FY25 broadly in line with expectations; focus on ASCO readouts and BD revenue realization in 2026

Overview

This report is HSBC Qianhai Securities’ FY25 performance review and valuation update for China-focused covered pharmaceutical companies. The report argues that although domestic healthcare cost containment, NRDL repricing, and potential VBP still constrain earnings upside, leading companies continue to post over 20% growth in innovative-drug sales, supporting high-single- to low-double-digit product sales growth. Looking to 2026, clinical-readout catalysts from meetings such as ASCO, AACR, and ESMO, as well as BD licensing revenue recognition from early pipelines, are expected to be the main industry catalysts.

Core views

Core views are: first, FY25 pharma sales overall were in line with expectations, with performance variance driven more by timing of BD revenue recognition; second, launches and volume ramp of innovative drugs are expected to lift average covered-company 2026 revenue growth to about 11%; third, the industry’s average 16x 2026e PE and 17% earnings growth remains attractive on a blended basis; fourth, prioritize companies with more sustainable growth, stronger R&D, and BD potential, with Hansoh as the top pick and Buy maintained for Hengrui, CMS, CSPC, and SBP; fifth, maintain Hold for Fosun A/H and Livzon A/H due to competition, expenses, VBP, and limited catalysts.

Analysis framework

The report combines FY25 actuals, 2026-2028e revenue and net profit forecasts, market consensus, DCF valuation, peer PE valuation, clinical pipeline readouts, and BD progress. For each key company, it separately assesses revenue gaps, expense rates, net profit revisions, target price changes, upside/downside catalysts, and key downside risks.

Methodology notes

• Valuation methodDCF

  Discounted cash flow valuation

  SBP, CSPC, Livzon A-share, and Fosun A-share are valued primarily through DCF, with the base year rolled forward from 2025 to 2026. Key assumptions include WACC, risk-free rate, equity risk premium, beta, terminal growth rate, and FX assumptions.

• Relative valuationPE and PEG comparison

  Comparable company valuation

  The report compares China A-share and Hong Kong-listed pharmaceutical companies with global peers on PE, earnings growth, ROE, and PEG to assess valuation attractiveness.

• Event-drivenClinical data and BD catalysts

  ASCO/AACR/ESMO readouts and licensing deals

  The report treats data readouts from ADC, GLP1/GIP, PD1/VEGF, CLDN18.2 ADC, EGFR ADC pipelines and license-out plus BD revenue recognition as key catalysts for 2026.

Asset mapping & comparison

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

• Sino Biopharm / SBP (1177 HK)

  Key covered company, Buy maintained

  Strengths

  Innovation transformation, LaNova M&A synergy, four innovative-drug launches in 2026, and USD300m BD prepayment expected to be recognized.

  Weaknesses

  FY25 revenue was below forecast; adjusted net profit was hit by RMB2.06bn impairment on financial assets, and 2026-2027 net profit forecasts were reduced.

  Comparison

  Compared with Livzon and Fosun, SBP has stronger BD and innovation catalysts; however, net profit forecasts face near-term pressure.

  Risks

  National VBP rollout for biosimilars, slower-than-expected growth of new medicines, delayed BD progress, and delays in oncology and respiratory projects.

• CSPC (1093 HK)

  Key covered company, Buy maintained

  Strengths

  Pipeline projects such as EGFR-ADC, BD progress, and patented products expected to support high-single-to-low-double-digit formulated sales recovery from 2027 onward.

  Weaknesses

  FY25 revenue and net profit declined; NBP, DMS, and JYL were pressured by NRDL pricing, leading HSBC to cut 2026-2027 revenue and profit forecasts.

  Comparison

  Compared with SBP, CSPC’s target price was raised but profit forecasts are below consensus; upside is more dependent on BD and clinical progress.

  Risks

  Biosimilar VBP, NBP generics launching slower than expected or over-disrupting sales, slower hospital access and ramp for new drugs, R&D delays, and anti-corruption impacts exceeding expectations.

• Livzon Pharma A/H (000513 CH/1513 HK)

  Covered company, Hold maintained

  Strengths

  FY25 revenue growth was in line with expectations, and there is upside potential if generics competition remains moderate or penetration of existing products increases.

  Weaknesses

  Limited upside in existing portfolio; Ilaprazole generic competition and mild PPI price compression create pressure, with selling expenses above expectations.

  Comparison

  Relative to Buy-rated names, Livzon has fewer catalysts in 2026-2027, and the target price was reduced.

