Why did innovative drug growth rebound in the third quarter?

  • Management attributed the improvement to two forces: continued growth in established products such as CDK4/6, AR, fluzoparib and henggliflozin, and a faster ramp-up of HER2 ADC, IL-17, JAK1 and PCSK9 products newly added to the national reimbursement list.
  • Hospital access delayed in the second quarter partly recovered. Management said hospital pharmacy committee meetings, promotional activities and academic events gradually resumed in the third quarter, helping newly reimbursed products enter hospitals faster; however, some established oncology products, including PD-1 and apatinib, remained under pressure.
  • The company maintained its 2026 innovative drug sales target, using the 19.2 billion yuan equity incentive target as a reference. By management’s calculation, this means fourth-quarter innovative drug sales must reach at least 5.3 billion yuan, up approximately 19% year on year.

How will licensing collaboration revenue affect the pace of profits?

  • Management expects business development (BD) revenue recognized in the fourth quarter to be roughly in line with the third quarter and the full-year figure for 2026 to exceed 2025, mainly from continued recognition of revenue from collaborations with GSK and BMS.
  • The 300 million US dollar upfront payment from the Novo Nordisk deal is expected to be received when the deal closes in the fourth quarter, but revenue recognition depends on the relevant delivery conditions and could fall in the fourth quarter of 2026 or the first quarter of 2027. The gap between receipt and revenue recognition makes the payment an important variable in the allocation of earnings between the two years.
  • Goldman Sachs’s model recognizes the upfront payment in the first quarter of 2027. It also forecasts an improvement in fourth-quarter product sales trends and BD revenue recognition roughly in line with the third quarter, while accounting for a normalization in selling expense growth as academic activities resume.

What is new in the long-term R&D pipeline?

  • Management views the long-acting technology behind HRS-1596, a once-weekly oral GLP-1/GIP peptide being developed with Novo Nordisk, as a platform: it has the potential to turn validated injectable drug targets into more convenient oral formulations.
  • Another long-acting bispecific drug, SHR-1139, is advancing through global development. Management said that among patients given a single dose, about 90% still achieved PASI90 after one year, meaning an improvement of at least 90% in psoriasis severity; among them, 65% had complete skin lesion clearance, supporting the potential for once-yearly dosing.
  • The design of SHR-1139’s global clinical development is being discussed with the US FDA; phase II studies in ulcerative colitis and pyoderma gangrenosum are underway.

How has Goldman Sachs revised its earnings and valuation assessment?

  • After updating its BD revenue recognition and operating expense assumptions, Goldman Sachs raised its earnings forecasts for 2026–2028 by 4.7%, 1.0% and 2.0%, respectively.
  • Goldman Sachs maintained its Buy rating and raised its 12-month price target from 74.98 yuan to 76.30 yuan. The bank cautioned that a slower-than-expected ramp-up of newly reimbursed innovative drugs, failure of key late-stage R&D projects and higher-than-expected global expansion costs could affect its assessment.