Hengrui Medicine Reports Record-High Interim Results, Solidifying Its Position as China's Innovation-Driven Pharma Leader

On the evening of August 21, Hengrui Pharma released its best-performing semi-annual report in its history.

According to the 2024 semi-annual performance report, Hengrui Pharma achieved operating revenue of RMB 13.601 billion in the first half of the year, a year-on-year increase of 21.78%; net profit attributable to shareholders of the listed company amounted to RMB 3.432 billion, up 48.67% year on year; and net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses reached RMB 3.490 billion, representing a year-on-year increase of 55.58%. The company’s performance grew significantly, with multiple key indicators reaching record highs, maintaining a steady development trajectory.

Notably, Hengrui Pharma’s total revenue in this semi-annual report has surpassed the RMB 13.3 billion recorded in the first half of 2021, prior to the implementation of volume-based procurement (VBP), signaling that the company has finally emerged from the impact of VBP and re-entered a trajectory of high performance growth.

Since 2021, impacted by multiple pressures including the centralized volume-based procurement of generic drugs, Hengrui Pharma has reported consecutive annual declines in both revenue and net profit, entering a trough in its corporate development.

With the return of founder Sun Piaoyang, Hengrui Pharma has launched comprehensive cost reduction and efficiency enhancement initiatives while increasing R&D investment in innovative drugs. Since 2023, the company’s performance has begun to bottom out and stabilize.

However, for Hengrui Pharma, which started with generic drugs, the title of “No. 1 in Innovative Drugs” is hardly deserved: as late as 2018, generics still accounted for more than 80% of Hengrui Pharma’s total revenue.

The release of this best-ever semi-annual report in history officially declares that Hengrui Pharma has secured the title of “No. 1 Innovative Drug Company” and returned to its peak.

The most significant highlight of this semi-annual report is that Hengrui Pharma’s transformation has reached a major milestone. During the reporting period, revenue from innovative drugs (tax-inclusive, excluding out-licensing income) amounted to RMB 6.612 billion, while out-licensing income reached EUR 160 million. It is estimated that the combined total of these two innovative revenue streams accounted for more than half of the company’s total revenue, becoming the primary engine driving performance growth.

Among these, products such as rezvilutamide, dalpiciclib, and henagliflozin have experienced rapid revenue growth after being included in the National Reimbursement Drug List (NRDL). Adebelimab has been incorporated into the special drug reimbursement catalogs of various local “Hui Min Bao” supplementary medical insurance schemes, further expanding its revenue contribution. Hetrombopag, recommended by multiple clinical practice guidelines, has achieved sustained and stable sales growth. Meanwhile, earlier-launched innovative drugs such as camrelizumab, pyrotinib, and apatinib have also contributed to sales increments, driven by the continuous approval of new indications and the accumulation of robust evidence-based medical data from post-marketing studies.

Meanwhile, the global expansion of innovative drugs has yielded results, becoming a second engine for performance growth. During the reporting period, the Company recognized the €160 million upfront payment received from Merck KGaA, Germany, for an out-licensing deal as revenue, further driving the growth of operational performance indicators.

In terms of innovative R&D, the cumulative R&D investment in the first half of 2024 reached RMB 3.86 billion, a year-on-year increase of 26.23%, bringing the company’s total cumulative R&D investment to over RMB 40 billion. Supported by this robust investment, Hengrui Pharma has continued to deliver on its R&D achievements. Since the beginning of this year, three drugs have been approved for marketing, including teglicidine fumarate, fluzoparib, and henggliflozin proline. Currently, the number of Class 1 innovative drugs marketed by Hengrui Pharma has increased to 16.

During the reporting period, a total of 57 clinical trial approvals for innovative drugs were obtained in the first half of the year. Ten clinical trials advanced to Phase III, 20 to Phase II, and 19 to Phase I. Currently, more than 90 independently developed innovative products are under clinical development, with over 300 clinical trials being conducted both domestically and internationally. In the first half of this year, four therapies received Breakthrough Therapy Designation from the Center for Drug Evaluation (CDE), which is expected to accelerate future approval processes.

In terms of marketing authorization applications, the National Medical Products Administration (NMPA) has accepted two applications: one for nevacizumab in the treatment of ankylosing spondylitis, and another for fluzoparib as monotherapy or in combination with apatinib for the treatment of breast cancer. As of the end of the reporting period, the Company had filed a cumulative total of 2,527 invention patent applications, including 691 PCT patent applications; it held 585 valid authorized invention patents in China and 705 authorized patents in overseas jurisdictions such as Europe, the United States, and Japan.

