Core innovative pipeline continues to drive growth, Morgan Stanley gives HENLIUS a valuation of 72 billion yuan, target price hits a new high

According to the Zhitong Finance APP, recently, Morgan Stanley released the latest research report, conducting an in-depth assessment of the innovative drug pipeline value of Fosun Pharma (02196) and its holding subsidiary HENLIUS (02696). The report pointed out that HENLIUS's core innovative pipeline continues to drive valuation growth, combined with its biosimilar business, is expected to contribute approximately RMB 72 billion to the total valuation of this innovative biopharmaceutical company. Based on the current valuation of over RMB 40 billion, this implies that the stock still has nearly 80% upside potential, translating to a target price of about HKD 145. Institutions are continuously raising the target price for HENLIUS, further highlighting their optimism about the company's value. Morgan Stanley stated that HENLIUS has established a diversified product portfolio consisting of antibodies and antibody-drug conjugates (ADC), while also expanding into the field of bispecific/trispecific antibodies. Although the company's sales were previously mainly driven by biosimilars and PD-1, this year's stock price increase (over 200% year-to-date) is primarily attributed to the potential demonstrated by its innovative pipeline in clinical trials. In particular, HLX43 (PD-L1 ADC) and HLX22 (HER2 monoclonal antibody) are core innovative assets that drive the prospects for external licensing and increase the diversity of the product pipeline and international collaborations. Specifically, HLX43 is well-positioned for the treatment of EGFR wild-type non-small cell lung cancer (NSCLC) in second-line/third-line (2L/3L) settings. The firm expects its peak sales in the U.S. market, adjusted for probability of success (PoS), to reach USD 3.9 billion (unadjusted USD 5.6 billion). The differentiated advantage of this drug lies in the encouraging objective response rates (ORR) it has shown in patients with advanced EGFR wild-type NSCLC and squamous NSCLC (sqNSCLC) patients who have failed prior docetaxel treatment (≥3L treatment), with rates of 46.7% and 30%, respectively, and its efficacy is independent of PD-L1 expression levels. Based on positive data, HENLIUS is seeking FDA approval for its use in ≥3L treatment indications based on single-arm data, and is currently evaluating it in a Phase II international multicenter clinical trial (MRCT) for second-line treatment (compared to docetaxel), with plans to initiate Phase III clinical trials within a year. Additionally, HENLIUS is also exploring its use in first-line NSCLC treatment and is conducting several Phase II trials targeting various other cancer types to broaden its label (indications). HLX22 has shown early signs of significant progression-free survival (PFS) and overall survival (OS) benefits in a Phase II trial for first-line (1L) HER2-positive gastric cancer (GC) conducted in China, with hazard ratios (HR) of 0.2 and 0.5 compared to current standard of care (SoC) at 24 weeks. However, considering the limited number of patients, the firm conservatively estimates its adjusted peak sales for first-line HER2-positive gastric cancer in the U.S., Japan, and Europe to be USD 2.7 billion (unadjusted USD 4.1 billion). HENLIUS is exploring the combination of HLX22 with Enhertu for the treatment of HR-positive/HER2-negative breast cancer (BC), with proof of concept (PoC) data expected to read out in the second half of 2026. If proven effective, it will further unlock its upside potential In addition, Serplulimab (PD-1) is expected to enter the Biologics License Application (BLA) stage in the United States (in the first half of 2026). It will be the first PD-1 monoclonal antibody to show good efficacy in first-line extensive-stage small cell lung cancer (ES-SCLC). The drug is also undergoing a Phase III clinical trial for neoadjuvant treatment of pMMR/MSS colorectal cancer (CRC, accounting for 95% of CRC cases) and gastric cancer (GC). Despite the intense competition in the cancer market, with various PD-1 products already available, Morgan Stanley believes that the unique positioning of Serplulimab in first-line ES-SCLC, neoadjuvant treatment of gastric cancer (GCneo), and CRC (where it has shown therapeutic benefits compared to limited available treatment options) should help it gain a considerable market share in its target markets. Overall, Morgan Stanley believes that HENLIUS's innovative product portfolio is an indispensable part of Fosun Pharma, and it is expected that 73% of its valuation growth will come from the global potential of its core candidates—HLX43, HLX22, and Serplulimab. In addition, its extensive global layout of biosimilars (which have been approved in the United States, Canada, ASEAN, the Middle East, and other regions) will effectively offset the negative impact of China's volume-based procurement (VBP) and contribute profits with higher profit margins