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.

Ask AI · Behind the growth of BD business, how is Hengrui Pharmaceuticals addressing the risk of partnership termination?

This article is sourced from Shidai Caijing, authored by Du Susmin.

Driven by the innovative drug business and BD (business development), “the pharma industry’s big boss,” Hengrui Pharmaceuticals (600276.SH; 01276.HK), achieved double-digit growth in both 2025 revenue and net profit. According to the 2025 annual report released on March 25, the company posted full-year operating revenue of RMB 31.629 billion, up 13.02% year over year; attributable net profit was RMB 7.711 billion, up 21.69%.

In terms of revenue mix, sales revenue from innovative drugs reached RMB 16.3429 billion, up 26.09%, accounting for 58.34% of pharmaceutical sales revenue and for the first time exceeding 50% of total revenue. By product, anti-cancer products remain the clear mainstay, achieving revenue of RMB 13.24 billion, up 18.52%, accounting for 81.02% of total innovative drug revenue.

At the same time, the non-oncology product lines are also rapidly gaining traction. In 2025, the company’s non-oncology products achieved revenue of RMB 3.102 billion, up 73.36%. Among them, products such as empagliflozin (SGLT2 inhibitor), and remigrazolam (GABAa receptor agonist), grew rapidly by effectively transferring their clinical advantages. However, although the growth rate of non-oncology products is impressive, their share of innovative drug revenue is still less than 20%, at 18.98%, and the diversification of the product lines needs further strengthening.

Shidai Caijing noted that Hengrui Pharmaceuticals also set a goal in its annual report to “strive for innovative drug sales revenue to achieve more than 30% growth in 2026.” On March 26, a medical industry analyst interviewed by Shidai Caijing said that for Hengrui Pharmaceuticals’ innovative drug segment, achieving 30%+ growth on top of a high base of RMB 16.3 billion means that in 2026, the company needs to add nearly RMB 5 billion. “This incremental scale is already comparable to the full-year revenue of a mid-sized pharmaceutical company, which puts high demands on product launch timing and market penetration capabilities.” The analyst pointed out.

In the generic drug segment, Hengrui Pharmaceuticals’ 2025 annual report did not directly disclose the specific revenue figures, but it clearly stated that due to the ongoing impact of domestic centralized procurement policies, the segment’s overall revenue saw a slight decline. It also acknowledged that as innovative drug sales revenue continues to grow, the proportion of generic drug sales revenue in total sales will decrease year by year. With that, the revenue structure will be further optimized, and the innovation-driven development pattern will become even more solid.

In addition, BD revenue has become another important engine of Hengrui Pharmaceuticals’ performance growth. Financial report data shows that in 2025, the company’s external licensing revenue was RMB 3.392 billion, accounting for 10.7% of total operating revenue, up 25.62% year over year. This revenue composition includes an upfront payment of USD 200 million from Merck (MSD), an upfront payment of USD 75 million from the U.S. pharma company IDEAYA, an upfront payment of EUR 15 million from Merck KGaA (Germany), and an upfront payment of USD 65 million from and equity of Braveheart Bio (the U.S. start-up), as well as an upfront payment of USD 500 million from GlaxoSmithKline (GSK), of which about USD 100 million was recognized based on fulfillment progress.

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However, behind the booming BD business, risks are also gradually becoming visible. On March 5, Merck KGaA announced that it would terminate its global licensing collaboration with Hengrui Pharmaceuticals around the PARP1 inhibitor HRS-1167, and at the same time give up its global option for the Claudin 18.2 ADC drug SHR-A1904. In October 2023, Merck obtained the global development rights to the drug with an upfront payment of EUR 160 million and potential milestone payments of up to EUR 1.4 billion. Now, after the project has been in progress for less than two and a half years, it has come to an abrupt end.

Regarding the reasons for the termination, Hengrui Pharmaceuticals mentioned in its annual report that, considering the continuously emerging efficacy and safety data when HRS-1167 is used in combination with other drugs, and the rapidly evolving competitive landscape in the PARP inhibitor field, Merck KGaA made a strategic decision not to continue developing the drug.

“Over the past few years, there have not been few cases of ‘returns’ in China’s innovative drug BD transactions, which also means that BD transactions carry a risk of being returned. After a large upfront payment is recognized as revenue for the current period, the subsequent milestone payments are uncertain.” The aforementioned industry analyst told Shidai Caijing.

In addition to more frequent BD authorizations, Shidai Caijing has noticed that Hengrui Pharmaceuticals is accelerating the build-out of its independent international capabilities. The annual report shows that the company has newly opened a U.S. Boston clinical research and collaboration center, recruiting multiple key management personnel and medical experts to join its overseas R&D team. In addition, multiple innovative drugs have initiated their first overseas clinical trials, steadily advancing registration and approval for later-stage assets. Meanwhile, the BLA (Biologics License Application) filing for the PD-1 product carrelizumab in the U.S. has been resubmitted and accepted.

At present, Hengrui Pharmaceuticals has successfully weathered the centralized procurement (collective bidding) impact cycle, with both innovative drug revenue and BD revenue continuing to strengthen. As the industry’s “elder brother,” external expectations of Hengrui Pharmaceuticals go far beyond simply Fast-follow (rapid follow) and relying on BD upfront payments. Instead, they focus on truly moving from leading status in China to leading globally—along with the ability to develop globally first-in-class drugs and achieve independent commercialization overseas.