Source | Phoenix Finance

Author |DW

In May 2025, China's pharmaceutical industry ushered in a historic moment - the "Pharma King" of A-share Hengrui Medicine officially passed the listing hearing on the Hong Kong Stock Exchange, and will launch the Hong Kong stock IPO roadshow as soon as this month. The estimated fundraising scale is US$2 billion (about RMB 14.5 billion), and it is expected to become another "A+H" pharmaceutical giant listed after WuXi AppTec, BeiGene and Rongchang Bio.

This move has sparked heated discussion in the market - why is this "not short of money" pharmaceutical company with a cash book exceeding 24 billion yuan and a debt-to-asset ratio of only 7.30% (as of the end of the first quarter of 2025) still going to go public in Hong Kong? What is even more striking is that behind the leading companies with a market value of 300 billion yuan, there are the most legendary couples in the Chinese pharmaceutical industry - Sun Piaoyang and Zhong Huijuan. They started from ordinary technicians and chemistry teachers in small towns in northern Jiangsu, and jointly built a medical empire with a total market value of over one trillion yuan, and were hailed as the "most awesome medical couple."

However, in recent years, Hengrui Medicine has faced challenges: its market value has been overtaken by BeiGene, and it has also suffered from problems such as the loss of R&D personnel and the low proportion of innovative drug revenue. Now that the "couple couple" has been listed on the Hong Kong stock market again, can we tell a new story and achieve a gorgeous turn?

01 The trap of "sky-high-priced medicine" and the "couple-wife" pharmaceutical enterprise empire

"The farthest distance in the world is not life and death, but the medicine is there, but I can't afford it." This widely circulated sentence accurately hits the social pain points brought by high-priced medicines. Seven years ago, the release of the movie "I Am Not a God of Medicine" pushed the controversy over "sky-high-priced anti-cancer drugs" to a climax. The protagonist of the film, Cheng Yong, acts as an agent for the Indian generic drug "Glenin", brings hope to patients with chronic myeloid leukemia, directly pointing to the contradiction between the high cost of original drugs and the universality of generic drugs.

In reality, one of the main manufacturers of the domestic generic drug "Gleevec" is Hausen Pharmaceutical (the operating entity of Hansen Pharmaceutical), which is led by Zhong Huijuan, wife of Sun Piaoyang, chairman of Hengrui Medicine. This connection once made Hausen Pharmaceutical regarded as Hengrui Medicine's "shadow company".

In the Chinese business world, "husband and wife" are not uncommon, but it is extremely rare for Sun Piaoyang and Zhong Huijuan to be in charge of a listed company and list the rich. Hengrui and Hansen (Hausen) they jointly created are therefore known as the "most awesome couple" in the medical circle.

In 1982, Sun Piaoyang, a graduate of China Pharmaceutical University, was assigned to the Lianyungang Pharmaceutical Factory, which was on the verge of bankruptcy. In 1990, when he was 32 years old, he took over the heavy burden of the factory manager, the factory was still producing red potions, with an annual profit of less than one million. The chemical engineer wearing glasses mortgaged the factory and spent 1.2 million yuan to buy the anti-cancer drug patent and improved the injection into oral capsules. In 1992, this "life-saving capsule" was born, with a single drug sales of over 100 million yuan, which made the debt factory reborn.

Sun Piaoyang firmly believes in the iron law of "survival without innovation". In 2000, Hengrui entered the A-share market, and he spent all 480 million yuan in fundraising to research and development, but he hit the wall in the cooperation between industry, academia and research - scientists want papers, companies want products. The tragic defeat in the patent battle with Sanofi in France in 2003 made him realize the urgent need for independent innovation. When PD-1 monoclonal antibody was released in 2019, its pipeline had 47 innovative drugs, and it had entered the global innovative drug arena from the Red Sea of ​​generic drugs.

While Sun Piaoyang rewrites the fate of the pharmaceutical factory, his wife Zhong Huijuan is performing a more dramatic life. In order to support her husband's career, this chemistry teacher at Lianyungang Middle School resolutely resigned from her teaching position in 1996 and took over Hansen Pharmaceutical, which had only more than a dozen people. She took the laboratory as her home and led the team to develop the first new drug, and her sales soared to 30 million in 1997. 23 years later, Hansen landed on the Hong Kong Stock Exchange, with a market value of over 100 billion Hong Kong dollars on the first day. She topped the "Hong Kong Stock Pharmaceutical Queen" with a net worth of 60 billion.

