CSPC Pharma is undoubtedly one of the most eye-catching stars in the recent Hong Kong pharmaceutical stocks. After the mid-term financial report fell short of expectations, the stock price once dropped by more than 20%, but in the past three weeks, the stock price has rebounded by more than 60%.

The company's rapid rise in stock price was driven by a series of bold moves, such as the introduction and authorization of new products, key personnel appointments, and a 5 billion buyback plan. However, the real reason behind these actions is the accelerated innovation transformation of CSPC Pharma.

Heavyweight product License in/out, accelerating innovation and international transformation

CSPC Pharma is accelerating the pace of external product licensing and cooperation.

On October 8, the company entered into an exclusive licensing agreement with AstraZeneca for the global development, manufacturing, and commercialization of the lipoprotein(a) inhibitor YS2302018. Pursuant to the agreement, CSPC Pharma will receive a prepayment of 0.1 billion dollars and has the right to receive up to 0.37 billion dollars in potential development milestone payments and up to 1.55 billion dollars in potential sales milestone payments, as well as tiered sales royalties based on annual net sales.

On October 29, CSPC Pharma announced that its wholly-owned subsidiary Jintman Biotech will acquire the HER2 dual-site ADC drug JSKN003. The collaboration costs include a prepayment of 0.4 billion yuan, a development milestone payment related to the first patient enrolled in multiple registration clinical trials of 0.3 billion yuan, as well as regulatory milestone payments and sales milestone payments based on regulatory approval progress, totaling up to 3.08 billion yuan, in addition to double-digit licensing fees.

In February 2023, CSPC Pharma's giant stone biopharma, a subsidiary of CSPC Innovation Pharmaceutical, and Corbus Pharmaceuticals, Inc. entered into an exclusive licensing agreement for the development and commercialization of the recombinant humanized anti-Nectin-4 antibody-drug conjugate SYS6002 in the United States and other countries, with an authorized amount of up to 0.693 billion dollars.

In July 2022, CSPC Pharma announced that it would transfer the global rights outside Greater China for the innovative drug SYSA1801, a Claudin18.2 ADC, to Elevation Oncology for 1.195 billion yuan.

During this year's mid-term report conference call, CSPC Pharma also revealed that the EGFR ADC product SYS6010 is currently actively negotiating authorization cooperation with two large international companies. With more data releases, further collaboration is expected.

Through overseas authorization of innovative products and introduction of products to the domestic market, CSPC Pharma's innovation and internationalization strategy has become increasingly clear. Overseas, CSPC Pharma relies on partners for international clinical trials and commercialization; while domestically, the company introduces potential products through its sales capabilities, continuously expanding the market with a "dual approach" strategy.

Personnel changes, resolute actions in transformation and innovation.

In addition, CSPC Pharma has been active in personnel changes recently, with a clear trend towards internationalization and youth, further complementing the company's overall innovative transformation strategy.

On September 9th, the company announced the appointment of Dr. Liu Yongjun as the Executive President and Global R&D President of CSPC Pharma, responsible for the group's research and development, pipeline strategy, and international business development. Dr. Liu Yongjun has significant influence in the industry.

Dr. Liu Yongjun was one of the highest-ranking Chinese scientists in multinational pharmaceutical companies. He has served as a senior R&D executive at Pfizer, Astrazeneca, and later as the global head of research at Sanofi. Before joining CSPC Pharma, he was responsible for Innovent Bio's global R&D, pipeline strategy, business cooperation, and international business.

Similar personnel appointments also occurred last year at another established pharmaceutical company - Jiangsu Hengrui Pharmaceuticals. In early 2023, Jiangning Jun was appointed as the company's Deputy General Manager and Chief Strategy Officer, driving Hengrui to frequently engage in external BD over the next year and a half, enabling multiple heavyweight products to achieve overseas authorization cooperation and successfully expand into international markets.

In addition to the personnel changes at the group level, on September 23, CSPC Pharma's innovative platform CSPC Innovation (CSPC Innovation Pharmaceutical) appointed Yao Bing as the new Chairman of the company.

The management team is getting younger, with clear signs of innovation and transformation. The company stated about this appointment: "Chairman Yao Bing has rich experience in innovative drugs, and the company's future focus will be on innovative drugs, so Yao Bing's background is more in line with the company's development strategy."

In terms of capital operations in transformation and innovation, CSPC Pharma has been taking frequent actions.

Just after the personnel changes, the A-share platform of CSPC Innovation Pharmaceutical, is gradually transforming into the company's innovation platform through asset acquisitions.

Established in 2006, CSPC Innovation Pharmaceutical is an important company in the health business sector of CSPC Pharma. In 2019, CSPC Innovation Pharmaceutical successfully listed on the GEM, becoming the first Chinese red-chip company to return to the A-share market through spin-off.

In September last year, CSPC Innovation Pharmaceutical announced its plan to increase its cash investment in Jusun Bio by 1.87 billion yuan to gain control of Jusun Bio. Jusun Bio's pipeline covers antibodies, ADCs, and mRNA vaccines. On January 3rd this year, CSPC Innovation Pharmaceutical completed the equity transfer of Jusun Bio, taking an important step into the innovative drug track.

Jusun Bio has already contributed the first approved product for CSPC Innovation Pharmaceutical - the Raniqizumab injection (trade name: Ensuximab) developed by Jusun Bio was approved by the National Medical Products Administration at the end of June this year, indicated for the treatment of recurrent or metastatic cervical cancer patients with PD-L1-positive expression who have failed at least one platinum-containing first-line chemotherapy regimen.

After completing the equity transfer of Jusun Bio, CSPC Innovation Pharmaceutical further announced its plan to acquire Baike Biotechnology, a subsidiary of CSPC Pharma, through cash and stock payments. Baike Biotechnology mainly engages in innovative biopharmaceutical businesses such as long-acting protein drugs, with core assets including the Chia TaiTian's sales of over 1 billion yuan and the long-acting GLP-1 receptor agonist TG103.

After two rounds of price adjustments, the acquisition of cspc pharma Baike by cspc innovation pharmaceuticals is still in progress. After the acquisition is completed, cspc innovation pharmaceuticals will further achieve a comprehensive transformation to the innovative drugs platform in terms of revenue, profit, and pipeline layout.

Continuously strengthening shareholder returns.

On September 19, the company announced a plan to repurchase up to 5 billion Hong Kong dollars of shares. Within 24 months from the date of the announcement, the company will repurchase up to a total of 5 billion Hong Kong dollars of shares from the market, funded by the company's available cash reserves, and the repurchased shares will be cancelled.

Prior to this announcement, the company's board of directors had approved a repurchase plan of up to 1 billion Hong Kong dollars, of which approximately 0.773 billion Hong Kong dollars has been completed, and the repurchased shares will also be cancelled.

Furthermore, in the interim report, the board of directors announced the distribution of the 2024 interim dividend of sixteen Hong Kong cents per share, a year-on-year increase of 14.3%, and the dividend ratio increased to 58%. As of the date of the interim report announcement, the company has provided shareholders with a total return of 3.285 billion yuan through interim dividends and share repurchases.

Conclusion

Old pharmaceutical companies such as cspc pharma, sino biopharm, jiangsu hengrui pharmaceuticals, and hansoh pharma have already embarked on a unique development path in the transformation to innovative drugs. From the independent innovation products going overseas to the introduction and cooperation of outstanding domestic products, all of these indicate that the Chinese innovative drug industry is entering a whole new development stage.