Innovative drugs contribute 60% of revenue, with licensing business becoming normalized.

As comprehensive support policies for innovative drugs gradually take effect, the industry's transformation and upgrading enjoys favorable external conditions, with domestic innovative pharmaceutical companies showing steady and positive performance.

On August 20, leading domestic innovative drug company Hengrui Pharma (600276.SH; 1276.HK) released its first half 2025 financial report. The report shows the company achieved operating revenue of 15.761 billion yuan, up 15.88% year-over-year; net profit attributable to shareholders reached 4.45 billion yuan, up 29.67% year-over-year; and net operating cash flow reached 4.3 billion yuan, up 41.8% year-over-year.

Revenue, net profit, and net operating cash flow all hit record highs for the same period, with performance entering an explosive growth phase.

**Innovative Drugs Contribute 60% of Revenue, Licensing Business Becomes Normalized**

Founded in 1970, Hengrui Pharma has developed into an innovative international pharmaceutical enterprise focused on researching, developing, producing and marketing high-quality medicines. The company focuses on new drug R&D in oncology, metabolic and cardiovascular diseases, immune and respiratory system diseases, and neuroscience, making it one of China's leading innovative drug companies.

By business segment, innovative drug sales and licensing contributed 9.561 billion yuan in the first half, accounting for 60.66% of total revenue. Among this, innovative drug sales revenue reached 7.57 billion yuan, representing 55.3% of pharmaceutical sales revenue, becoming the core driver of company growth. Dongguan Securities noted that innovative drug business revenue maintains rapid growth, driving steady company performance growth.

Medical insurance-covered innovative drugs including Relugolix, Dalpiciclib, and Henagliflozin demonstrated excellent clinical data validated in practice, with clinical value receiving continued recognition from doctors and patients, maintaining rapid revenue growth. Earlier-launched innovative drugs including Celecoxib, Remimazolam, Pyrotinib and Fluzoparib continue contributing incremental sales revenue as post-marketing research evidence accumulates and new indications receive approval.

Additionally, some innovative products have far from realized their sales potential due to short market presence and exclusion from medical insurance. Hengrui Pharma indicated it will persist in medical and market-driven approaches to promote new product adoption and accelerate commercialization of quality innovative products, aiming to contribute stronger growth momentum in the future.

Notably, innovative drug licensing revenue has become an important component of company operating revenue, establishing itself as normalized business. During the reporting period, Hengrui Pharma received $200 million in upfront payments from Merck and $75 million from IDEAYA for licensing deals, which were recognized as revenue, further boosting operating performance indicators.

"The company received $200 million from MSD and $75 million from IDEAYA in licensing upfront payments in H1 2025, significantly enhancing performance. In 2025 to date, the company has successively reached multiple blockbuster collaborations, including oral GnRH receptor antagonist SHR7280 (indications covering medically assisted reproduction and gynecology) partnering with Germany's Merck ($15 million euros upfront), oral small molecule drug HRS-5346 targeting lipoprotein(a) partnering with MSD ($200 million upfront + up to $1.77 billion milestone payments + sales royalties), and up to 12 innovative drugs covering respiratory, autoimmune and inflammatory, and oncology treatment areas (including PDE3/4 inhibitor HRS9821 ex-Greater China licensing) partnering with GSK ($500 million upfront, potential approximately $12 billion option exercise fees and milestone payments + sales royalties)." China Securities views Hengrui Pharma's "borrowing ships to sail overseas" as remarkably effective, with business development opening its second growth curve.

For generic drugs, Hengrui Pharma's quality generic products including Bupivacaine Liposome and first-to-file approved Paclitaxel Injection (albumin-bound) in the US achieved rapid sales growth during the reporting period, driving overall generic drug business revenue to modest increases.

From a channel perspective, by the end of the first half, Hengrui Pharma's commercial network covered over 30 provincial-level administrative regions nationwide, encompassing over 25,000 hospitals, over 200,000 offline retail pharmacies, and all mainstream online pharmacy platforms. Additionally, Hengrui Pharma established grassroots market architecture, with community terminal coverage exceeding 1,500 locations to date, cumulative academic activities covering nearly 20,000 physician visits, continuously enhancing grassroots brand influence.

**Cumulative R&D Investment Exceeds 48 Billion Yuan, Over 400 Clinical Trials Ongoing Domestically and Internationally**

The continued improvement in innovative drug revenue stems from Hengrui Pharma's long-term high-intensity R&D investment. In the first half this year, Hengrui Pharma's R&D investment reached 3.871 billion yuan (including 3.228 billion yuan in expensed R&D investment). By the end of the first half, Hengrui Pharma's cumulative R&D investment exceeded 48 billion yuan. These investments laid a solid foundation for the company's current innovative achievement explosion.