According to the annual report, the impact of the national volume-based procurement (VBP) on Hengrui Pharma’s overall revenue is diminishing. Despite an increase in total revenue, income from generic drugs continues to decline. Caspofungin Acetate for Injection, which was included in the ninth round of national VBP this year, saw a year-on-year sales decrease of RMB 279 million during the reporting period. Ioversol Injection, Sevoflurane for Inhalation, and Papaverine Hydrochloride Injection, which were subject to regional VBP, experienced a combined year-on-year sales decline of RMB 276 million during the same period.

Currently, Hengrui Pharma continues to advance the refinement of its innovation system, having established 14 R&D centers in Lianyungang, Shanghai, the United States, and Europe, with a global R&D team comprising more than 5,000 employees. During the reporting period, Hengrui further perfected its established technical platforms for small-molecule chemical drugs (including peptides and PROTACs), monoclonal/bispecific antibodies, antibody-drug conjugates (ADCs), small nucleic acids, radiopharmaceuticals, multispecific antibodies, and bispecific ADCs. It has also initially built platforms for new molecular modalities such as peptide-drug conjugates (PDCs), antibody-oligonucleotide conjugates (AOCs), DNA-antibody conjugates (DACs), and mRNA, while continuously expanding platforms in structural biology and AI-driven drug discovery.

Taking the ADC platform as an example, Hengrui Pharma’s ADC platform has currently secured clinical trial approval for 12 novel and differentiated ADC molecules. Among these, three candidates—SHR-A1811 (HER2 ADC), SHR-A1921 (TROP2 ADC), and SHR-A1904 (CLDN18.2 ADC)—have entered Phase III clinical trials. Notably, SHR-A1811 has had six indications included in the Center for Drug Evaluation’s (CDE) Breakthrough Therapy Designation list.

However, the key to Hengrui Pharma’s return to its peak lies in the implementation of its internationalization strategy, which serves as the second engine for its performance growth. During the reporting period, Hengrui received an upfront payment of €160 million from Merck KGaA for an out-licensing deal. To date, Hengrui has secured overseas licensing partnerships for 11 innovative drugs.

In terms of overseas listings, early this year, the tacrolimus extended-release capsules submitted by Chengdu Shengdi, a subsidiary of Hengrui Pharma, were approved for marketing in the United States, marking the first generic version of this product approved by the U.S. FDA. In July, Hengrui Pharma’s bupivacaine liposome injection received approval from the U.S. FDA, becoming the first generic version of this product to be approved globally. Furthermore, multiple international multi-center Phase III clinical trials for innovative drugs such as fluzoparib and hetrombopag are currently underway.

In its semi-annual report, Hengrui Pharma confidently highlighted its global standing: the company has been listed for three consecutive years in the “Top 25 Global Pharmaceutical Companies by Pipeline Scale” ranked by the renowned international consulting firm Citeline, climbing to 8th place this year and setting a new high for Chinese pharmaceutical companies.

Sun Piaoliang once declared, “Only innovation that dares to compete internationally is true innovation.” As early as 2008, Hengrui Pharma had already proposed its “innovation + internationalization” strategy. In 2009, Hengrui submitted an application to the U.S. Food and Drug Administration (FDA) for clinical trials of its innovative drug, regagliptin, in the United States. The application was approved, making Hengrui the first Chinese pharmaceutical company to pursue simultaneous regulatory submissions in both China and the United States.

Over the two years since Sun Piaoyang’s return to Hengrui Pharma, the company has persisted in ramping up investment in innovative drugs and advancing its internationalization strategy, despite fierce competition in China’s biopharmaceutical industry and pressures from volume-based procurement and national medical insurance negotiations. In the aftermath of the “Aiolos Bio debacle,” Hengrui made a resolute decision to pursue overseas expansion through the NEWCO model.

In May this year, Hengrui Pharma announced the joint establishment of a new overseas company, HERCULES CM NEWCO, INC. (hereinafter referred to as “Hercules”), together with Bain Capital, RTW Investments, Atlas Ventures, and Sinovest. Hengrui Pharma has granted Hercules, for consideration, the exclusive rights (excluding the Greater China region) to globally develop, manufacture, and commercialize its independently developed innovative GLP-1 drugs HRS-7535, HRS9531, and HRS-4729. In addition, Hengrui Pharma will acquire a 19.9% equity stake in Hercules. The total value of the transaction is expected to exceed USD 6 billion.

As a pioneer among China’s innovative pharmaceutical companies, Hengrui Pharma has already emerged from the shadow of significant challenges, including national medical insurance negotiations and centralized volume-based procurement. Now, with the deepening implementation of its “innovative drugs + global expansion” strategy, Hengrui is once again standing at the forefront of China’s innovative pharmaceutical industry with unstoppable momentum.