On January 6, 2023, the Hong Kong Stock Exchange (HKEX) unveiled significant news in the pharmaceutical sector, showcasing the corporate ambitions of Henrui Medicine, one of China's leading pharmaceutical firmsThe firm officially submitted its listing application to go public in Hong Kong, with aspirations of achieving an “A+H” dual listing in both mainland China and Hong KongThis announcement comes with joint sponsorship from international financial powerhouses Morgan Stanley, Citigroup, and Huatai International, exemplifying Henrui's intent to solidify its global presence.

Henrui Medicine has its roots deeply embedded in China, evolving into a globally recognized innovative pharmaceutical enterpriseSince 2019, the firm has consistently secured a position among the top 50 pharmaceutical companies worldwide, as per the rankings published by PharmExec, a prominent American pharmaceutical industry magazine

Additionally, in Citeline's 2024 ranking of the largest global pharmaceutical pipelines, Henrui proudly claims the eighth spot, underscoring its potential for innovation and growth.

The rationale behind Henrui's decision to pursue an H-share listing is multifacetedFirstly, tapping into the Hong Kong market facilitates an expansion of its international recognitionThe Hong Kong stock market boasts a diverse array of international investors, which could elevate the company’s brand influence in the global pharmaceutical landscapeSecondly, the H-share listing is anticipated to optimize the company's capital structure, opening new avenues for financing that can support diversified funding effortsLastly, this strategic move stands to bolster Henrui’s global footprint, enabling the company to enhance its overseas business ventures and forge international research collaborations, thus bridging gaps in foreign markets.

As outlined in its prospectus, Henrui intends to utilize the net proceeds from the global offering primarily for research and development initiatives, as well as constructing new manufacturing and research facilities both in China and globally

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Further investments to expand or upgrade existing production capabilities in its home market will also be addressed, along with provisions for working capital and general corporate needs.

The company’s dual strategy of promoting innovation and harnessing international avenues is a clear hallmark of its operational ethosHenrui is actively engaging in specialized research across various therapeutic areas, notably oncology, metabolic and cardiovascular diseases, immunology, respiratory illnesses, and neuroscienceThis commitment has led to the establishment of comprehensive technology platforms, facilitating a steady stream of innovative drugs and new treatment indications that have garnered regulatory approval.

According to the prospectus, Henrui’s product array showcases a robust and highly differentiated portfolio of innovative products, many of which are poised to become blockbuster pharmaceuticals

To date, 17 new molecular entities (NMEs) and four additional innovative drugs have successfully entered the marketBeyond that, the company is nurturing a pipeline of over 90 candidate NMEs and has eight other innovative drugs currently in clinical and late-stage trials — a testament to its rigorous R&D effortsThe total number of clinical trials undertaken is approximately 400, which includes over 20 trials conducted internationally.

The forthcoming H-share issuance will enable Henrui to intensify its investments in research and development, propelling its pipeline of innovative drugs whilst reinforcing its competitive edge in the marketplaceThis strategic enhancement is pivotal for the continuous optimization of its product portfolio and further assures its steadiness in the global pharmaceutical sphere.

Notably, Henrui’s increased focus on innovation has yielded considerable financial successes

As referenced in the prospectus, the proportion of revenue derived from innovative drug sources surged from 38.1% in 2022 to an impressive 43.4% in 2023, with projections indicating further growth to 47.7% for the nine-month period ending September 30, 2024. According to a research report by Frost & Sullivan, Henrui stands out among Chinese pharmaceutical firms in terms of both the revenue from newly developed molecular entities and the number of innovative drugs in its pipeline.

The clinical value of Henrui's innovative products is also commendableIn oncology, the groundbreaking results from the global Phase III CARES 310 clinical trial, where the combination of carrelizumab and apatinib emerged as a first-line treatment for advanced hepatocellular carcinoma, demonstrated a median overall survival duration of 23.8 monthsThis statistic marks the longest reported survival among all first-line treatments for unresectable hepatocellular carcinoma thus far

Moreover, the approval application for HER2 ADC shuriconcizumab (SHR-A1811) has been recognized by China’s National Medical Products Administration as a breakthrough therapy across seven indications, ranking first among all drugs in clinical stages in China.

