Recently, Hansoh Pharma released its financial performance for the first half of 2023. During this period, the company's revenue was approximately 4.511 billion yuan, representing a 1.7% increase compared to the same period last year; the net profit attributable to shareholders of the listed company was 1.289 billion yuan, representing a year-on-year decrease of 0.7%. R&D investmentRMB 9.29 billion, compared to last yearUp 25.8% in the first half of the year, accounting for approximately 20.6% of revenue.

A significant increase in the revenue share of innovative drugs is one of the key highlights of Hansoh Pharma's 2023 interim report, with innovative drug sales accounting for 61.8% of the company’s revenue, approximately RMB 2.796 billion, representing a year-on-year growth of 20.1%.

Hansoh Pharma, known for its origin in generic drugs, owns Olanxen (Olanzapine Tablets) and Pulaile (Pemetrexed Disodium for Injection).Sodium) and other first-to-market generic drugs with annual sales exceeding 1 billion yuan.

However, with the implementation of the centralized procurement policy, Hansoh Pharma's generic drug business segment has been continuously impacted, and its profits have been affected.Squeeze, the company's revenue growth rate slowed down.

Heavyweight generic drug varieties are almost all included in the centralized procurement.Under the 2019 centralized procurement expansion, Hansoh Pharma's core products, Olaning and Xinyi, were awarded bids in both the pilot and expanded centralized procurement programs, with two successive price reductions. Among them, Olaning underwent a second price cut during the centralized procurement expansion, with a reduction of 35%.To offset the impact of centralized procurement, Hansoh Pharma began shifting to innovative drug business at a very early stage.

However, it was not until 2021 that the company truly reaped the benefits from its years of efforts in the innovative drug sector.202In 1 year, Hansoh Pharma's innovative drugs achieved double growth.Revenue reached 4.2 billion yuan,The proportion of the company's total revenue increased from 18.0% in 2020 to 42.4%.

As of H1 2023, Hansoh Pharma has successfully launched seven innovative drugs. Among these seven drugs, six are the first domestically produced drugs in their respective categories. The six innovative drugs, including Almonertinib (Ameile), Ravidasvir (Hengmu), Olverembatinib (Haosen Xinfu), Inebilizumab (Xinyue), Pegfilgrastim (Fulaimi), and Milnacipran (Mailingda), have been included in China's national medical insurance catalog.

Listed Innovative Drugs

Driven by innovative drugs such as Ameitinib, the company's innovative drug performance has seen strong growth. In 2022, revenue from innovative drugs accounted for half of the company’s total revenue, approximately 5.06 billion yuan, becoming the core driving force behind the company’s performance growth.

The new indications for multiple innovative drugs of the company are still advancing. With the update of the national medical insurance catalog, the sales of Hansoh Pharma's innovative drugs will continue to be steadily released, and future growth is expected.

Behind Hansoh Pharma's rapid "generic-to-innovative" transformation lies its consistently high R&D investment. From 2018 to 2022, the proportion of R&D investment by Hansoh Pharma was 11.41%, 12.91%, 14.41%, 18.09%, and 18.0%, respectively.

High R&D investment has enabled Hansoh Pharma to build a rich R&D pipeline. Currently, Hansoh Pharma has over 40 innovative drug clinical trials ongoing, sourced from more than 30 innovative drug projects at various clinical stages.The company plans to file 8-10 IND applications and 2-3 NDA applications annually. By 2025, the company expects to launch over 15 innovative drugs, with revenue from innovative drugs accounting for more than 80%.

Under the steady pace of transformation in innovative drugs, the company has also maintained robust financial performance. The overall performance from 2018 to 2021 showed steady growth, with only a slight decline in 2022.

Compared with most pharmaceutical companies that struggle with tight cash flow, Hansoh Pharma has a strong cash flow advantage, which can support the company's future investment in innovative R&D. Since 2015, the net cash flow generated from the company’s operating activities has been positive.As of the first half of this year, the companyCash and bank deposits of 16.917 billion yuan, financial assets at fair value through profit or loss of 4.503 billion yuan, and other financial assets of 2.089 billion yuan.

Innovative Drugs Account for the Majority of Revenue, Hansoh Pharma Enters the Fast Lane of "Generic to Innovative" Transition