Qunyi Securities: Maintaining Fosun Pharmaceuticals' (02196) “Buy” Rating Target Price of HK$26.5

The Zhitong Finance App learned that Qunyi Securities released a research report saying that in order to reflect that Fosun Pharmaceuticals (02196)'s large down payment increased profits, the bank raised its profit forecast. The bank expects the company to achieve net profit of 3.32 billion yuan, 4.68 billion yuan, and 4.77 billion yuan respectively in 2027, YOY +19.8%, +40.8%, and +19.1% (originally estimated at 3.32 billion yuan, 3.86 billion yuan, 4.59 billion yuan, YOY +19.8%, +16.2%, and +19.1% respectively), EPS is 1.2 yuan, 1.8 yuan, and 1.8 yuan respectively. The corresponding H share PE is 16X/11X/11X, and H shares have been undervalued for a long time. The bank is optimistic about its development and maintains HHH's “purchase” Investment rating, target price HK$26.5.

The main views of Qunyi Securities are as follows:

Incidents:

The company announced that the company's holding subsidiary, Yakyu Pharmaceuticals, Fosun Pharmaceutical Industries and Pfizer have jointly signed a “License Agreement” to authorize Pfizer's exclusive right to develop, use, manufacture and commercialize the oral small molecule drug GLP-1R agonist (including YP05002) and products containing this active ingredient on a global scale. Yakuyu Pharmaceutical will receive a non-refundable down payment of 150 million US dollars and development milestone payments of up to 350 million US dollars based on clinical and commercialization progress of licensed products. Furthermore, based on the annual net sales of the licensed products, Pfizer paid up to US$1,585 million in sales milestone payments to Yakou Pharmaceuticals.

Authorized products are in overseas Phase I clinical trials

YP05002 is an oral small molecule glucagon-like peptide-1 receptor (GLP-1R) agonist independently developed by the company and has independent intellectual property rights. It is mainly used to treat type 2 diabetes, obesity and related diseases. Currently, YP05002 products are in phase I clinical trials in Australia.

Major deal with Pfizer, R&D strength recognized

The total package price of the company's blockbuster BD deal is 2,085 billion US dollars, which is over 10 billion yuan. It is a major transaction, and the transaction party is Pfizer, a well-known multinational pharmaceutical company. It can be considered a landmark event where the world's leading pharmaceutical companies recognized the company's product development strength, and an important milestone in the company's innovation leadership and deep internationalization. The bank believes that the company's R&D pipeline has gone global and is in the eyes of large overseas pharmaceutical companies. It is expected that more BD trading opportunities will occur in the future, and the overall value of the company's R&D pipeline is expected to be re-evaluated.

A large down payment will increase the level of net profit

The company will now receive a down payment of 150 million US dollars (about 1.06 billion yuan at the latest exchange rate), which is equivalent to 38% of the company's net profit in 2024, which will greatly increase the company's net profit. The bank expects that it may be included in 2026.

Risk warning: New product development progress and sales fall short of expectations, drug collection and national negotiations to reduce prices exceeding expectations, risk of impairment of goodwill