Valuation of Fosun Pharma's Innovative Drug R&D Pipeline

is a leading healthcare group in China, with a current market capitalization of approximately , a share price of $26.46, and a price-to-earnings ratio of [0]. In terms of financial performance, the company’s 2024 ROE was 6.89%, net profit margin 8.30%, and operating profit margin 11.30%, with overall profitability at the upper-middle level in the industry [0].

Fosun Pharma’s BD transactions in the innovative drug field in recent years have shown the following characteristics:

: Supplement independent R&D capabilities by licensing in overseas innovative drug pipelines to reduce early-stage R&D risks
: Establish joint R&D collaborations with international pharmaceutical companies to share R&D costs and risks
: Promote overseas licensing of self-developed innovative drug products to achieve international expansion

This ‘licensing-in + independent R&D’ dual-drive model allows the company to quickly enrich its product portfolio while controlling R&D risks.

The valuation of innovative drug R&D pipelines needs to be classified by clinical phase:

R&D Phase	Success Rate	Valuation Range (per project)	Risk Characteristics
Pre-clinical	10-15%	$5M-$30M	Highly uncertain
Phase I Clinical	30-40%	$30M-$100M	Safety risk
Phase II Clinical	50-60%	$100M-$300M	Efficacy risk
Phase III Clinical	60-70%	$300M-$1B	Commercialization risk
Launched	90%+	Based on sales multiple	Market risk

:

• Oncology
  : Core therapeutic area, usually enjoying a higher valuation premium
• Immunology
  : Autoimmune diseases, with great market growth potential
• Cardiovascular/Metabolic Diseases
  : Chronic disease management, stable cash flow

:

• First-in-class
  : Global first-in-class target, high risk and high return
• Best-in-class
  : Differentiated me-better drugs, optimal risk-reward ratio
• Fast-follow
  : Fast-follow strategy, higher R&D success rate

####3. Valuation Methodologies

rNPV = Σ[FCF_i × P_success_i] / (1+r)^i

Where FCF_i is the cash flow in year i, P_success_i is the success probability at each stage, and r is the discount rate (usually 10-15%).

From pre-clinical to launch, the cumulative success probability at each stage is approximately:

• Phase I →30-40%
• Phase II →50-60%
• Phase III →60-70%
• NDA/BLA →85-90%

Refer to the valuation levels of similar BD transactions:

• Licensing-in of early-stage pipelines: $10M-$50M upfront payment + milestones
• Licensing-in of Phase III pipelines: $100M-$500M upfront payment + sales royalties

1. Echeloned Pipeline Layout
   : Multi-level pipeline portfolio reduces the risk of failure of a single product
2. International BD Capability
   : Frequent BD transactions reflect the company’s strong international business development capabilities
3. R&D Efficiency Assurance
   : The company adopts conservative accounting policies, and a high depreciation/capital expenditure ratio ensures effective resource allocation [0]

1. Long R&D Cycle
   : Innovative drugs usually take 10-15 years from discovery to launch
2. Regulatory Uncertainty
   : Differences exist between domestic and international approval requirements
3. Intensified Competition
   : Competition for drugs targeting the same targets is becoming increasingly fierce
4. Policy Impact
   : Medical insurance negotiations and volume-based procurement policies continue to affect drug pricing

Based on Fosun Pharma’s:

• Pipeline quantity and phase distribution
• Therapeutic area competitiveness
• International BD capability
• Current financial status

:

:

• Key clinical trial data readout
• New BD collaboration signing/milestone achievement
• Regulatory approval progress

:

• Pipelines gradually realize commercial value
• International strategy continues to advance
• R&D efficiency continues to improve

---

[0] Jinling AI Financial Database - Fosun Pharma (600196.SS) Financial and Market Data