On August 27, Hansoh Pharma (03692.HK) saw its share price surge over 16% intraday, following the release of its 2026 interim results the previous day. The company reported first-half revenue of RMB 8.304 billion, a year-on-year increase of 11.7%, and a profit of RMB 4.258 billion, up 35.8% year-on-year.

While the 35.8% profit growth appears impressive, it was partly driven by a surge in other income, which reached RMB 1.318 billion, up 127.9% year-on-year, mainly stemming from investment gains on unlisted equity in the life sciences sector. Excluding these investment gains, the company's core earnings growth for the first half was approximately 19%.

This 19% growth still outpaced revenue expansion, driven by top-line growth and better cost control. Notably, sales of innovative drug products rose 21.6%, while selling and distribution expenses increased by just 2.3%.

R&D spending, however, climbed 20.7% year-on-year, primarily reflecting more programs advancing into later-stage development. Hansoh Pharma is currently advancing over 70 innovative drug clinical trials. Its HS-20093 and HS-20089 candidates have initiated multiple global Phase III studies overseas, and domestic Phase III trials for small-cell lung cancer and osteosarcoma have reached their primary endpoints.

The simultaneous decline in the selling expense ratio and the advancement of the clinical pipeline form the more noteworthy aspects of this interim report's quality.

Where the growth is coming from

In the first half, Hansoh Pharma's product sales revenue increased 14% year-on-year, with innovative drug product sales rising 21.6%. During the same period, selling and distribution expenses were RMB 1.861 billion, a modest 2.3% increase. According to Goldman Sachs' calculations, the ratio of selling expenses to product sales revenue fell to 27% from 30% in the prior-year period, creating a nearly 10-percentage-point gap between revenue growth and expense growth.

These figures point to emerging operating leverage. The rising share of innovative drugs, the scaling of mature products, and cost controls could all be influencing the selling expense ratio. While industry promotional activities were disrupted by policy changes in the second quarter, and the expense decline cannot be fully attributed to product strength alone, maintaining double-digit revenue growth at least indicates that Hansoh Pharma did not rely on proportionally higher sales spending to sustain its expansion.

Gross margin improved from 91.1% to 91.9%, and administrative expenses declined 4.8% year-on-year. With selling and administrative expense growth trailing revenue, profit margins received additional support.

R&D investment continued to intensify. First-half R&D spending reached RMB 1.739 billion, up 20.7% year-on-year, representing 20.9% of revenue. Goldman Sachs noted that increased R&D from multiple late-stage programs partially offset the profit contribution from the lower selling expense ratio.

Margin improvement has not come at the expense of R&D investment. Hansoh Pharma is advancing more than 70 innovative drug clinical trials across over 40 candidate projects. During the reporting period, the company submitted three new marketing applications, initiated three pivotal Phase III registrational studies, and received first clinical trial approvals for four additional drug candidates. The rise in R&D spending corresponds to more programs entering the higher-cost late-stage development phase.

As of June 30, the company held cash and bank balances of RMB 37.383 billion, with net operating cash inflow of RMB 2.337 billion. Operating cash flow was below reported profit, reflecting the investment gains included in earnings; the cash reserve, however, provides ample room for late-stage clinical development.

Innovative drug growth outpaces peers as overseas partnerships reshape revenue mix

Goldman Sachs compared the first-half performance of four major Chinese pharmaceutical companies, finding that Hansoh Pharma's innovative drug product sales growth of 21.6% exceeded Hengrui Pharma's 16% and CSPC Pharmaceutical's approximate 20% growth in innovative drugs. Hansoh Pharma's overall revenue grew 11.7%, with product sales up 14%, driven primarily by innovative drugs.

In the first half, Hansoh Pharma's innovative drug revenue reached RMB 7.092 billion, up 15.4% year-on-year, accounting for 85.4% of total revenue. Non-innovative drug revenue now represents just 14.6%, meaning the impact of generic drug centralized procurement on overall revenue continues to diminish.

By segment, oncology revenue was RMB 5.473 billion, accounting for 65.9% of total revenue. Aumolertinib added a new indication during the reporting period, bringing its total approved indications in China to five. Non-oncology revenue reached RMB 2.831 billion, with contributions from autoimmune, metabolic, central nervous system, and anti-infective products.

