Why do the HER2 ADC data reinforce the investment thesis?

  • In a Chinese phase III trial, Hengrui’s HER2 ADC SHR-A1811 was used as first-line treatment for HER2-low breast cancer. Median progression-free survival in the overall population, as assessed by an independent central review, was 16.4 months, versus 6.8 months in the chemotherapy group, with a hazard ratio of 0.27. Overall survival data remain immature, with events recorded in 26% of patients, and the overall trend favors the treatment group.
  • Across trials, SHR-A1811’s median progression-free survival was numerically higher than the 13.2 months reported in another trial of T-DXd; however, the weaker performance of the chemotherapy control group in Hengrui’s trial partly explains its more pronounced hazard ratio.
  • The incidence of interstitial lung disease with SHR-A1811 was 2.5%, below the 11%–12% reported in historical T-DXd trials; however, its incidence of grade 3 or higher treatment-related adverse events was 84.4%, above the 67.9% in the chemotherapy group in this trial.

Where is the commercial opportunity for the HER2 ADC?

  • SHR-A1811 has been approved in China for second-line or later treatment of HER2-mutated non-small cell lung cancer, HER2-positive breast cancer and HER2-positive colorectal cancer. A supplemental marketing application for HER2-low breast cancer was accepted in July 2026, and Morgan Stanley expects this indication could expand the potential market from 2027 onward.
  • For overseas rights, Hengrui has licensed emerging-market rights to Glenmark while retaining rights in major developed markets.

How did the HER3 and Nectin-4 ADCs perform?

  • In an interim analysis of a Chinese phase III trial in EGFR-mutated non-small cell lung cancer following EGFR-TKI treatment, the HER3 ADC SHR-A2009 achieved median progression-free survival of 8.3 months, versus 5.4 months in the control chemotherapy group, with a hazard ratio of 0.47. Morgan Stanley considers the data broadly within the range for drugs in the same class and in line with expectations.
  • The incidence of grade 3 or higher treatment-related adverse events was 40.7% in the SHR-A2009 group and 38.9% in the chemotherapy group. Overall survival data remain immature; after disease progression, 19.4% of patients in the chemotherapy group crossed over to receive the investigational drug.
  • Phase II cervical cancer data for Nectin-4 ADC SHR-A2102 slightly exceeded the bank’s expectations: among 36 patients who had received no more than two prior lines of treatment in the 6 mg/kg dose group, the confirmed objective response rate was 47.2% and median progression-free survival was 7.0 months. The figures were numerically higher than those of comparable pipeline candidates in cross-trial comparisons, but the incidence of grade 3 or higher treatment-related adverse events was 58% in the combined 6 and 8 mg/kg groups.

What new insights did the KRAS G12D program provide?

  • The KRAS G12D inhibitor HRS-4642, combined with chemotherapy, showed activity in preliminary results from a neoadjuvant phase II trial in KRAS G12D-mutated pancreatic ductal adenocarcinoma: the objective response rate was 63% in the group without adebrelimab and 87% in the group receiving the PD-L1 drug; tumors shrank in all patients.
  • The 6-month event-free survival rates in the two groups were 87% and 96%, respectively, and survival data remain immature; the incidences of grade 3 or higher events were 47% and 53%, respectively. Morgan Stanley believes adding adebrelimab may enhance efficacy and that the overall results met its expectations.

How does Morgan Stanley view Hengrui’s Hong Kong-listed shares?

  • The bank lists Hengrui as a top pick, with an overweight rating on its Hong Kong-listed shares and a target price of HK$82, implying approximately 72% upside from the 23 October 2026 closing price of HK$47.76. The report also identifies significant setbacks in the innovative drug pipeline or a greater-than-expected impact from centralized procurement as downside risks.