Hansoh Pharmaceutical
2023 results beat on Ameile and collaboration revenue; Double- digit drug sales growth in 2024; Upgrade to BUY
Hansoh recorded favourable 2023 results, with revenue up by 7.7% YoY beating our estimates, thanks to strong sales growth of Ameile (+20% YoY) and BD revenue of RMB600m from GSK. Net profit increased by 26.9% YoY to RMB3.3bn, with NPM of 32%. The management expects double digit growth in drug sales in 2024, with over 70% from innovative drugs. Ameile is expected to generate 20% YoY growth in 2024 and sales of RMB6bn in 2026, per management. Post results, we upgrade Hansoh to BUY with TP of HK$17.2, factoring in the rapid growth of Ameile, collaboration revenue of RMB1.4bn in 2024, and other new products including TYK2 and GLP-1/GIP.
Key Factors for Rating
2023 results beat: Hansoh announced 2023 results with revenue up 7.7% YoY to RMB10.1bn, beating our estimates, mainly driven by strong growth of Ameile (+20% YoY in terms of sales and +100% YoY in terms of volume) and BD revenue of RMB600m from GSK, while revenue from CNS and anti-infective rug slightly missed our expectation. Revenue of innovative drugs and collaborative products amounted to RMB6.87bn (+37.1% YoY), accounting for 68% of total revenue (vs. 53% in 2022). Sales (including BD revenue) of CNS diseases/oncology/anti-infective/metabolic diseases and others changed by - 9%/+12%/+2%/+26% in 2023.
GPM stayed at 90% thanks to the collaboration revenue offsetting the impact of Ameile's price cut. RnD expense soared by 24% YoY to RMB2.1bn or 20.8% of revenue (vs 18.0% in 2022). Net profit increased by 26.9% YoY to RMB3.3bn, with net margin of 32%. The management expects double digit growth in drug sales in 2024, with over 70% from innovative drugs. Besides, the management expects milestone revenue with undisclosed amount from GSK in 2024. The management expects its sales force to remain at 5,000-5,500 people, with improved output per capita in 2024.
Ameile as the strong growth driver: Ameile delivered 20% YoY growth in sales upon 43% price cut after being included in NRDL as 1L EGFR-mutant NSCLC in 2023, beating our expectation. After digesting the impact of price cut in 2023, Ameile is expected to generate 20% YoY growth in 2024 and sales of RMB6bn in 2026, as per management, thanks to its broad hospital and pharmacy coverage and indication expansion, including adjuvant NSCLC (sNDA submission in 3Q24 and potential approval before June 2025), +chemo in 1L NSCLC, +EGFR/c-Met in 1LNSCLC (to initiate pivotal trial in 2025), + HS-10241 (c-MET) in c-MET NSCLC (ongoing pivotal trial), and +ADC in EGFR-TKI failed NSCLC, etc.