Hengrui Pharma Q3 Net Profit Jumps 89% as Innovative Drugs and Licensing Drive Beat

Jiangsu Hengrui Pharmaceuticals, one of China's largest drug makers, reported a net profit of 2.46 billion yuan for the third quarter, a significant 88.92% year-on-year increase that exceeded the Bloomberg analyst consensus estimate of 2.38 billion yuan. Revenue rose 20.55% to 8.95 billion yuan, also beating forecasts of 8.55 billion yuan.

The company stated in a Tuesday filing that improving innovative drug sales and out-licensing revenue contributed to the growth. This stronger quarter helped Hengrui recover from a disappointing first half, when revenue declined 1.9% year on year to 15.5 billion yuan, and net profit edged up just 0.3% to 4.47 billion yuan.

Hengrui attributed its first-half revenue decline to China's national and regional centralized procurement policies, which aim to lower medicine prices through bulk purchasing. Generic medicine sales plunged 16.1% year on year for the six months ended June 30. The company said it had "proactively" scaled back resources allocated to its generic medicine business to limit related risks.

In contrast, innovative medicines maintained steady growth. For the nine months ended September 30, innovative medicines generated 13.87 billion yuan in revenue, up 17.05% year on year, accounting for 64.59% of total drug sales. Out-licensing revenue jumped 31.12% from a year ago to 2.78 billion yuan. Earlier this month, Hengrui entered into a major licensing deal with Danish pharmaceutical giant Novo Nordisk involving its oral GLP-1 weight-loss drug HRS-1596, worth up to US$2.6 billion.

Despite the beat, Hengrui noted that growth in innovative drug revenue so far this year had fallen short of the company's expectations at the beginning of the year, citing "slower-than-expected progress in hospital access" and intensifying competition.