In 2019, the couple won the Forbes China Rich List with a net worth of 182.4 billion yuan, and their wealth peaked at 251.4 billion yuan the following year. Hengrui's market value once approached 600 billion yuan, and together with Hansen, it built a medical map covering all fields such as anti-cancer, anti-infection, and diabetes. Adding to Hansen Pharmaceuticals, the market value of the two's medical empires was once close to 1 trillion yuan.

Hengrui Medicine will soon be listed on the H-share market, and this top couple in the pharmaceutical industry will reunite in the Hong Kong stock market.

02 The 300 billion empire has hidden worries: the revenue of innovative drugs is only half of Baekje

Looking back at Hengrui Medicine's growth history, it is a microcosm of an industry that breaks through generic drugs and transforms into innovative drugs. In the early years, it rose with its first generic anti-cancer drug, and was forced to accelerate the layout of innovative drugs due to the impact of the profits of generic drugs due to the centralized procurement policy.

Myths are not smooth sailing. In 2021, the policy of centralized procurement of generic drugs hit Hengrui hard, with the core product carboplatin injection lowering the price by 80%, and the net profit plummeted by 28% that year, and the market value evaporated by more than 400 billion yuan. Sun Piaoyang, who retreated behind the scenes, was forced to regain the leadership seal, lay off 4,000 employees, and capitalized R&D expenses to beautify financial reports for the first time. At the same time, Hansen was fined 25.54 million yuan for "selling money with money", exposing the pain of the industry's unspoken rules.

In recent years, Hengrui Pharmaceutical's revenue and net profit have both increased. Hengrui's Hong Kong stock IPO is more like a "breakout battle": enhancing brand influence through financing in the international capital market and paving the way for overseas travel. However, its overseas revenue accounts for less than 3%, far lower than BeiGene (58.2%). The approval of the core product Carrelizumab FDA has hit a setback, which is in sharp contrast to the success of BeiGene PD-1 drug in the US market.

Deeper anxiety comes from changes in the market structure, and the "involved" of domestic innovative drugs has intensified. New forces such as BeiGene have rapidly risen with their global innovative drug strategy. Their revenue in the first three quarters of 2024 was 19.1 billion yuan, while Hengrui's innovative drug revenue in the same period was 9.6 billion yuan. Judging from the revenue of innovative drugs alone, BeiGene has surpassed Hengrui Medicine and has become a veritable leader in innovative drugs. The gap between the two further widened in 2024, with Hengrui Medicine and BeiGene’s innovative drug revenues of 13.892 billion yuan and 27.214 billion yuan respectively.

Judging from the prospectus submitted previously, Hengrui Medicine's company's revenue in the first three quarters of 2024 was 20.19 billion yuan and its net profit was 4.62 billion yuan. Among them, the proportion of innovative drugs revenue rose to 47.7%, but generic drugs still contributed more than half of the revenue, and the transformation has not been completely completed. Hengrui Medicine's business covers multiple fields such as tumors, metabolism, cardiovascular and other fields, and has 17 innovative drugs on the market. Judging from the recently updated prospectus, in 2024, Hengrui Medicine's innovative drugs accounted for 49.64%, setting a record high in history.

A senior pharmaceutical industry insider pointed out to Phoenix Finance that Hengrui and Baekje represent two paths for the development of innovative drugs in China. Hengrui transformed from generic drugs, while Baekje relied on overseas markets. The person mentioned that although Hengrui has strong sales capabilities (as of December 31, 2024, Hengrui Medicine has a sales team of about 9,000 people, and its sales network covers more than 22,000 hospitals and more than 200,000 offline retail pharmacies in more than 30 provincial administrative regions in China), there has been a problem of loss of R&D personnel in recent years. He believes that this Hong Kong stock IPO may be for financing, and the R&D cycle of innovative drugs is long, affected by medical insurance policies and needs to maintain market value, forming an "impossible triangle", which limits the R&D investment of Chinese pharmaceutical companies, and future mergers and acquisitions may be an important way.