  Risks

  Slower ramp of leuprolide microsphere and Ilaprazole, delays in R&D or generic drug approvals, expense ratio expansion, and healthcare price-pressure impact worse than expected.

• Fosun Pharma A/H (600196 CH/2196 HK)

  Covered company, Hold maintained

  Strengths

  BD revenue has increased, VBP timing may be later than previously assumed, and 2026e net profit forecasts were raised by 6%.

  Weaknesses

  Innovation transition requires higher R&D spending; 2027e net profit forecast was reduced modestly; biosimilar VBP introduces uncertainty to sustainable growth.

  Comparison

  Compared with Livzon, Fosun has more BD and innovation-transformation optionality, but Hold is maintained due to H-share liquidity and VBP risk.

  Risks

  Biosimilar and other drug VBP impacts on profitability, slower ramp from Fosun Henlius and Gland new medicines, slow R&D progress, and anti-corruption policy impacts worse than expected.

• Hansoh

  HSBC top pick, Buy maintained

  Strengths

  The report favors its sustainable growth and strengthening R&D, expecting B7H3 ADC, GLP1/GIP, and NDA progress data to provide catalysts.

  Weaknesses

  This input did not provide detailed financial adjustments and target-price sections.

  Comparison

  Listed as top pick among covered companies and preferred over most peers.

  Risks

  Clinical data, approvals, and commercialization progress may not materialize as expected.

Key data

• Covered-company average revenue growth in 2026around 11%Supported by innovative-drug launches and a larger number of BD opportunities.
• Industry valuationaround 16x 2026e PEThe report sees valuation as still attractive, with implied average earnings growth of about 17%.
• SBP FY25 revenueRMB31.8bn, up 10.3% year-on-yearBelow HSBC’s forecast of 6%, mainly due to delayed recognition of the USD300m LaNova PD1-VEGF prepayment.
• SBP target price and ratingBuy, HKD9.00Target price was reduced from HKD9.60, implying about 56% upside.
• CSPC FY25 revenueRMB26.0bn, down 10.4% year-on-yearBelow HSBC’s forecast of 5%, with product sales affected by NRDL pricing pressure.
• CSPC target price and ratingBuy, HKD11.90Target price was raised from HKD11.00, implying about 32% upside.
• Livzon FY25 revenueRMB12.0bn, up 1.8% year-on-yearRevenue was in line with expectations, while net profit was 7% below forecast due mainly to higher-than-expected selling expenses.
• Livzon A/H target price and ratingHold, RMB37.00/HKD30.80Target price was reduced from RMB39.50/HKD33.70 because of intense competition and limited catalysts.
• Fosun Pharma target price and ratingHold, RMB28.50/HKD22.50A-share target was reduced from RMB30.00; H-share target was reduced from HKD24.30.

Impact & implications

For investors, returns in China pharmaceuticals in 2026 are more dependent on innovative-drug clinical data, BD realization, and pipeline globalization than on FY25 static performance. Buy-rated names are better suited for investors focusing on R&D and BD optionality, while Hold-rated names require clearer easing of competition, improving expense ratios, or more explicit pipeline catalysts. At the sector level, healthcare price-pressure and VBP define the valuation floor, while ASCO data and license-out shape the upside.

Risks

• Biosimilar VBP implemented earlier than expected or in a wider scope.
• Generics price-cut competition is more intense, compressing mature-product revenue and margins.
• Medical insurance cost-containment policies become stricter, impacting pharma sales ramp.
• Innovative-drug sales ramp, hospital access, or indication expansion are slower than expected.
• BD deal recognition, license-out, or partnership progress is delayed.
• Delays in key R&D programs, clinical data readouts, or NDA approvals.
• Anti-corruption policy impact on pharma sales ramp is larger than expected.
• Geopolitical risk affecting globalization and BD partnerships.

What to watch

• 2026 ASCO readouts for SBP CLDN18.2 ADC and related data.
• ADC, PD1/VEGF, and PD1 combination-therapy data for CSPC, SBP, and Fosun at AACR, ESMO, and other conferences.
• Whether SBP’s USD300m BD prepayment is recognized in 2026.
• CSPC EGFR-ADC license-out progress and globalization partnership progress.
• The launch and ramp speed of innovative drugs for Hengrui, Hansoh, CSPC, and SBP.
• Biosimilar VBP, NRDL pricing changes, and healthcare cost-containment policy pacing.
• Competitive intensity of Livzon Ilaprazole generics and PPI price changes.
• Fosun Pharma R&D intensity, and Fosun Henlius and Gland new-drug ramp.