Summary of Key Highlights
Hengrui Medicine's performance in the first half of 2026 was generally stable (revenue of RMB 15.456 billion, net profit attributable to the parent company of RMB 4.465 billion, with growth rates around 1%). However, there were significant changes in its business structure: Innovative drugs have become the main driver of growth (income from innovative drugs amounted to RMB 8.809 billion, accounting for 63.16% of total drug revenue, with a growth rate of 16.38%), among which non-tumor innovative drugs exhibited particularly strong growth (73.97%). The company's R&D pipeline is showing promising results (multiple potential blockbuster drugs have entered the Phase III trial or NDA stage). Hengrui has upgraded its globalization strategy by listing two new companies, thereby sharing in the value appreciation of their equity. Additionally, the risks associated with generic drug centralized procurement are being gradually mitigated, as the company has also announced a share repurchase plan worth RMB 1-2 billion to boost investor confidence. Overall, Hengrui's growth model is shifting from a focus on generic drugs to a dual-driven approach based on innovation and globalization, opening up new opportunities for generating revenue in foreign markets.
Detailed Analysis
1. Innovative Drugs Take the Lead, with Non-Tumor Areas Showing Explosive Growth
Hengrui was previously known as an expert in oncology drugs, but now non-tumor innovative drugs have become a new growth engine:
- Innovative drugs account for over 60% of revenue: In the first half of the year, income from innovative drugs reached RMB 8.8 billion, accounting for 63% of total drug revenue, up from 59% last year, and with a growth rate of 16%, significantly exceeding the overall company performance. Oncology drugs still played a key role (RMB 6.265 billion, or 71% of innovative drug revenue), with products such as Relverumab (for prostate cancer) and Darcilizumab (for breast cancer) performing well. The newly launched Rucapituzumab (an HER2 ADC targeting cancer cells) also saw rapid sales growth.
- Non-tumor drugs experience remarkable growth: Revenue from non-tumor innovative drugs increased by 73.97% year-on-year, driven by several areas:
- Metabolism (blood sugar and weight management): Products like Henggliclazide and Repaglinide performed well.
- Autoimmunity: Emiciximab (for dermatitis) saw rapid growth after being included in the medical insurance coverage.
- Cardiovascular: Rucaximab (for heart failure) also demonstrated positive results.
- Anesthesia: Remimazolam (a surgical anesthetic) continued to grow.
- Industry trends are favoring these areas: There is a global investment trend in metabolism-related drugs (e.g., GLP-1 for weight management and blood sugar control), and China's autoimmune drug market is expected to reach RMB 54 billion this year, with significant potential for GLP-1 drugs. Hengrui has seized these opportunities.
For the second half of the year, Hengrui plans on leveraging four additional growth drivers: continuing sales of core products, adding new indications for existing drugs, accelerating hospital approvals, and using AI to streamline academic promotion, which could further accelerate the market launch of innovative drugs.
2. Aggressive R&D Investment for Future Profit Sources
The future of innovative drug companies depends on their R&D pipelines, and Hengrui has been generous with its funding:
- High R&D expenditure: R&D expenses in the first half of the year amounted to RMB 4.6 billion, a year-on-year increase of 18.96%. Over the past three years, R&D costs have accounted for more than 20% of total revenue (21.7%, 23.5%, and 22% in 2023-2025 respectively), which is relatively high compared to other domestic pharmaceutical companies.
- Visible progress in the pipeline: Seven innovative products were approved in the first half of the year, including two Class 1 new drugs (Rilafupralα and Ruzonore sodium). In the second half, additional products such as Sudagliptin Insulin and Fumaric Acid Likankopan were approved. Potential blockbuster drugs are on the horizon:
- HER3 ADC (SHR-A2009) for lung cancer has successfully completed Phase III trials and is ready for market application.
- The GLP-1/GIP dual-target drug Repopeptide showed promising results in Phase III trials and is also preparing for application.
- The oral GLP-1 (HRS-7535) reduced weight by an average of 11.1% after 44 weeks and is also planned for application. Once these drugs are launched, they could generate significant revenue.
- Abundant pipeline reserves: Hengrui currently has 27 Class 1 innovative drugs on the market, over 100 in clinical trials, and more than 400 clinical studies underway both domestically and internationally, ensuring a steady supply of new products in the coming years.
3. Upgraded Globalization Strategy: New Companies for Long-Term Benefits
Hengrui has adopted a new approach to globalization by listing two new companies:
- What is the NewCo model?: Instead of selling assets once, Hengrui collaborates with foreign companies to establish new entities (NewCos), injecting its innovative drug pipelines into them while holding equity in these companies. Once the NewCos go public, Hengrui can profit from equity appreciation and share in subsequent R&D and sales revenues.
- Two NewCos have already been listed: Kailera was listed on NASDAQ in April (with Hengrui's GLP-1 pipeline), increasing Hengrui's equity value to approximately RMB 300 million; Braveheart Bio was listed in August (with Hengrui's myocardial myosin inhibitor pipeline), increasing its equity value to about RMB 220 million.
- Continued international expansion: Relverumab's European marketing application has been accepted by the EMA, and TF ADC (SHR-4375) for pancreatic cancer has received FDA orphan drug designation, allowing direct sales overseas and potential revenue generation.
The industry predicts that Chinese innovative drug companies will begin generating revenue in foreign markets starting 2027, and Hengrui is well-positioned to benefit from this trend.
4. Reduced Risks in Traditional Business, with a Share Repurchase Plan to Boost Confidence
Generic drugs were once the main source of revenue for Hengrui, but centralized procurement has reduced their profitability. The company is working to reduce this reliance:
- Declining proportion of generic drug revenue: Generic drug revenue in the first half of the year was RMB 5.139 billion, accounting for 36.84% of total revenue, down from 44.72% last year, indicating that the impact of centralized procurement is being mitigated.
- Share repurchase plan to boost confidence: Hengrui plans to use RMB 1-2 billion in its own funds to repurchase shares at a price not exceeding RMB 81.78 per share. This indicates that the company believes its stock price is undervalued and aims to strengthen its core team through employee ownership, demonstrating confidence in future growth.
Conclusion
Hengrui Medicine has successfully transformed from a leader in generic drugs to a company driven by innovation and globalization. With innovative drugs accounting for over 60% of revenue, strong growth in non-tumor areas, an abundant pipeline, and diversified global revenue sources, the company's long-term growth prospects are solid. Although short-term performance growth is stable, the underlying logic is becoming increasingly clear, particularly with the potential to generate revenue in foreign markets. (Note: This analysis does not constitute investment advice.)