Capital Securities has issued a research report, stating that it has raised its profit forecast for Fosun Pharma (02196) to reflect the significant upfront payment that will boost profits. The firm expects the company to achieve net profits of RMB3.32 billion, RMB4.68 billion, and RMB4.77 billion in 2025, 2026, and 2027, respectively, representing year-on-year growth of +19.8%, +40.8%, and +19.1% (previously forecasted at RMB3.32 billion, RMB3.86 billion, and RMB4.59 billion, with YoY growth of +19.8%, +16.2%, and +19.1%). EPS is projected at RMB1.2, RMB1.8, and RMB1.8, corresponding to H-share P/E ratios of 16X, 11X, and 11X. Given the undervaluation of H-shares, the firm remains optimistic about Fosun Pharma's long-term growth and maintains a "Buy" rating with a target price of HK$26.5.
Key points from Capital Securities: 1. **Recent Development**: Fosun Pharma's subsidiaries, Youcare Pharmaceutical and Fosun Pharma Industrial, have signed a licensing agreement with Pfizer. The agreement grants Pfizer exclusive global rights to develop, use, manufacture, and commercialize Fosun Pharma's proprietary oral small-molecule GLP-1R agonist (including YP05002) and related products. Youcare will receive a non-refundable upfront payment of $150 million, up to $350 million in development milestone payments, and up to $1.585 billion in sales milestone payments based on net sales performance.
2. **Pipeline Progress**: YP05002, an internally developed oral small-molecule GLP-1R agonist, is currently in Phase I clinical trials in Australia for treating type 2 diabetes, obesity, and related conditions.
3. **Strategic Significance**: The deal, valued at $2.085 billion (over RMB10 billion), marks a major milestone for Fosun Pharma, reflecting global recognition of its R&D capabilities by a leading multinational pharmaceutical company like Pfizer. The firm believes this signals Fosun Pharma's expanding global pipeline and potential for more licensing opportunities, which could lead to a revaluation of its R&D assets.
4. **Financial Impact**: The $150 million upfront payment (approximately RMB1.06 billion) represents 38% of Fosun Pharma's 2024 net profit and is expected to significantly enhance earnings, likely recognized in 2026.
**Risk Factors**: Potential delays in new product development or commercialization, unexpected price cuts from centralized procurement or national negotiations, and goodwill impairment risks.