Fosun Pharma's results were roughly in line, with clearer catalyst paths for innovative drugs and global biosimilars

Overview

The report assesses Fosun Pharma's second-quarter and first-half 2026 performance, concluding that results were roughly in line and that the investment thesis remained broadly unchanged. Earnings grew faster than revenue, while innovative drugs, overseas operations, and Henlius continued to drive growth; the medical device and healthcare service segments remained a drag. Key catalysts ahead center on HLX43, HLX22, global biosimilar registrations, and the early-stage innovative pipeline.

Core views

Fosun Pharma's revenue increased 4.8% year over year and adjusted net profit rose 19.1% in 1H26; excluding foreign exchange effects, the increases were 7% and 22%, respectively. Growth was primarily driven by a 13.8% year-over-year increase in innovative drug revenue and 16.5% growth in overseas operations. The report characterized second-quarter performance as roughly in line, considered its impact on the existing investment thesis unchanged, and viewed the direction of consensus EPS estimates over the next 12 months as broadly stable. The company reiterated its ESOP-implied FY2026 targets: RMB11.23 billion in innovative drug sales and RMB3.96 billion in net profit, both implying approximately 20% growth. Performance continued to diverge across businesses. Revenue from the medical device segment declined 4.9% year over year, and the segment recorded a loss of RMB22 million, mainly due to drags from Sisram, Breas, and the diagnostics business. Revenue from the healthcare service segment increased 4.1% year over year, but its loss widened to RMB207 million. Weakness in these segments partially offset growth in innovative drugs and overseas operations, indicating that the group's earnings improvement still depends on optimizing the product mix and turning around loss-making businesses. Henlius is a key growth platform highlighted in the report. Its revenue reached RMB3.59 billion in 1H26, up 27% year over year. Product sales were RMB2.94 billion, up 15%, with sales in China rising 10% and overseas sales increasing 159%; BD and service revenue amounted to RMB702 million. Due to higher R&D expenses, net profit increased 10% year over year to RMB430 million, slower than revenue growth. The report therefore emphasizes that Henlius is currently scaling up overseas commercialization while continuing to invest resources in its innovative pipeline and global clinical development. HLX43, a PD-L1 ADC, represents one of the most intensive sets of clinical catalysts in 2H26. The product has enrolled more than 1,500 patients globally, over 50% of whom are non-small-cell lung cancer patients, with more than 100 patients enrolled in the US. The company plans to present updated Phase I TSCC data at WCLC, followed by GC data at ESMO. In lung cancer, following discussions with the FDA regarding an accelerated approval pathway, a Phase III trial in second-line or later non-squamous NSCLC may begin in 2H26, while a Phase II/III trial in second-line squamous NSCLC is already underway. The report also focuses on the FDA filing for PD-1 in extensive-stage small-cell lung cancer and FDA approval of the bevacizumab biosimilar. The global multicenter trial of HLX22, a novel-epitope HER2 monoclonal antibody, is evaluating first-line treatment for HER2-positive GC, comparing tras+chemo with or without pembro. The report expects the trial may complete enrollment by the end of 2026 and report topline results in 2H27. In the earlier-stage pipeline, assets including DLL3xDLL3xCD3xCD28, STEAP1xCD3xCD28, cMETxEGFR ADC, and KAT6A/B may report first-in-human data in 2027. The company expects to receive more than five new IND approvals in 2H26, with listed programs including STEAP1/CD3/CD28, PD-1/IL2, IL-1R3, and HER2/HER2 ADC. Global biosimilars represent another long-term growth pillar. Henlius recently extended its partnership with Sandoz, securing at least a 40% profit share and potentially up to a 60% revenue share. Management expects more than 10 biosimilars to receive FDA approval by 2030, corresponding to an aggregate addressable market of over US$100 billion for the originator drugs. Morgan Stanley further provides a scenario analysis: assuming the corresponding biosimilar market equals 50% of the originator-drug TAM, Henlius captures approximately 20% market share, and a 40% revenue share applies, this could translate into approximately US$4 billion in sales for Henlius. This is a conservative estimate based on explicit assumptions, rather than realized revenue. The financial model projects EPS of RMB1.26, RMB1.50, RMB1.69, and RMB1.82 for 2025 through 2028, respectively, versus consensus estimates of RMB1.16, RMB1.47, RMB1.65, and RMB1.82. Over the same period, net revenue is projected at RMB41.662 billion, RMB43.078 billion, RMB44.020 billion, and RMB46.599 billion, respectively; EBITDA at RMB6.177 billion, RMB7.180 billion, RMB7.725 billion, and RMB8.131 billion; and ModelWare net profit at RMB3.371 billion, RMB3.994 billion, RMB4.518 billion, and RMB4.854 billion. The forward P/E declines from 21.0x to 15.4x, 13.6x, and 12.7x; P/B declines from 1.5x to 1.2x, 1.1x, and 1.1x; ROE rises from 7.1% to 8.2%, 8.8%, and 8.9%; and EV/EBITDA declines from 10.3x to 6.5x, 5.5x, and 4.5x. The valuation uses a sum-of-the-parts approach: RMB85 billion for the innovative drug business, RMB12 billion for the generic drug portfolio, Sinopharm valued at 5x 2026E P/E, RMB8 billion for the medical technology segment, and healthcare services valued at 5x EV/EBITDA. Based on this, the report assigns Fosun Pharma's A-shares a price target of RMB36.00, implying 56% upside from the August 25, 2026 closing price of RMB23.02. The A-share 52-week price range at the time was RMB33.10 to RMB20.85. The historical H-share price target shows a current value of HKD28.5, while the share price was HKD17.31 on August 26, 2026. Both the A-shares and H-shares are rated Overweight.

