Recently, Hengrui Medicine lost its position as the "No. 1 pharmaceutical company".
In the pharmaceutical industry, BeiGene's transcendence sends a signal.
For a long time in the past, Hengrui Medicine was the undisputed leader in the pharmaceutical industry. Relying on the model of "imitation + innovation", Hengrui has been leading the entire industry, and many of its core products once occupied half of the domestic pharmaceutical market.
As early as 2021, Hengrui Medicine's stock price continued to rise after a series of sharp increases, reaching a high of 96.7 yuan per share, and its total market value reached an astonishing 616.9 billion yuan.However, the turning point also occurred in 2021. Affected by multiple factors in the industry and the outside world, Hengrui Medicine's growth engine gradually stalled, and the "imitation + innovation" model began to fail.
In terms of performance, from 2021 to 2023, Hengrui Medicine's revenue growth rate was -6.59%, -17.87% and 7.26% respectively, and its net profit growth rate was -28.41%, -13.77% and 10.14% respectively. Compared with the revenue growth rate of 25%+ and net profit growth rate of 30%+ in the past, Hengrui Medicine's performance growth has slowed down significantly in recent years.
From the current perspective, although Hengrui Medicine's market value has been surpassed by BeiGene, the significance behind this is quite significant. This means that the "imitation + innovation" model that Hengrui Medicine has used for more than ten years has begun to be subverted, and the moat advantage it has built under this model is gradually being lost. It also proves that the era of innovative drugs in the domestic pharmaceutical industry has arrived.
Industry alternation
Hengrui Medicine's predicament comes from the industry itself.
In the past, Hengrui Medicine's success as the leading pharmaceutical company was largely due to its forward-thinking approach. For example, while other pharmaceutical companies were still developing APIs, Hengrui Medicine had already shifted its focus to generic drugs for oncology and anti-infective medicines.
Later, when the industry began to flock to generic drugs, Hengrui Medicine was already ahead in developing innovative drugs. In other words, Hengrui Medicine's vision was years ahead of most pharmaceutical companies, and it is precisely this "generation gap" that has enabled Hengrui Medicine to maintain its leading position.
However, in the broader context of innovation, Hengrui Medicine's pace is still "too slow." Of course, the innovative drug industry is inherently characterized by high investment, long development cycles, and a high failure rate.
According to media reports, only one out of over 10,000 promising compounds ultimately becomes a marketed drug. This demonstrates that the success of innovative drugs relies not on foresight but on "hard power." Given the extremely high barriers to entry for developing innovative drugs, pharmaceutical companies that are able to do so already possess significant capabilities. Consequently, in the era of innovative drugs, Hengrui Medicine faces increasing competitive pressure.
In terms of R&D investment, Hengrui Medicine's R&D expenses will be 5.943 billion, 4.887 billion, and 4.954 billion from 2021 to 2023, respectively, accounting for 33.29%, 34.73%, and 34.23% of period expenses. It is reported that Hengrui Medicine's net profit has been negative in recent years.
The massive capital investment will undoubtedly put pressure on Hengrui Medicine's performance at this stage. However, if a hit product emerges, all problems can be easily solved.
For example, BeiGene, whose market capitalization has surpassed Hengrui Medicine, will spend 9.538 billion yuan in 2021, 11.15 billion yuan in 2023, and 12.81 billion yuan in 2024, respectively—1.6 times, 2.28 times, and 2.59 times more than Hengrui Medicine. This shows that the pharmaceutical industry's predicament stems from the products and companies themselves, not the capital market.
The fact that Hengrui was surpassed by BeiGene shows the changes that an innovative product can bring to a company and even an industry.
Hengrui's breakthrough
Hengrui Medicine has long been aware of the changes in the industry in recent years.
In order to cope with market pressure, Sun Piaoyang, who had retired behind the scenes, came out again.
After Sun Piaoyang returned to the front line, he immediately adjusted his R&D strategy. This included several overseas investments made by Hengrui Medicine over the past two years, including a stake in Yingli Pharmaceuticals, the acquisition of Wanchun Pharmaceutical's Plinabulin, an investment in Tianguangshi, and a partnership with Qiyu Bio.
Hengrui Medicine's R&D strategy has shifted from relying mainly on "self-research" in the past to "self-research + acquisition".
From now on, the effect of the strategy adjustment is obvious.
It is reported that Hengrui Medicine will launch more than 20 innovative drugs in 2024, and the sales of innovative drugs are expected to reach 50%; the next two years will be an intensive period for Hengrui to launch innovative drugs, and 13 products are expected to be approved, including anti-tumor drugs, postoperative analgesics, ophthalmic drugs, innovative drugs in the fields of autoimmunity and metabolism, etc.
Furthermore, Hengrui Medicine's performance and stock price have also begun to recover. In terms of performance, Hengrui Medicine's cumulative revenue and net profit in the first three quarters of last year were 20.19 billion yuan and 4.62 billion yuan, with revenue and net profit growth rates of 18.67% and 32.98%, respectively. Regarding its stock price, Hengrui Medicine's stock price has continued to rise over the past three quarters, with a cumulative increase of 26.19%, and its market capitalization has returned to above 300 billion yuan.
In addition to shifting its R&D strategy, Hengrui Medicine recently made another noteworthy move. On February 6th, Hengrui Medicine released a document personally signed by Chairman Sun Piaoyang, which strongly mandated that the entire company, from headquarters to subsidiaries, and from R&D to sales, submit detailed AI application plans by February 25th, with implementation directly tied to cadre performance evaluations.
As for the reasons behind Hengrui Medicine's comprehensive AI rollout, media analysis suggests it's driven by a need to accelerate development. According to a TechEmergence report, AI can increase the success rate of new drug development by 16.7%. AI-assisted drug development can save pharmaceutical companies $54 billion in R&D costs annually and reduce time costs by 40% to 60% in key R&D stages.
Overall, while Hengrui Medicine's brief rise to the top of the industry sends some signals, it's not all bad news for the company. Increasing R&D efforts in innovative drugs and striving for breakthroughs through innovation remain Hengrui's most important strategy going forward.

https://caifuhao.eastmoney.com/news/20250225090416586120600