Jiangsu Hengrui Medicine: A High-Conviction Buy in the Evolving Oncology Landscape

In the rapidly evolving oncology sector, Jiangsu Hengrui Medicine (Hengrui) has emerged as a standout player, combining cutting-edge R&D, strategic global partnerships, and a robust financial foundation to drive long-term shareholder value. As of August 2025, the company's accelerating pipeline and expanding international footprint position it as a compelling high-conviction investment in the healthcare sector.

Strategic R&D Momentum: Fueling Innovation in Oncology

Hengrui's oncology pipeline is a testament to its commitment to innovation. The company has secured clinical trial approvals for three oncology drugs in 2025, including trastuzumab rezetecan, a HER2-targeting ADC approved by China's NMPA for non-small cell lung cancer (NSCLC). This drug, which received Breakthrough Therapy and Priority Review designations, is also pursuing U.S. Orphan Drug Designation for biliary tract cancer, a niche but high-growth segment.

The company's collaboration with IDEAYA Biosciences on IDE849 (SHR-4849), a DLL3-targeting ADC for small-cell lung cancer (SCLC), further underscores its focus on unmet medical needs. With over 70 patients enrolled in its Phase 1 trial and data set to be presented at the IASLC 2025 World Conference on Lung Cancer, Hengrui is positioning itself at the forefront of next-generation oncology therapies.

Hengrui's R&D engine is supported by a 15% revenue allocation to innovation, one of the highest in China's biopharma sector. Its 14 global R&D centers and 5,500-strong team are advancing modalities like PROTAC-based AR degraders for prostate cancer and Claudin-18.2 ADCs, which could redefine treatment paradigms in the coming years.

Global Partnerships: De-Risking Growth and Expanding Reach

Hengrui's strategic alliances with global pharma giants have amplified its market potential while mitigating R&D risks. The €160 million upfront payment from Merck KGaA for exclusive rights to HRS-1167 (a next-gen PARP1 inhibitor) and an option on SHR-A1904 (a Claudin-18.2 ADC) highlights the global value of its pipeline. These deals, structured for milestone and royalty-based revenue, could generate up to €1.4 billion in total value, providing a financial cushion for domestic innovation.

Equally significant is the $500 million collaboration with GSK for HRS-9821, a PDE3/4 inhibitor for COPD, and 11 other programs. While GSK handles global commercialization (outside China), Hengrui retains domestic rights, leveraging its deep market expertise while accessing GSK's global infrastructure. This model allows Hengrui to focus on R&D while capitalizing on international demand for its therapies.

Market Potential: Capturing Domestic and Global Oncology Growth

Hengrui's domestic dominance in AR inhibitors, led by Rezvilutamide, is a cornerstone of its success. With a 30% market share in China and inclusion in the National Reimbursement Drug List (NRDL), the drug is projected to generate $2.5 billion in combined revenue by 2028 alongside Fuzuloparib, a PARP inhibitor. These therapies are addressing high-risk prostate cancer segments, which are expected to grow at 8% annually.

Globally, Hengrui is capitalizing on the $50 billion ADC market by 2030. Its ADCs, including trastuzumab rezetecan, are poised to gain traction in the U.S. and Europe, where regulatory hurdles are offset by its partnerships. The company's 52.14% revenue contribution from oncology in 2024—projected to rise further—reflects its ability to monetize innovation in high-margin segments.

Financial Resilience and Shareholder Value

Hengrui's financials reinforce its investment thesis. With a 23.44% net profit margin, 0% debt-to-equity ratio, and 54.4% year-over-year earnings growth, the company is well-positioned to sustain reinvestment in R&D. Analysts project 14.05% annual earnings growth through 2028, driven by its expanding pipeline and global partnerships.

Shareholder returns are also a priority, with a 0.3% dividend yield and a 18% payout ratio. The company's recent equity buybacks and focus on cost-effective therapies (e.g., Rezvilutamide's competitive pricing vs. imported AR inhibitors) further enhance its value proposition.

Investment Case: A Buy for Long-Term Growth

Hengrui's alignment with the Healthy China 2030 initiative—prioritizing cancer survival rates and reimbursement for innovative therapies—ensures favorable policy tailwinds. Its ability to outpace domestic peers by focusing on high-margin innovation, rather than generics, sets it apart in a competitive landscape.

For investors, the key catalysts include:
1. Near-term: Positive Phase 1 data for IDE849 at IASLC 2025 and U.S. trial initiation in Q3 2025.
2. Mid-term: Global approvals for trastuzumab rezetecan and HRS-1167, unlocking new revenue streams.
3. Long-term: Expansion into ADCs and PROTACs, which could redefine oncology treatment.

With a current valuation that underprices its pipeline potential and global ambitions, Hengrui offers a compelling buy case. The company's strategic R&D focus, de-risked partnerships, and financial strength make it a rare combination of innovation and execution in the healthcare sector.

In conclusion, Jiangsu Hengrui Medicine is not just a participant in the oncology revolution—it is a leader shaping its future. For investors seeking exposure to a high-conviction, innovation-driven biopharma play, Hengrui's accelerating momentum and global vision make it an immediate buy.