Analysis framework

The report first compares first-half revenue, adjusted net profit, and foreign exchange effects with expectations, then breaks down operating performance across innovative drugs, overseas operations, medical devices, healthcare services, and Henlius. It subsequently reviews clinical, regulatory, and IND catalysts across the product pipeline from 2H26 through 2027 and estimates the potential of global biosimilars using assumptions for TAM, market share, and partnership revenue sharing. Finally, through ModelWare financial forecasts and a sum-of-the-parts valuation, the report translates its operating and pipeline assessments into earnings forecasts and a price target.

Methodology notes

• Valuation MethodSOTP Valuation

  SOTP sum-of-the-parts valuation

  The report separately values innovative drugs, generic drugs, Sinopharm, medical technology, and healthcare services, then aggregates the value of each component to reflect Fosun Pharma's diversified business structure.

• Valuation MethodPE/PEG valuation

  2026E P/E

  The Sinopharm component is valued at 5x 2026E P/E, multiplying the business's projected earnings by the specified valuation multiple.

• Valuation MethodEV/EBITDA valuation

  Healthcare services EV/EBITDA valuation

  The healthcare service segment is valued at 5x EV/EBITDA, measuring the business's value as a multiple of enterprise value relative to earnings before interest, taxes, depreciation, and amortization.

• Industry/Sector Analysis Framework

  TAM–market share–revenue share scenario analysis

  Starting from an originator-drug TAM of over US$100 billion, the report sequentially assumes that biosimilars address 50% of the TAM, Henlius captures approximately 20% market share, and a 40% revenue share applies, thereby deriving approximately US$4 billion in potential sales.

• Company Fundamentals and Financial Framework

  Morgan Stanley ModelWare versus consensus estimates

  The report uses its internal ModelWare framework to forecast revenue, profit, EPS, and valuation metrics and compares them with Refinitiv consensus estimates to assess earnings deviations and the direction of future earnings expectations.

Asset mapping & comparison

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

• Fosun Pharma A-shares (600196.SS)

  The report assigns an Overweight rating and a price target of RMB36.00, implying 56% upside from the RMB23.02 closing price.

  Strengths

  Innovative drugs and overseas operations are growing rapidly, while Henlius offers multiple clinical and biosimilar commercialization catalysts.

  Weaknesses

  Medical device revenue declined and the segment recorded a loss, while losses in healthcare services widened.

  Comparison

  The rating uses risk-adjusted total return relative to Morgan Stanley's China healthcare coverage universe as its benchmark.

