Overview of the Healthcare Sector in China

The global pharmaceutical market reached an impressive value of \$1.09 trillion in 2023, significantly outpacing the size of China’s domestic market. Amid rising geopolitical risks and intense local competition, Chinese biopharmaceutical companies are pursuing globalization as a necessary strategy for sustainable growth. Leading the charge are companies like BeiGene, HUTCHMED, and Legend Biotech, leveraging innovative therapies and effective global strategies to establish a foothold in international markets.

BeiGene (Ticker: 6160 HK)

Recommendation: BUY

Target Price: HK\$160.00

BeiGene has emerged as a global leader in oncology, becoming the only domestic biopharmaceutical company with proven global capabilities. Ranked as the 15th-largest global cancer drug producer in 2023, BeiGene has built an integrated global operating platform that underpins its success in launching and commercializing innovative therapies.

Key Products:

• BRUKINSA: This Bruton’s Tyrosine Kinase (BTK) inhibitor achieved \$1.8 billion in revenue for the first nine months of 2024, marking a 107% year-over-year growth. With approvals in over 75 countries, BRUKINSA contributes 67.7% of the company’s revenue and is poised for continued growth in the global market.
• TEVIMBRA: As the leading PD-1 monoclonal antibody (mAb) domestically, TEVIMBRA generated \$536.6 million in sales in 2023. It is approved in over 40 countries and has been launched in the U.S. at a 10% lower price compared to its competitor, Keytruda. TEVIMBRA targets the \$50 billion global PD-(L)1 market.

BeiGene is diversifying its revenue mix with its strong haematology and solid tumor pipelines. The company’s ongoing rebranding to BeOne Medicines and planned redomiciling to Switzerland signifies its ambition to become a leading global biopharma player. Analysts project a 35.0% compound annual growth rate (CAGR) in global revenue from 2024 to 2026, with the company expected to achieve operating profit breakeven by 2025.

HUTCHMED (Ticker: 13 HK)

Recommendation: BUY

Target Price: HK\$30.00

HUTCHMED is recognized as a frontrunner in globalization, leveraging strategic partnerships to mitigate geopolitical risks and accelerate market penetration. With over 20 years of experience in oncology and immunology, HUTCHMED has achieved significant milestones in its global expansion.

Key Achievements:

• FRUZAQLA (Fruquintinib): In collaboration with Takeda, HUTCHMED has globally launched FRUZAQLA, amassing \$203 million in sales within the first nine months of 2024. Approvals in the EU, Japan, and other countries position it as a potential blockbuster within the next two to three years.
• Pipeline Growth: HUTCHMED is accelerating its R&D efforts, with upcoming product launches in China, including Sovleplenib, Tazemetostat, and new indications for Savolitinib in 2025-2026. Additionally, the company expects Savolitinib to secure U.S. FDA approval in 2026, with global expansion slated for 2027.

HUTCHMED achieved profitability in 2023, supported by significant upfront and milestone income from Takeda. With a robust two-year earnings CAGR of 41.0% (2024-2026) and a recent \$477 million gain from the sale of a 45% stake in SHPL, the company is on track for self-sustained growth. Trading at 2.2x 2025 projected price-to-book (P/B) ratio, HUTCHMED presents an attractive investment opportunity.

Legend Biotech

Legend Biotech has made significant strides in the global market through its partnership with Johnson & Johnson. Their collaborative product, CARVYKTI, is the first B-cell maturation antigen (BCMA)-targeted therapy approved by the EU for relapsed or refractory multiple myeloma. This breakthrough positions Legend Biotech as a key player in addressing unmet medical needs globally.

Other Key Players

CSPC Pharmaceutical Group (Ticker: 1093 HK)

Recommendation: HOLD

CSPC is a prominent player in the Chinese pharmaceutical industry, offering a stable revenue base. However, with a projected upside of only 24.9%, the recommendation for CSPC remains HOLD, reflecting its moderate growth potential compared to peers.

Sino Biopharm (Ticker: 1177 HK)

Recommendation: BUY

Sino Biopharm presents an attractive growth outlook with a projected upside of 78.1%. The company is leveraging innovation to expand its market share, making it a compelling investment choice.

Hansoh Pharma (Ticker: 3692 HK)

Recommendation: BUY

Hansoh Pharma is a strong contender in the biopharmaceutical space, with a projected upside of 73.5%. The company’s focus on innovative therapies positions it well for sustained growth.

Innovent Biologics (Ticker: 1801 HK)

Recommendation: BUY

Innovent is targeting a 66.7% upside, backed by a robust pipeline and expanding market approvals. This makes it a significant player in the global biopharma domain.

CSPC Innovation (Ticker: 300765 CH)

Recommendation: BUY

CSPC Innovation is expected to deliver a 38.7% upside, driven by its focus on advanced R&D and innovation. Its growth potential in both domestic and international markets remains strong.

Risks to Consider

Despite the promising outlook, several risks could impact the performance of the biopharmaceutical sector. These include worsening geopolitical tensions, intensifying competition, slower biotech funding recovery, weaker-than-expected financial results, and challenges in product R&D and market launches. Additionally, risks related to overseas expansion, collaborations, and domestic regulatory policies remain significant concerns.

Conclusion

Chinese biopharmaceutical companies are making remarkable strides in the global market, with BeiGene and HUTCHMED leading the charge. Both companies have demonstrated robust growth potential, making them attractive investment opportunities. While geopolitical and regulatory risks remain, the sector’s innovation-led approach provides a strong foundation for sustainable growth.