(Yicai) August 22 – Hengrui Pharmaceuticals shares rose after the leading Chinese pharmaceutical company announced that profits and sales rose sharply in the first half of the year, further reversing the profit slump of recent years thanks to the company’s investments in innovative drugs.
Hengrui (SHA: 600276) closed 3.8 percent higher at CNY 43.93 (USD 6.16) per share in Shanghai today, after rising as much as 4.6 percent earlier.
Net profit rose 49 percent year-on-year to CNY3.4 billion (US$481 million) in the six months to June 30, the Jiangsu province-based company’s half-year results showed last night, while revenue rose 22 percent to CNY13.6 billion (US$1.9 billion).
EProfits were hit by falling revenue from generic drugs as a result of the Chinese government’s centralized bulk purchasing program, which led to drastic price cuts on drugs. HengRui’s income from such a drug fell CNY 279 million (USD 39.1 million) in the first half of the year after it was included in the program.
The company’s revenue fell 28 percent for the full year of 2021 and 14 percent in 2022 before rising 10 percent last year.
However, through steady investment in research and development and the successful registration of new products, Hengrui’s innovative medicines business, which accounted for more than half of its total sales in the January-June period, has begun to offset declining revenues from the traditional generics segment.
Research and development spending increased by 26 percent to CNY 3.9 billion in the first half of the year, accounting for 28 percent of sales and 112 percent of profits in the period. So far, Hengrui has billion (USD 5.6 billion) for research and development.
Thanks to the investment, Hengrui’s sales of novel drugs rose 33 percent to CNY6.6 billion in the six months, while revenue from one of its 11 overseas-licensed innovative treatments reached EUR160 million (USD178.3 million). The two drugs accounted for 58 percent of total sales.
A decline in costs also contributed to Hengrui’s earnings recovery, as the company’s expense-to-sales ratio fell 0.5 percentage points to 29 percent in the second quarter.quarter compared to the previous three months.
Publisher: Tang Shihua, Futura Costaglione
