CICC Maintains 'Outperform' Rating on Hansoh Pharma (03692.HK) with Target Price of HK$21.12 Amid Global GLP-1 Licensing Deal with MSD

According to Zhisheng Finance APP, CICC released a research report stating that it maintains the "Outperform Industry" rating for Hansoh Pharma (03692), expressing optimism about the company's future overseas progress and maintaining a target price of 21.12 Hong Kong dollars. Since the upfront payment from this licensing collaboration may be recognized in 2025, the bank has lowered its expectations for licensing revenue in 2024 while maintaining its expectations for licensing fees in 2025. As a result, the profit forecast for 2024 has been reduced by 9.7% to 4.04 billion yuan, while the profit forecast for 2025 remains unchanged. On December 18, 2024, the company announced that it had granted Merck an exclusive global licensing agreement for HS-10535 (an oral GLP-1 receptor agonist).

CICC's main points of view are as follows:

Hansoh Pharma Reaches GLP-1 Collaboration with MSD, Total Deal Value Exceeds $2 Billion.

According to the agreement, Merck obtains the global exclusive license rights for the development, production, and commercialization of HS-10535. The company will receive an upfront payment of $112 million, potential milestone payments of up to $1.9 billion, and royalties based on product sales. Under specific conditions, the company may co-promote or exclusively commercialize HS-10535 in China. The bank expects this transaction to potentially boost the company's 2025 performance.

Multiple GLP-1 products in development, with progress among the leading companies in China.

Hansoh Pharma has a strategic layout in the GLP-1 field, including PEGylated Losenatide Injection (a GLP-1 weekly formulation for Type II diabetes, launched in 2019), HS-20094 (a GIP/GLP-1R dual-target weekly formulation for diabetes/weight loss in Phase II), HS-10501 (an oral GLP-1R agonist for obesity/diabetes in Phase I), and this authorized project HS-10535 (an oral GLP-1R agonist in preclinical stage). The firm believes that this collaboration represents MSD’s high recognition of Hansoh Pharma’s GLP-1 R&D capabilities. Global GLP-1 drug sales from January to September 2024 have exceeded 30 billion USD and are in a phase of rapid growth. Multiple clinical trials indicate that dual/multi-target and oral GLP-1RA drugs show advantages in efficacy or compliance. The firm is optimistic about the company's current GLP-1 pipeline.

In recent years, the company's BD pace has accelerated, continuously broadening the R&D pipeline.

Following two major collaborations with GSK on HS-20089 (B7-H4 ADC) and HS-20093 (B7-H3 ADC) at the end of 2023, Hansoh Pharma continued to efficiently execute its BD strategy in 2024: 1) Expanded collaboration with Premas on HS-20117 (EGFR/c-Met ADC), with Premas set to develop an ADC based on this drug; 2) Acquired the rights to develop and commercialize HS-20137 (IL-23p19) from Qyuns Biopharma in Greater China; 3) Obtained the rights to develop and commercialize LP-168 (BTKi) for non-oncology indications from Luper Pharma in Greater China. To date, the company has accumulated over 20 BD projects and is accelerating its international expansion through overseas licensing.

Risk:Product commercialization falls short of expectations; intensified competitive landscape; clinical data underperforms.