The revenue share of innovative drugs first exceeded 50%, with Jiangsu Hengrui Medicine netting 7.7 billion yuan last year; Business Development (BD) has become a new engine for performance.

Source: Times Finance Author: Du Sumin

Driven by the innovative drug business and business development (BD), “pharmaceutical leader” Heng Rui Medicine (600276.SH; 01276.HK) achieved double-digit growth in both revenue and net profit for 2025. According to the annual report released on March 25, the company achieved annual operating revenue of 31.629 billion yuan, a year-on-year increase of 13.02%; net profit attributable to shareholders reached 7.711 billion yuan, a year-on-year increase of 21.69%.

From the revenue structure, sales revenue from innovative drugs reached 16.342 billion yuan, a year-on-year increase of 26.09%, accounting for 58.34% of total drug sales revenue, and for the first time exceeding 50% of total revenue. By product, anti-tumor products remain the absolute mainstay, achieving revenue of 13.240 billion yuan, a year-on-year increase of 18.52%, accounting for 81.02% of total innovative drug revenue.

At the same time, the non-tumor product line is also rapidly rising. In 2025, the company’s non-tumor products achieved revenue of 3.102 billion yuan, a year-on-year increase of 73.36%. Among these, products such as Hengrili (SGLT2 inhibitor) and Remimazolam (GABAa receptor agonist) have achieved rapid growth by effectively conveying clinical advantages. However, despite the impressive growth rate of non-tumor products, they still accounted for less than 20% of innovative drug revenue, at 18.98%, indicating that product line diversification needs to be further strengthened.

Times Finance noted that Heng Rui Medicine also set a goal in the annual report to “strive for more than 30% growth in innovative drug sales revenue by 2026.” On March 26, a pharmaceutical industry analyst stated in an interview with Times Finance that for Heng Rui Medicine’s innovative drug sector to achieve more than 30% growth on a high base of 16.3 billion yuan, it means an additional nearly 5 billion yuan in 2026. “This incremental scale is equivalent to the annual revenue of a mid-sized pharmaceutical company, placing high demands on the product release pace and market penetration capability,” the analyst pointed out.

In the generic drug segment, Heng Rui Medicine’s annual report for 2025 did not disclose specific revenue figures but clearly indicated that due to the ongoing impact of domestic centralized procurement policies, overall revenue for this segment experienced a slight decline. It also admitted that as innovative drug sales revenue continues to grow, the proportion of generic drug sales revenue in total sales revenue will decrease year by year, resulting in further optimization of the revenue structure and a more solid innovation-driven development pattern.

Additionally, BD revenue has become another important engine for Heng Rui Medicine’s performance growth. Financial report data shows that in 2025, the company’s external licensing revenue reached 3.392 billion yuan, accounting for 10.7% of total operating revenue, with a year-on-year increase of 25.62%. This revenue composition includes a $200 million upfront payment from Merck Sharp & Dohme (MSD), a $75 million upfront payment from American pharmaceutical company IDEAYA, a €15 million upfront payment from Germany’s Merck KGaA, a $65 million upfront payment and equity from American startup Braveheart Bio, and approximately $100 million confirmed from the $500 million upfront payment from GlaxoSmithKline (GSK) based on performance milestones.

                      Image source: Tuchong

However, behind the rapid progress of BD business, risks are also gradually emerging. On March 5, Merck KGaA announced the termination of its global licensing collaboration with Heng Rui Medicine regarding the PARP1 inhibitor HRS-1167, while simultaneously relinquishing global options for the Claudin 18.2 ADC drug SHR-A1904. In October 2023, Merck obtained global development rights for this drug with a €160 million upfront payment and potential milestone payments of up to €1.4 billion. Now, the project has abruptly halted after less than two and a half years of advancement.

Regarding the reasons for termination, Heng Rui Medicine mentioned in the annual report that it was due to the efficacy and safety data emerging with the combination of HRS-1167 and other drugs, as well as the rapidly evolving competitive landscape in the PARP inhibitor field, leading Merck KGaA to make a strategic decision to discontinue the development of this drug.

“In recent years, there have been numerous cases of ‘returns’ in BD transactions for Chinese innovative drugs, which also implies that BD transactions carry return risks. Large upfront payments accounted for current revenue, but subsequent milestone payments remain uncertain,” the aforementioned pharmaceutical industry analyst pointed out to Times Finance.

In addition to more frequent BD authorizations, Times Finance noted that Heng Rui Medicine is accelerating the establishment of its own international capabilities. The annual report shows that the company has opened a clinical research and collaboration center in Boston, USA, recruiting several key management personnel and medical experts to join the overseas research and development team. Additionally, multiple innovative drugs have initiated their first overseas clinical trials, steadily promoting the registration and approval of late-stage assets, while the BLA (Biologics License Application) submission for the PD-1 product Camrelizumab in the United States has been resubmitted and accepted.

Currently, Heng Rui Medicine has successfully navigated the impact of centralized procurement cycles, with continuing growth in both innovative drug revenue and BD revenue. As the “big brother” of the pharmaceutical industry, expectations for Heng Rui Medicine extend far beyond just being a fast follower and relying on BD for upfront payments; the goal is to truly transition from a leading position in China to becoming a global leader, with the capability to develop globally innovative drugs and achieve overseas independent commercialization.