  Risks

  Drug price controls, major pipeline setbacks, volume-based procurement of generic drugs and biosimilars, rising hospital acquisition valuations, and tighter industry regulation.

• Fosun Pharma H-shares (2196.HK)

  The report assigns an Overweight rating; the historical price target shows a current value of HKD28.5, while the share price was HKD17.31 as of August 26, 2026.

  Strengths

  Shares the same growth thesis as the A-shares regarding innovative drugs, Henlius's global clinical development, and biosimilar commercialization.

  Weaknesses

  Likewise exposed to operating drags from the medical device and healthcare service segments.

  Comparison

  The rating uses risk-adjusted total return relative to Morgan Stanley's China healthcare coverage universe as its benchmark.

  Risks

  Drug price controls, major pipeline setbacks, volume-based procurement of generic drugs and biosimilars, rising hospital acquisition valuations, and tighter industry regulation.

Key data

• 1H26 revenue growth+4.8% YoYUp 7% excluding foreign exchange effects
• 1H26 adjusted net profit growth+19.1% YoYUp 22% excluding foreign exchange effects
• Innovative drug revenue growth+13.8% YoYOne of the primary drivers of group growth in the first half
• Overseas business revenue growth+16.5% YoYOne of the primary drivers of group growth in the first half
• FY2026 innovative drug sales targetRMB11.23 billionESOP-implied target, representing 20% growth
• FY2026 net profit targetRMB3.96 billionESOP-implied target, representing 20% growth
• Henlius first-half revenueRMB3.59 billionUp 27% YoY
• Henlius product salesRMB2.94 billionUp 15% YoY; China up 10%, overseas up 159%
• Henlius BD and service revenueRMB702 million1H26
• Henlius net profitRMB430 millionUp 10% YoY, affected by higher R&D expenses
• HLX43 global enrollmentMore than 1,500 patientsMore than 50% were NSCLC patients, with over 100 enrolled in the US
• Long-term biosimilar regulatory targetMore than 10 FDA approvals by 2030Corresponding originator-drug TAM exceeds US$100 billion
• Biosimilar scenario salesApproximately US$4 billionBased on assumptions of 50% of the corresponding TAM, approximately 20% market share, and a 40% revenue share
• A-share price targetRMB36.0056% upside from the RMB23.02 closing price

Impact & implications

The report believes Fosun Pharma's current results do not change the existing investment thesis: innovative drugs and overseas commercialization support earnings growth, while Henlius's clinical pipeline and global biosimilar partnerships provide medium- to long-term catalysts. However, the medical device and healthcare service businesses remain loss-making, and subsequent valuation realization will depend on pipeline data, regulatory progress, product ramp-up, and improvements in loss-making segments.

Risks

• Faster-than-expected growth in biosimilar sales could create upside relative to the base-case scenario.
• Rapid adoption of CAR-T therapies and expansion into additional indications could provide further upside.
• More favorable government policies or earlier-than-expected product launches could create upside.
• Government drug price controls could reduce product prices and profitability.
• Major clinical or regulatory setbacks in the innovative pipeline could weaken growth expectations.
• Volume-based procurement of generic drugs and biosimilars could create pricing pressure.
• Rising hospital acquisition valuations could increase expansion costs.
• Further tightening of industry regulation could pressure operations and valuation.

What to watch

• Watch for the updated Phase I TSCC data for HLX43 at WCLC and the subsequent GC data presentation at ESMO.
• Watch whether the Phase III trial of HLX43 in second-line or later non-squamous NSCLC can begin in 2H26, as well as discussions with the FDA regarding an accelerated approval pathway.
• Watch the FDA filing for PD-1 in extensive-stage small-cell lung cancer and FDA approval of the bevacizumab biosimilar.
• Watch whether HLX22 can complete enrollment by the end of 2026 and report topline results in 2H27.
• Watch for more than five new IND approvals in 2H26 and first-in-human data for multiple early-stage assets in 2027.
• Watch whether the company can achieve its FY2026 targets of RMB11.23 billion in innovative drug sales and RMB3.96 billion in net profit.
• Watch global biosimilar approvals, revenue sharing, and sales ramp-up under Henlius's partnership with Sandoz.