[Zhenzhuo Hong Kong Stock Expert] China Medical System (00867.HK) successfully transformed, spin-off of dermatology drug listing has bright prospects
$CMS(00867.HK) has its business strengths primarily in the three core dimensions of "effective innovation transformation, strong commercialization capabilities, and a clear internationalization strategy." After enduring the pain of centralized procurement in the past, the company has returned to a growth trajectory in 2025, with significantly enhanced competitiveness.
The group's innovative drug products continue to scale up. In 2025, revenue reached 9.390 billion yuan (up 8.9%), with exclusive/innovative drug revenue surging 44.1%, accounting for nearly 60% of total revenue, completely eliminating reliance on older products affected by centralized procurement.
CMS has about 50 innovative pipelines. For example, the world's first brain cell protective agent Y-3 has been submitted for market approval, and its self-developed weight-loss ** siRNA drug CMS-D008 has also entered clinical trials.
Furthermore, Poon Tit-shan, Vice Chairman of the Hong Kong Stock Analysts Association, pointed out that the group possesses a powerful commercialization system with deep and extensive channels. After 30 years of deep cultivation, the company has covered over 55,000 hospitals and 320,000 retail pharmacies nationwide, possessing strong market access and promotion capabilities.
Moreover, the group's dermatology business (Dermagene) achieved a 73.2% surge in revenue in 2025 through omni-channel marketing including new retail and e-commerce. After the launch of its core product Ruxolitinib Cream, the target annual sales exceed 500 million yuan.
The company has established a complete "introduction - registration - sales" chain in Southeast Asia. 2025 was the first year of sales, with growth expected to exceed 100% in 2026, creating a second growth curve.
In recent years, CMS has adopted the "Search & Development (S & D)" model, not blindly chasing hotly contested red ocean markets like PD-1, but focusing on blue ocean areas with urgent clinical needs and favorable competitive landscapes. For example, the introduced Ruxolitinib Cream filled the gap in vitiligo treatment in China and is seen as a potential blockbuster product worth billions. Additionally, it has established advantages in areas like varicose vein sclerotherapy and epilepsy emergency treatment through "exclusive" products.
CMS has been preparing for the spin-off and listing of its dermatology business subsidiary, Dermagene, since last year.
The spin-off and listing of Dermagene can benefit CMS and its shareholders in three aspects: capital operations, business focus, and shareholder returns. Capital Operations and Value Release. After independent listing, it can directly raise funds in the capital market, providing "fresh water" for high sales expenses and R&D investments. The parent company can focus on core prescription drug areas like cardiovascular/cerebrovascular and central nervous system, and fully expand into the Southeast Asian market.
This spin-off adopts an "in-specie distribution" method, which is equivalent to directly distributing Dermagene shares to shareholders without affecting existing shareholding ratios. Simultaneously, an independent listing also facilitates equity incentives for core employees, helping retain talent.
In summary, CMS's advantages lie in its first-class commercialization capabilities and pragmatic product selection strategy, which constitute a deep moat in the current pharmaceutical winter. Poon Tit-shan, Vice Chairman of the Hong Kong Stock Analysts Association, suggests investors can gradually accumulate shares at the current price for medium-term holding, with a target of HK$17 and a stop-loss below HK$11.70.
Author: Poon Tit-shan
Vice Chairman, Hong Kong Stock Analysts Association (I do not hold the relevant shares; my clients hold the relevant shares)
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