Innovative drug sales and cost control drove an earnings beat in the first half, while Hansoh Pharma's next product cycle is expected to begin in 2027

Overview

The report assesses Hansoh Pharma's 1H26 results, innovative drug product cycle, late-stage ADC pipeline, and valuation changes. Goldman Sachs believes that innovative drug sales, a lower selling expense ratio, and investment income jointly drove the earnings beat; Ameile continues to provide foundational growth, while new product launches beginning in 2027 and the global development of ADCs are expected to create a second wave of growth.

Core views

Hansoh Pharma's 1H26 results exceeded Goldman Sachs' expectations, primarily driven by innovative drug sales, cost control, and investment income. Revenue reached RMB8.3bn, up 12% YoY; product sales increased 14% YoY, including 21.6% YoY growth in innovative drug sales, outpacing Hengrui Pharma and CSPC Pharmaceutical Group. Collaboration revenue was broadly flat against a high base in 1H25. Earnings reached RMB4.3bn, up 36% YoY; even excluding investment income, earnings still grew 19% YoY, indicating that the outperformance was not entirely dependent on non-operating items. Selling expenses as a percentage of product sales declined from 30% in 1H25 to 27%, and improved operating leverage offset the impact of a 20.7% YoY increase in R&D expenses. Management maintained its guidance for double-digit growth in both FY26 product sales and BD revenue, while planning to increase FY26 R&D investment by 30% YoY to fund multiple Phase III programs and next-generation assets. Goldman Sachs also noted that the recent oral IL-23 NewCo transaction could generate additional fair-value gains in the future, representing potential earnings upside. Existing core product Ameile remains the foundation of near-term growth, but both management and Goldman Sachs view 2027 as the key inflection point for the business to transition from a single-product-driven model to a multi-product-driven model. Management reiterated its target for Ameile to achieve peak sales of RMB8bn in 2030 and believes that long-term sales could exceed RMB10bn through indication-based lifecycle expansion and combination therapy strategies. Beyond Ameile, the company expects to enter a major launch cycle beginning in 2027: in oncology, the RET inhibitor HS-10365, c-MET inhibitor HS-10241, and B7-H3 ADC HS-20093 are all targeted for launch in 2027 and could further strengthen the lung cancer portfolio; in non-oncology, the GLP-1/GIP dual agonist HS-20094 could become the second domestically developed dual agonist approved in China, while the TYK2 inhibitor and IL-23 monoclonal antibody are targeted for approval from 2028 to 2029 and beyond. Goldman Sachs believes this second wave of innovative products will become a major source of growth from 2028, gradually reducing the company's reliance on a single-product narrative and supporting sustainable double-digit growth beyond the current EGFR TKI cycle. The ADC pipeline is viewed in the report as an important source of medium-term value, with B7-H3 ADC HS-20093 (Ris-rez) and B7-H4 ADC HS-20089 (Mo-rez) as the core assets, whose global development is led by GSK. Phase III studies of Ris-rez in small-cell lung cancer and osteosarcoma in China have met their primary endpoints, with the first new drug application planned for submission by the end of 2026 and potential approval in 2027; other Phase III studies in China targeting second-line non-small-cell lung cancer and esophageal squamous cell carcinoma have also begun, and GSK plans to initiate three additional global Phase III studies in 2H26. Enrollment in Mo-rez's Phase III ovarian cancer study in China is nearing completion, while GSK has initiated two global Phase III programs and plans to initiate another three within the year. Management expects to present multiple key results at WCLC and ESMO, including Phase III data for Ris-rez in small-cell lung cancer and osteosarcoma, as well as updated Mo-rez data. The number of development programs, achievement of key endpoints, and global collaboration footprint collectively support Goldman Sachs' assessment of the ADC assets' medium-term value. Following the results, Goldman Sachs raised its FY26E earnings forecast by 15%, reflecting stronger-than-expected innovative drug sales, operating leverage from lower selling expenses, and additional investment income recognized during the period. FY27E and FY28E earnings forecasts were raised by 5.0% and 5.4%, respectively, mainly reflecting continued improvement in operating leverage and greater contributions from innovative products, while the underlying assumptions for the existing commercialized product portfolio remained broadly unchanged. Based on the updated forecasts, Goldman Sachs raised its 12-month target price from HK$50.10 to HK$52.70 and maintained its Buy rating; relative to the current price of HK$31.74 stated in the report, this implies 66.0% upside. The target price is based on a sum-of-the-parts valuation: the innovative drug business is valued at RMB28.7bn using DCF, while the generic drug business is valued at RMB3.26bn using a 10x FY26 P/E multiple. This valuation structure indicates that the majority of the target value is derived from the innovative drug business and its long-term cash flows, while the generic drug business is valued separately at a lower multiple.