In the competitive landscape of diabetes and weight-loss medications, Henrui is introducing a new GLP-1 and GIP dual receptor agonist (HRS9531) which possesses industry-leading potentialThe performance of the oral small molecule GLP-1R agonist (HRS-7535) has successfully reached Phase III trial enlistment, with peptide-based drug multiple receptor agonists (HRS-4729) already progressing towards clinical studiesImportantly, no other GLP-1, GIP, and GCG triple receptor agonists have received regulatory approval globally as of now.

This plethora of innovative successes stems from Henrui's exceptional research and development capabilities

The firm’s R&D endeavors have evolved from focusing solely on small molecules to a broader array of drug forms, which now include proteolysis-targeting chimeric proteins (PROTAC), peptides, monoclonal antibodies (mAbs), bispecific antibodies (BsAbs), multispecific antibodies, antibody-drug conjugates (ADCs), and radioligand therapies (RLT). Backed by leading technological platforms, Henrui is not only fostering transformative innovations but also successfully shortening the timeline for discovering and validating potential first-in-class or best-in-class compounds.

Henrui is also making significant strides in its internationalization strategy, achieving commercialization in over 40 nationsThe company has extensive experience adhering to regulatory standards set forth by overseas agencies such as the European Medicines Agency (EMA) and the US FDA related to production and quality measures

Recent milestones include the streamlined new drug applications (ANDAs) for three first generics granted by the US FDA in January, July, and October of 2024. Current and prospective global partners frequently assess Henrui, leading to opportunities for long-term collaborationsThese accomplishments reflect the global recognition of the quality management systems implemented by the company.

Since 2018, Henrui has also engaged in 12 out-licensing partnerships regarding 15 molecular entities, amassing approximately $12 billion in total transactional value, along with initial payments exceeding $400 millionThese endeavors remarkably enhance Henrui Medicine's global footprint and industry prestige.

Looking ahead to this new phase of growth, Henrui is witnessing substantial enhancements in its overall operations, thus further accentuating its global reachTheir remarkable financial trajectory demonstrates a total revenue of 22.8 billion yuan (approximately USD 3.54 billion) in 2023, representing a significant compound annual growth rate (CAGR) of about 14% since 2013, far surpassing the roughly 4% CAGR of the global pharmaceutical market during the same period.

The published financial data from the prospectus indicates Henrui's gross profit figures for 2022 to Q3 2024 being 17.789 billion yuan, 19.295 billion yuan, and 17.356 billion yuan respectively, along with net profits recorded at 3.815 billion yuan, 4.278 billion yuan, and 4.616 billion yuan for the same periods

Henrui touts a long-standing net profit margin, with 17.9%, 18.7%, and 22.9% recorded during the respective periodsRegarding cash flow, net operating cash inflows amounted to 1.265 billion yuan, 7.644 billion yuan, and 4.585 billion yuan during this timeline.

Historically, Henrui's only fundraising occurred at the time of its A-share listing, where it raised 479 million yuanIf the current Hong Kong IPO moves forward, it will mark Henrui's first instance of re-financing since its A-share debutWith an impressive record of having issued dividends 24 times amounting to a 16.45% dividend payout rate summing to over 8.029 billion yuan, Henrui's performance is remarkable against its initial fundraising achievements.

From a funding perspective, Henrui maintains a leading stance in R&D investments domesticallyIllustratively, research outflows for 2022, 2023, and Q3 2024 stand at 4.887 billion yuan, 4.954 billion yuan, and 4.549 billion yuan respectively, which constitutes 23.0%, 21.7%, and 22.5% of total revenues for those periods

This strong investment in R&D has catalyzed the nurturing of a robust innovative organizational frameworkCurrently, Henrui employs over 5,500 dedicated R&D personnel, nearly 60% of whom hold master’s degrees or higher, many of whom bring extensive experience from prominent multinational pharmaceutical firms and prestigious research institutionsThe company has also established 14 research centers across both domestic and international landscapes to address multi-domain pipeline developmental needs.

Furthermore, due to exemplary corporate governance, social responsibility practices, and commitment to sustainable business operations, Henrui has received an “A” rating in MSCI's Environmental, Social, and Governance (ESG) assessments for two consecutive years starting in 2023.

Industry experts assert that Henrui Medicine's R&D pipeline boasts numerous innovative products approaching commercialization, complemented by a continuously growing pipeline that merges short-term catalysts with long-term growth potential