China Daily | Hengrui's third-quarter profit rebounds on out-licensing revenue

Jiangsu Hengrui Pharmaceuticals reported a nearly 89 percent year-on-year rise in third-quarter net profit, driven by higher revenue from licensing its drug candidates to overseas partners.

Net profit attributable to shareholders climbed to 2.46 billion yuan in the three months ended September, while revenue rose 20.55 percent year-on-year to 8.95 billion yuan, according to its third-quarter report released on Tuesday.

It was the company's second-highest quarterly net profit on record, behind the 2.58 billion yuan reported in the second quarter of 2025. Both revenue and profit returned to year-on-year growth after declining in the April-June quarter.

For the first nine months, revenue increased 5.26 percent year-on-year to 24.41 billion yuan, and attributable net profit rose 20.38 percent to 6.92 billion yuan.

Hengrui recognized 2.78 billion yuan in revenue from licensing innovative medicines to partners in the nine-month period, up 31.12 percent year-on-year. This mainly came from agreements with GSK and Bristol Myers Squibb as contractual obligations were fulfilled, along with milestone payments for some licensed products, the company said.

It received 4.34 billion yuan in cash from upfront and milestone payments during the period, mainly a $600 million upfront payment from Bristol Myers Squibb. Not all of that payment had been recognized as revenue.

At an earnings briefing in September, Hengrui said it had received the $600 million in the third quarter and initially recorded it as a contract liability, according to a report from financial news outlet Caixin. Revenue would be recognized as the company fulfilled its obligations under the agreement.

The partners announced the deal in May to jointly advance 13 early-stage projects in oncology, hematology and immunology. The agreements include licensing rights in both directions and have a potential total value of about $15.2 billion, subject to the exercise of options and achievement of development, regulatory and commercial milestones, according to Hengrui.

Sales of Hengrui's innovative medicines also grew, rising 17.05 percent year-on-year to 13.87 billion yuan in the first nine months and accounting for 64.59 percent of pharmaceutical sales, the quarterly report showed.

Products outside oncology led that growth, with sales climbing 75.36 percent to 4.01 billion yuan. Innovative cancer medicines, which accounted for more than 70 percent of innovative drug sales, recorded a much smaller increase of 3.13 percent to 9.87 billion yuan.

The modest growth in cancer drug sales weighed on the outlook for the innovative medicines business. Hengrui said it expected full-year innovative drug sales growth to fall short of its target, despite an improvement in the third quarter.

The company cited changes in market conditions, slower-than-expected progress in securing hospital access and increased competition for some longer-established medicines, including cancer drugs camrelizumab and pyrotinib.

It had set a goal in March of increasing innovative drug sales by more than 30 percent in 2026.

Hengrui is continuing to develop new medicines, with research and development spending totaling 7.15 billion yuan in the first nine months, according to its quarterly report.

The company expects at least eight new products to win approval in each of 2027 and 2028, along with 14 and 11 new indications, respectively, according to company forecasts cited in a report by Huatai Securities.

Huatai separately forecast that innovative medicines would account for 66 percent of Hengrui's pharmaceutical sales in 2026, rising to 75 percent in 2027 and 81 percent in 2028 as new products reach the market and existing medicines gain approval for additional indications.

Hengrui has also expanded its overseas partnerships. In September, it agreed to grant Novo Nordisk exclusive rights to develop, manufacture and commercialize HRS-1596 outside China, according to a company announcement.

The experimental GLP-1/GIP dual receptor agonist has the potential for once-weekly oral dosing to treat obesity and type 2 diabetes.

The agreement provides for a $300 million upfront payment and could be worth up to $2.6 billion if development, regulatory and commercial milestones are met. Hengrui is also eligible for royalties on sales in the licensed territory.

Hengrui said when announcing the deal that it expected the transaction to close in the fourth quarter, subject to regulatory clearance and other customary conditions.

https://www.chinadaily.com.cn/a/202611/01/WS6ae6af55e4b06d4aa05664a4.html