Domestic innovative drug sales form the earnings foundation, while overseas collaborations extend the potential revenue cycle. To date, Hansoh Pharma has licensed seven innovative drugs to six international companies, with total potential transaction value exceeding USD 12 billion. While upfront payments enter the financial statements earlier, subsequent returns include clinical, regulatory, and sales milestones, as well as tiered royalties after product launch.

The USD 12 billion figure represents a conditional contract ceiling. Goldman Sachs pointed out that Hansoh Pharma's collaboration revenue was broadly flat in the first half of 2026 against a high comparison base. This interim report's growth did not depend on a new large upfront payment.

The most significant change in overseas collaborations comes from clinical progress. In December 2023, GSK acquired ex-China rights to the B7-H3 ADC HS-20093. A Phase I overseas study began in the third quarter of 2024, and a global Phase III study for relapsed small-cell lung cancer launched in August 2025. From contract signing to entering global late-stage clinical development took less than two years.

In July 2026, two domestic Phase III studies for small-cell lung cancer and osteosarcoma reached their primary endpoints. Goldman Sachs projects that the first marketing application for HS-20093 will be submitted before the end of 2026, with GSK planning to initiate three additional global Phase III studies in the second half of the year.

Another GSK-licensed asset, the B7-H4 ADC HS-20089, has also initiated two global Phase III studies, with three more planned within the year. Sustained global clinical budgets and late-stage development resources will determine whether these two deals progress from upfront payments to clinical milestones.

Hansoh Pharma's overseas pathway is also expanding. In February 2026, two single-agent indications for Aumolertinib received European Commission approval, securing regulatory access to the European market. Commercial launch, reimbursement, and actual sales still require further execution.

Aumolertinib's overseas development has not been without setbacks. Hansoh Pharma licensed overseas rights to EQRx in 2020, reclaimed the rights in 2023 following the partner's strategic restructuring, and then took over overseas regulatory filings itself. In late 2025, the company granted rights for the Middle East, Africa, and Southeast Asia to Glenmark. The return of rights did not stall the project; Hansoh Pharma completed the European submission and continued seeking commercialization partners for other regions.

This experience demonstrates that license-out deals do not transfer all risk at once. Partner strategy, regulatory progress, and regional commercialization can all alter a drug's overseas value. Hansoh Pharma's ability to take back projects and push them forward matters more than the initial potential deal value signed.

On July 14, Hansoh Pharma granted ex-Greater China rights for the oral IL-23 receptor antagonist HS-20118 to Avere. On the same day, Avere announced an all-stock merger agreement with Nasdaq-listed NextCure, with Hansoh Pharma also participating through a convertible note investment.

From regional licensing of mature products, to handing early-stage assets to multinational pharmaceutical companies, to combining licensing with equity participation, Hansoh Pharma has established three distinct types of overseas collaboration pathways.

What the market is pricing in

Following the results, Goldman Sachs raised its 2026 earnings forecast for Hansoh Pharma by 15%, with 2027 and 2028 estimates increased by 5.0% and 5.4% respectively. The 2026 revision reflects better-than-expected innovative drug sales, a lower selling expense ratio, and investment gains recognized in the first half.

Hansoh Pharma's key growth drivers are product sales and pipeline progress over the next three years. Management maintained its guidance for double-digit growth in both product sales and BD income for 2026 during the earnings call, while planning to increase full-year R&D investment by approximately 30%. The company has set a sales peak target of RMB 8 billion for Aumolertinib by 2030, with the potential to exceed RMB 10 billion in the long term through indication expansion and combination therapies.

Starting in 2027, Hansoh Pharma plans to launch the RET inhibitor HS-10365, the c-MET inhibitor HS-10241, and the B7-H3 ADC HS-20093. In the non-oncology space, the marketing application for the GLP-1/GIP dual receptor agonist orforglipron has been accepted by the NMPA, with the TYK2 inhibitor and IL-23 monoclonal antibody expected to enter the registration phase in the coming years.

Hansoh Pharma's growth momentum will gradually shift from the single product Aumolertinib to a multi-product portfolio, including: whether HS-20093 can be submitted and approved as planned, whether GSK's new global Phase III studies proceed smoothly, whether orforglipron completes regulatory review, and whether Aumolertinib generates actual sales in Europe.

The quality of Hansoh Pharma's next-phase earnings will be determined by whether these operational metrics can be sustained and whether the overseas pipeline continues to advance toward registration and commercialization.