CITIC International Highlights Breakthroughs in Chinese Innovative Drug Exports and Recommends Hansoh Pharma (03692.HK) and Innovent Biologics (01801.HK)

According to the Zhisheng Finance APP, Zhongtai International released a research report stating that Hansoh Pharma (03692) is expected to have smooth sales of its existing products in the second half of the year. The $80 million upfront payment received from Roche will be recorded by the end of 2025, and Roche’s support will facilitate the smooth progress of HS-20110’s development. Innovent Bio (01801) reported over 40% year-on-year growth in product revenue for Q3, reaching more than RMB 3.3 billion, slightly exceeding expectations. The collaboration with Takeda is expected to accelerate the R&D progress of immuno-oncology (IO) therapies and antibody-drug conjugates (ADC).

The main viewpoints of CIC International are as follows:

The Hang Seng Healthcare Index underperformed the Hang Seng Index in October.

Hang Seng Healthcare dropped 11.1% in October and significantly underperformed the Hang Seng Index. The bank believes the main reasons include: 1) Since 2025, the Hang Seng Healthcare Index has been continuously rising; the market may recently be concerned that measures such as the U.S. imposing tariffs on pharmaceuticals could impact the prospects of innovative drugs going overseas. 2) The Chinese patent protection period for the well-known weight-loss drug Semaglutide is set to expire in 2026, and the market may worry that generic drugs will bring competition to existing products. 3) The 2025 National Reimbursement Drug List negotiation was held at the end of October, leading to a strong wait-and-see sentiment in the market.

Frequent Successes in the Overseas Expansion of Innovative Drugs

Recent Successes in Overseas Expansion for China's Innovative Pharmaceuticals: Hansoh Pharma to Grant Roche Subsidiary an Exclusive Global License (Excluding Greater China) for Antibody-Drug Conjugate HS20110; Innovent Bio to Collaborate with Takeda on Advancing Next-Gen Immuno-Oncology (IO) and Antibody-Drug Conjugate (ADC) Development. Leads Biolabs (09887) to License U.S.-Based Dianthus (DNTHUS) Rights for Research, Manufacturing, and Commercialization of Autoimmune Drug LBL-047 Outside Greater China.

The bank believes that Roche, Hansoh Pharma's partner, is a globally renowned industry giant with rich experience in ADC development, so the R&D of HS20110 is expected to proceed smoothly. Innovent Bio’s partner Takeda is Japan's most famous pharmaceutical enterprise, with annual revenue ranking among the top ten globally for many years and having a strong sales network in Japan, Europe, and the United States. The company stated that the timing for recording the upfront payment has not been determined yet, but the bank believes that cooperation with Takeda will benefit both the R&D and sales of the product. Leads Biolabs’ partner Dianthus focuses on autoimmune drug development, and the bank believes that this overseas licensing agreement will also facilitate the advancement of product development.

The 11th Volume-Based Procurement Expected to Have Limited Impact on Major H-share Companies

The Eleventh Batch of National Volume-based Procurement in China Produced Winning Results, Including a Total of 55 Drugs Covering Commonly Used Medications in Areas Such as Anti-infection, Anti-allergy, Anti-tumor, Blood Sugar Reduction, Blood Pressure Reduction, Blood Lipid Reduction, and Anti-inflammatory Pain Relief. The three major leaders in the Hong Kong-listed pharmaceutical sector—Hansoh Pharma, CSPC Pharmaceutical Group (01093), and China Biologic Products (01177)—all had products selected, but none involved core products. Based on the press release from the National Medical Products Administration, this procurement round saw regulators focus on guiding companies to make reasonable bids, achieving the State Council's goal of "anti-internal competition." Therefore, the impact on major Hong Kong-listed enterprises is expected to be minimal.

Risk Warning

1) Significant price reductions in drugs and medical devices may impact performance; 2) If the development of new drugs is slower than expected, it may affect the timeline for realizing the R&D pipeline; 3) If the sales and marketing efforts for new drugs post-launch are less effective than anticipated, it may be difficult to bring profits to the company in the short term.