Analysis framework

Goldman Sachs first compared 1H26 revenue and earnings with its own expectations and the prior-year period, then decomposed the changes into product sales, innovative drug growth, collaboration revenue, the selling expense ratio, R&D investment, and investment income. It then assessed, in chronological order, Ameile's existing growth, the new product launch cycle beginning in 2027, and the progress of late-stage ADC clinical trials and global development, adjusting its FY26E-FY28E earnings forecasts accordingly. Finally, it derived the 12-month target price using a sum-of-the-parts approach combining a DCF valuation for the innovative drug business with a P/E valuation for the generic drug business.

Methodology notes

• Valuation MethodologySOTP Valuation

  Sum-of-the-Parts Valuation

  The report values the innovative drug and generic drug businesses separately and then adds them together to reflect differences in growth, risk, and applicable valuation methodologies between the two businesses.

• Valuation MethodologyDCF

  DCF Valuation of the Innovative Drug Business

  Based on the present value of the innovative drug business's future cash flows, Goldman Sachs values this segment at RMB28.7bn, making it the primary component of the target value.

• Valuation MethodologyPE/PEG valuation

  FY26 P/E Valuation of the Generic Drug Business

  The report values the generic drug business at RMB3.26bn using a 10x FY26 P/E multiple.

• Corporate Fundamentals and Financial FrameworkOperating/Financial Leverage Analysis

  Selling Expense Ratio and Operating Leverage Analysis

  By examining the decline in selling expenses as a percentage of product sales from 30% to 27%, the report explains how revenue growth translated into faster earnings growth and offset the impact of increased R&D investment.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Revenue Source and Product Mix Breakdown

  The report breaks down revenue into product sales, innovative drug sales, and collaboration revenue, comparing the growth rates of each component to identify the primary sources of the 1H26 revenue beat.

Asset mapping & comparison

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

• Hansoh Pharma (03692.HK)

  The report believes the company benefits from rapid growth in innovative drug sales, a lower selling expense ratio, the new product cycle beginning in 2027, and global ADC development, and maintains a Buy rating.

  Strengths

  1H26 innovative drug sales grew 21.6% YoY, with improved operating leverage; Ameile has lifecycle expansion potential, while the late-stage innovative drug and ADC pipelines are relatively robust.

  Weaknesses

  Current growth still relies heavily on Ameile, and the future multi-product-driven model must await new drug approvals and commercialization; the FY26 R&D investment budget is set to increase 30% YoY.

  Comparison

  1H26 innovative drug sales growth outpaced Hengrui Pharma and CSPC Pharmaceutical Group.

  Risks

  Lower-than-expected generic drug sales following volume-based procurement, slower new drug ramp-up, innovative drug R&D failures, and lower-than-expected collaboration revenue from the pipeline's global expansion.

