China Galaxy Securities: Covered Fuhong Hanlin (02696) for the first time and gave a “recommended” rating to steadily advance domestic and foreign business

The Zhitong Finance App learned that China Galaxy Securities released a research report saying that Fuhong Hanlin (02696) was founded in 2010 and focuses on the fields of hematomas, solid tumors, autoimmune diseases, etc., and is the first company in China to lay out biosimilar drugs. Since 2018, the company has actively reached cooperation with overseas manufacturers on biosimilar drugs and innovative drugs. Products represented by trastuzumab have been approved for marketing in more than 50 countries and regions around the world. Covered for the first time, giving it a “Recommended” rating.

The main views of China Galaxy Securities are as follows:

Biosimilars are the basic market, and domestic and foreign business is progressing steadily

In 2023, the company turned a loss into a profit. In 2024, operating income was 5.724 billion yuan, up 6% year on year, and net profit after deducting non-return to mother was 815 million yuan, up 50% year on year. Among similar innovative pharmaceutical companies in Hong Kong stock, operating profit was at the leading level. In 2025, we entered a period of rapid overseas business development, and the profit of 2025H1 overseas products increased by more than 200% year on year. With the launch and commercialization of products such as trastuzumab, desumab, and pertuzumab in key regions such as the US, overseas revenue and profits are expected to maintain high growth.

HLX43 large single products are being actively promoted, and the value of R&D pipelines has increased

1) HLX43 is a potential global BICPD-L1ADC. It is undergoing clinical research for multiple indications such as lung cancer, gastric cancer, and thymic cancer. Following the update of Phase 1 data at the WCLC Conference in September 2025 (56 cases in total), on November 2, 2025, the company announced the key updated data for HLX43 treatment of NSCLC, combining international multi-center phase II clinical results for the first time. The overall efficacy was remarkable: patients with squamous NSCLC (2 mg/kg, n=33) had an ORR of 33.3%, and those with non-squamous NSCLC (2.5 mg/kg, n=35) had an ORR of 48.6%. At the same time, HLX43 does not rely on biomarker screening: PD-L1 negative (TPS < 1%, n = 43) patients had an ORR of 39.5%, indicating that efficacy is not limited by PD-L1 expression, which is expected to cover a wider range of groups. Furthermore, HLX43 is safe: the platelet count is reduced by only 1.7%, and hematologic toxicity is low. 9.8% of patients reported iRAE, and 2.9% of patients developed immune-related lung disease, but significant treatment benefits were observed: 40% CoRR and 100% tumor shrinkage rate, suggesting that its efficacy is mediated through small molecule toxins and immune mechanisms. At the same time, 2025 eSmoAsia revealed that HLX43 showed excellent initial clinical efficacy in advanced cervical cancer phase II clinical studies, with an ORR of 37.9%, DCR of 72.4%, and manageable safety. 2) HLX22: Combining trastuzumab with trastuzumab is more effective and safe. A phase II study of first-line treatment of HER2-positive gastroesophageal junction (G/GEJ) cancer with HLX22 combined with trastuzumab showed continued PFS/OS benefits, reduced the risk of progression or death by 80% during a follow-up period of >2 years, and global phase III clinical trials are ongoing. 3) Slulizumab: Differentiated strategy, leading the ES-NCLC circuit. Perioperative indications for gastric cancer have reached the main clinical end point. It will be the world's first perioperative gastric cancer treatment plan (pre- and post-operative) to replace adjuvant chemotherapy after surgery with immune monotherapy.

Performance has entered a period of improvement. Achieving full circulation of Hong Kong stocks will increase valuation

The company's early layout was globalized to expand the global market coverage of its products, and commercialization of core biosimilar products became an important driving force for performance and profit. Rituximab was approved for marketing in China in February 2019. It is the first biosimilar product developed and approved for marketing in China according to the “Technical Guidelines for Biosimilar Development and Evaluation (Trial)” issued in 2015. Operating income continued to grow at a high rate, and net profit to mother continued to improve. The company issued an announcement on March 24, 2025, recommending full circulation of H shares. Currently, the company's Hong Kong tradable shares account for 30.07%. After all or part of the domestic shares are converted, the company's liquidity is expected to improve significantly.

Investment proposal: Fuhong Hanlin uses global biosimilar R&D and sales as the basic platform, and lays out innovative pipelines such as ADC and monoclonal antibodies. Some products show broad spectrum and BIC potential, and subsequent performance growth is highly certain. The company's net profit for 2025-2027 is estimated to be 8.23/7.44/1,129 billion yuan, corresponding to the current stock price PE of 39/43/28 times. Using an absolute valuation method, the company's total market value is 521-67.9 billion yuan.

Risk warning: 1. Risk of insufficient growth in pharmaceutical consumption capacity due to increased macroeconomic pressure; 2. Risk that policies such as medical insurance payments for innovative drugs fall short of expectations; 3. Risk of global order transfer due to geopolitics; 4. Risk of collection or fee reduction exceeding market expectations; 5. Risk that product development progress falls short of expectations.