By the end of the first half, Hengrui Pharma submitted 255 new patent applications in Greater China and 33 international PCT applications, obtaining 41 authorizations in Greater China and 44 foreign authorizations. The company has cumulatively applied for 2,864 invention patents in Greater China and 737 PCT patents, holding 1,125 authorized invention patents in Greater China and 797 authorized patents in Europe, America, Japan and other foreign countries. Patents cover new drug compounds, protein molecular structures, preparation processes, applications, and formulation compositions, providing comprehensive, long lifecycle patent protection for company products.

Additionally, Hengrui Pharma maintains a rich research pipeline with sufficient innovative development momentum. The company has over 100 proprietary innovative products in clinical development, with over 400 clinical trials ongoing domestically and internationally. In the first half, Hengrui Pharma had 5 marketing applications accepted by NMPA, 10 clinical programs advanced to Phase III, 22 clinical programs advanced to Phase II, and 15 innovative products first advanced to Phase I clinical trials. Regarding project registration filings, in the first half, the company obtained 12 innovative drug formulation production approvals and 62 innovative drug clinical approvals; 2 clinical trials were included in the breakthrough therapy designation list. Thus, Hengrui Pharma's cycle of "marketing one batch, clinical testing one batch, developing one batch" has formed, constructing a moat based on strong R&D capabilities.

Currently, Hengrui Pharma has obtained marketing approval in China for 23 Class 1 innovative drugs and 4 Class 2 new drugs, with 6 Class 1 new drugs approved in the first half this year and 6 new indications for innovative drugs approved, maintaining industry-leading innovative achievements.

According to the "2025 Pharmaceutical R&D Annual Review" released by internationally renowned consulting firm Citeline in 2025, Hengrui Pharma's proprietary pipeline ranked second globally. The "2024 Hurun China 500" shows Hengrui Pharma ranked 23rd among China's most valuable non-state-owned enterprises.

**Strengthening International Cooperation, Integrating into Global Drug Innovation Networks**

Based on endogenous development, Hengrui Pharma is also strengthening international cooperation, persisting in balancing proprietary R&D with open collaboration.

To this end, the company attracts high-quality talent globally through multiple channels. By the end of the reporting period, the company possessed a R&D team of over 5,600 professional personnel across different medical fields. The company continuously strengthens leadership talent with global vision, such as hiring Ms. Feng Ji, who possesses extensive multinational pharmaceutical executive experience, to join as company president; over 30% of the company's middle management and above possess overseas education or work experience; in recent years, the company systematically advanced global management trainee recruitment and actively attracts outstanding graduates from top global universities, successfully recruiting high-potential talent from globally renowned institutions including Yale University, Johns Hopkins University, University of Pennsylvania, and Peking University. Through excellent practices in talent recruitment, development, incentives, and organizational culture building, the company has maintained "China Top Employer" certification for four consecutive years.

Additionally, Hengrui Pharma continuously enhances global influence through high-level academic exchanges. In the first half this year, Hengrui Pharma achieved international recognition for 173 important research results related to company products. At the 2025 ASCO (American Society of Clinical Oncology) annual meeting, the DAWNA-A study was unveiled as a blockbuster oral presentation, first announcing Phase III clinical data for the company's innovative drug Dalpiciclib combined with endocrine therapy for HR+/HER2− early breast cancer postoperative adjuvant treatment. This large clinical study involving 5,274 patients showed that Dalpiciclib combined with endocrine therapy (ET) as adjuvant treatment significantly improved invasive disease-free survival (iDFS) with controllable safety. This provided the first Chinese evidence-based solution for HR+/HER2− high-risk breast cancer adjuvant treatment.

Notably, in July this year, Hengrui Pharma announced a strategic cooperation agreement with global pharmaceutical giant GlaxoSmithKline (GSK), jointly developing up to 12 innovative drugs covering respiratory, autoimmune and inflammatory, and oncology treatment areas (including PDE3/4 inhibitor HRS9821 ex-Greater China licensing). This transaction involves $500 million upfront payment, potential total amount of approximately $12 billion in option exercise fees and milestone payments, plus corresponding tiered sales royalties, setting a new record for Chinese innovative drug overseas expansion. Industry professionals view this as marking domestic innovative drugs' transition from "individual product overseas expansion" to "systematic capability overseas expansion," reflecting international recognition of Hengrui Pharma's R&D capabilities.

Dongguan Securities research indicates that Hengrui Pharma actively explores collaboration with multinational pharmaceutical enterprises, innovative startups, innovation investment funds, regional leading pharmaceutical companies and other diversified partners with global vision, seeking cooperation opportunities with leading global pharmaceutical companies to achieve rapid R&D result transformation, leveraging international leading partners to cover overseas markets, accelerating integration into global drug innovation networks, ultimately achieving maximum product value.