Key data

• 1H26 RevenueRMB8.3bnUp 12% YoY, above Goldman Sachs' expectations.
• 1H26 Product Sales Growth+14% YoYStronger than expected.
• 1H26 Innovative Drug Sales Growth+21.6% YoYGrowth outpaced Hengrui Pharma and CSPC Pharmaceutical Group.
• 1H26 Collaboration RevenueBroadly flatAgainst a high base in 1H25.
• 1H26 EarningsRMB4.3bnUp 36% YoY, above Goldman Sachs' expectations.
• Earnings Growth Excluding Investment Income+19% YoYIndicates that the operating business itself also achieved relatively rapid growth.
• Selling Expense Ratio27%Calculated as a percentage of product sales, down from 30% in 1H25.
• 1H26 R&D Expense Growth+20.7% YoYIncreased investment was driven by the advancement of multiple late-stage programs.
• FY26 R&D Investment Budget Growth+30% YoYFor multiple Phase III programs and next-generation assets.
• FY26 Operating GuidanceDouble-digit growth in both product sales and BD revenueManagement maintained its existing growth guidance.
• Ameile 2030 Peak Sales TargetRMB8bnLong-term sales could exceed RMB10bn through lifecycle expansion and combination therapies.
• Start of New Product Cycle2027HS-10365, HS-10241, and HS-20093 are all targeted for launch in 2027.
• Ris-rez First NDA PlanEnd of 2026Phase III studies in small-cell lung cancer and osteosarcoma in China have met their primary endpoints, with potential approval in 2027.
• Additional Global Phase III Plans for Ris-rezThree studies to begin in 2H26Advanced by GSK.
• Mo-rez Global Phase III ProgramsTwo initiated, with three more planned within the yearEnrollment in the Phase III ovarian cancer study in China is nearing completion.
• FY26E Earnings Forecast Revision+15%Reflects innovative drug sales, operating leverage, and additional investment income.
• FY27E/FY28E Earnings Forecast Revisions+5.0%/+5.4%Reflects improved operating leverage and growing contributions from innovative products.
• 12-Month Target PriceHK$52.70Raised from the previous HK$50.10.
• Current Price and Upside Stated in the ReportHK$31.74 / 66.0%Corresponding to a Buy rating.
• Innovative Drug Business ValuationRMB28.7bnBased on a DCF valuation.
• Generic Drug Business ValuationRMB3.26bnBased on a 10x FY26 P/E multiple.

Impact & implications

Goldman Sachs believes the 1H26 earnings beat and lower selling expense ratio have raised the near-term earnings base, while new product launches beginning in 2027, global Phase III ADC development, and subsequent clinical data could gradually reduce the company's reliance on Ameile as a single product. The earnings forecast upgrades and the higher DCF value of the innovative drug business jointly drove the target price increase to HK$52.70; meanwhile, future growth still depends on new product ramp-up, clinical R&D progress, and the realization of global collaboration revenue.

Risks

• Generic drug sales following volume-based procurement may be lower than expected.
• The sales ramp-up of innovative drugs may be slower than expected.
• The innovative drug pipeline is subject to clinical development risks.
• Collaboration revenue generated by the pipeline's global expansion may be lower than expected.

What to watch

• Monitor whether FY26 product sales and BD revenue can continue to achieve management's guidance for double-digit growth.
• Monitor whether FY26 R&D investment proceeds in line with the budgeted 30% YoY increase, as well as the progress of multiple Phase III programs and next-generation assets.
• Monitor whether Ris-rez can submit its first NDA by the end of 2026 and obtain potential approval in 2027.
• Monitor the three global Phase III studies of Ris-rez that GSK plans to initiate in 2H26, as well as the three additional global Phase III studies of Mo-rez planned within the year.
• Monitor the Phase III data for Ris-rez in small-cell lung cancer and osteosarcoma, as well as updated Mo-rez data, to be disclosed at WCLC and ESMO.
• Monitor the 2027 launch progress of HS-10365, HS-10241, and HS-20093, as well as subsequent approval milestones for HS-20094, the TYK2 inhibitor, and the IL-23 monoclonal antibody.
• Monitor whether the oral IL-23 NewCo transaction generates additional fair-value gains in the future.