03 Can internationalization maintain the throne of "Medicinal Grass"?

Hengrui Medicine's sprint for the Hong Kong stock IPO this time is regarded as an important measure to strengthen its "dialogue" with the international capital market and strive to protect its status as "Medicine Grain" ("A-share Drug King").

As a leader in the pharmaceutical industry for many years, Hengrui Medicine's market value exceeded 600 billion yuan in 2021. However, its stock price has been under pressure since then. At the close of A-share market on February 21, 2025, BeiGene surpassed Hengrui Medicine's 308 billion yuan with a market value of 310.7 billion yuan, ending the latter's 15-year position as the "No. 1 pharmaceutical company" and officially topped the market value list of A-share pharmaceutical companies. Although the market value gap between the two has narrowed to about 326.8 billion (Hengrui) vs. 327.3 billion (Beijing Gen), the challenge has already emerged.

In the prospectus, Hengrui Medicine made it clear that the fundraising will be focused on the construction of overseas R&D centers, global multi-center clinical trials, and the expansion of international sales network. At present, the company has launched more than 20 overseas clinical trials in many countries and regions including the United States, Europe, Australia, Japan and South Korea, and has products commercially sold in more than 40 countries. International layout has become its key strategy to deal with domestic competition and consolidate its industry position.

Hengrui Medicine also faces multiple risks and challenges in its Hong Kong stock listing. The market is worried that its Hong Kong stock valuation may be lower than that of A-shares, resulting in a downward market value under pressure, which will affect the trading activity and pricing power of A-shares. After the Hong Kong stock market is listed, Hengrui Medicine needs to benchmark international standards to strengthen GMP execution and clinical data transparency. At the same time, the company may need to form a cross-market investor relations (IR) team to deal with differences in financial report disclosure requirements and exchange rate fluctuations in the two places, and strive to enhance global investor confidence.

Hengrui Medicine spent a lot of space in its prospectus to reveal potential risks: for example, the research and development cycle of new drugs (especially innovative drugs) is long, the cost is high, and the results are unpredictable. If R&D or commercialization fails, it will seriously affect the company's profitability and prospects. If the drugs used in combination have safety, efficacy or other problems, it may lead to the inability to sell related products, delayed approval or shortage of supply, causing serious damage to the company's business.

Faced with an unstoppable wave of sea outings, Hengrui Medicine also pointed out that changes in patent laws in China, Europe, the United States and other jurisdictions in which Hengrui Medicine holds intellectual property rights may pose challenges to its intellectual property protection in such jurisdictions, increasing the risk of being copied or litigated.

As Hengrui Medicine's H-share listing approaches, Sun Piaoyang and Zhong Huijuan, the vision of the "couple and wife" in the pharmaceutical industry, has crossed national boundaries. Sun Piaoyang made it clear that the listing in Hong Kong is a key step in his globalization strategy. At the same time, Hansen Pharmaceutical, which Zhong Huijuan is taking the helm, is also accelerating its international market layout of mental and anti-tumor drugs.

However, the road ahead is not smooth. Competitive pressure on innovative drugs from new forces such as BeiGene continues to exist, and Hengrui's innovative drug revenue in 2024 is only about half of that of BeiGene. In addition to the controversy over the profits brought about by R&D capitalization, it still takes time to test whether this "Medical God couple" can continue to write the legend.

Over the years, Hengrui and Hansen have been repeatedly questioned by "shadow companies" due to their overlapping business and related transactions. For example, Hengrui had suspended the research and development of cipatinib, but the applicant for the clinical approval was Hansen; the two companies even shared the R&D platform, and Sun Piaoyang also combined the sales of the two companies to count.

From small factories in northern Jiangsu to multinational pharmaceutical companies, the story of Sun Piaoyang and Zhong Huijuan is a microcosm of China's pharmaceutical industry from imitation to innovation, from closure to globalization. Their success is not only the courage to break the deadlock in technology, but also the strategy of capital operation, and it is also inseparable from the opportunities given by the times. The listing of Hengrui H shares may be the beginning of the next "big bet" between the couple.

[Editor in charge: Ma Yidong PF171]