into its 2026—2028 earnings forecasts and uses a sum-of-the-parts valuation to aggregate the value of each business and equity holding, deriving 12-month H/A-share target prices.

Methodology notes

• Valuation MethodSOTP Valuation

  Sum-of-the-Parts Valuation

  The report separately estimates the value of the pharmaceutical business, the Henlius equity interest, medical devices, healthcare services, and the Sinopharm Group equity interest, then aggregates them to derive Fosun Pharma's 12-month H/A-share target prices.

• Valuation MethodPE/PEG valuation

  Five-Year Exit P/E Multiple

  The pharmaceutical business excluding the Henlius portfolio is valued at Rmb19.8bn using a five-year exit P/E multiple of 8.0x, serving as the valuation basis for the core operating business within the sum-of-the-parts valuation.

• (Method Outside the Vocabulary)

  Alzheimer's Disease Clinical Endpoint Assessment

  The report compares CDR-SB, used in Phase III, with ADAS-Cog13, used in Phase II, and considers the former more suitable for mild Alzheimer's disease; final regulatory and commercialization assessments will consider the full body of evidence from both primary and secondary endpoints.

Asset mapping & comparison

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

• Fosun Pharma H-shares (02196.HK)

  Fosun Pharma's Hong Kong-listed shares covered by the report, with a 12-month target price of HK$26.05, implying 57.3% upside relative to the stated price of HK$16.56.

  Strengths

  Innovative drug revenue maintains double-digit growth, international revenue has reached 31% of total revenue, and the company has R&D or launch catalysts including AR1001, HLX43, and HLX1803.

  Weaknesses

  Second-quarter earnings were below Goldman Sachs' forecast, mature products face pricing pressure, the medical device business is weak, healthcare services remain loss-making, and asset disposals are behind schedule.

  Comparison

  Represents the same company fundamentals as the A-shares, but uses a Hong Kong dollar target price and the H-share market price.

  Risks

  Innovative drug sales growth falling short of expectations, price reductions for generic drugs and biosimilars, larger-than-expected price cuts upon volume-based procurement contract renewals, and slower growth at Sinopharm Group.

• Fosun Pharma A-shares (600196.SH)

  Fosun Pharma's mainland-listed shares covered by the report, with a 12-month target price of Rmb33.70, implying 47.2% upside relative to the stated price of Rmb22.89.

  Strengths

  Innovative drug revenue maintains double-digit growth, international revenue has reached 31% of total revenue, and the company has R&D or launch catalysts including AR1001, HLX43, and HLX1803.

  Weaknesses

  Second-quarter earnings were below Goldman Sachs' forecast, mature products face pricing pressure, the medical device business is weak, healthcare services remain loss-making, and asset disposals are behind schedule.

  Comparison

  Represents the same company fundamentals as the H-shares, but uses a renminbi target price and the A-share market price.

  Risks

  Innovative drug sales growth falling short of expectations, price reductions for generic drugs and biosimilars, larger-than-expected price cuts upon volume-based procurement contract renewals, and slower growth at Sinopharm Group.

Key data

• 2Q26 SalesRmb10.4bnUp 3% YoY versus Goldman Sachs' Rmb10.8bn forecast, and broadly in line with expectations overall.
• 1H26 Innovative Drug Revenue Growth+14% YoYAchieved approximately 44% of the FY26 innovative drug revenue target.
• 1H26 Medical Device Revenue Growth-5% YoYAffected by weak medical aesthetics demand and slower surgical robot installations.
• 1H26 Healthcare Services Revenue Growth+4% YoYThe rehabilitation business continued to expand but remained loss-making.
• Group EarningsRmb851mnDown 9% YoY and below Goldman Sachs' Rmb926mn forecast.
• R&D Expense Growth+22% YoYOne of the main reasons for pressure on group earnings.
• Realized Non-Core Asset Disposal GainsApproximately Rmb500mnThe FY26 target exceeds Rmb2bn, and current progress is slower than expected.
• FY26 Innovative Drug Revenue TargetRmb11.2bnManagement maintained the target.
• FY26 Earnings TargetRmb3.96bnManagement maintained the target, but Goldman Sachs believes it is more dependent on the pace of subsequent asset disposals.
• 2029 Innovative Drug Revenue TargetRmb25bnApproximately half is expected to come from existing products and the other half from future new products.
• International Revenue Contribution31%Overseas growth is driven by biosimilars and the Gland business.
• Earnings Forecast Revisions2026E -8.2%; 2027E +5.9%; 2028E +6.5%The 2026 revision reflects softer product sales and lower investment income, while some asset disposal gains were deferred to 2027—2028.
• 12-Month H-Share Target PriceHK$26.05Previously HK$27.31; the current price is HK$16.56, implying 57.3% upside.
• 12-Month A-Share Target PriceRmb33.70Previously Rmb35.32; the current price is Rmb22.89, implying 47.2% upside.

Impact & implications

The report believes Fosun Pharma's near-term earnings remain affected by price reductions for mature products, R&D investment, and the pace of asset disposals, but sales growth of innovative drugs, overseas revenue growth, and new product launches are expected to gradually improve the growth mix. Phase III results for AR1001 could affect the valuation reassessment of the neurology business, while achievement of the full-year earnings target still depends to a significant extent on whether the asset disposal plan exceeding Rmb2bn can be accelerated.

Risks

• Upside risk: Sales of innovative drugs such as CAR-T outperform expectations.
• Upside risk: A reduced impact from volume-based procurement enables the existing generic drug portfolio to deliver better-than-expected sales.
• Upside risk: A recovery in consumer demand strengthens medical aesthetics device sales.
• Upside risk: Profit contributions from asset disposals exceed expectations.
• Downside risk: Generic drugs and biosimilars continue to face pricing pressure.
• Downside risk: Price reductions upon volume-based procurement contract renewals exceed expectations.
• Downside risk: Innovative drug sales ramp up more slowly than expected.
• Downside risk: Sinopharm Group's growth slows.

What to watch

• Monitor whether non-core asset disposals can accelerate from the current approximately Rmb500mn toward the FY26 target exceeding Rmb2bn.
• Monitor the expected database lock for the AR1001 trial around late September and the Phase III primary results to be presented at CTAD in November.
• Monitor whether BCMA CAR-T HLX1803 can receive approval before the end of 2026 as management expects.
• Monitor Phase I data for SRT-007, progress on HLX43, and pipeline presentations at the WCLC and ESMO conferences.
• Monitor indication expansion and 2H26 sales growth for Hansizhuang and Sukexin.
• Monitor whether the international business can continue growing from its current 31% revenue contribution.
• Monitor progress toward the FY26 targets of Rmb11.2bn in innovative drug revenue and Rmb3.96bn in group earnings.