CMS Securities released a research report initiating coverage on CMS (00867) with a "Strongly Recommend" rating. The institution believes the impact of centralized drug procurement on the company's performance has been largely digested. Through a strategy of "overseas licensing + domestic partnerships + independent R&D," CMS has built a rich pipeline of innovative drugs. Starting from 2024, the commercialization of multiple blockbuster products is expected to drive an inflection point in performance, ushering in a new growth phase fueled by innovative drugs and international expansion. The main viewpoints of CMS Securities are as follows.
CMS is a platform-based pharmaceutical company focusing on the entire drug lifecycle, distinguished by its commercialization capabilities. Since initiating its "New CMS" transformation in 2018, the company has gradually absorbed the impact of centralized procurement on its core products, with innovation and internationalization becoming the core drivers of growth. The year 2024 marks the first year of commercialization for its innovative products, with several major innovative drugs set to launch successively. Furthermore, through its international industrial arm, CMS is expanding into emerging markets such as Southeast Asia.
The company has digested the impact of centralized procurement, transitioning from being "China's largest CSO" to a "Pharma" company, and is now advancing towards becoming an "innovative drug company with full-chain development." From a performance perspective, while the sequential inclusion of three core products into centralized procurement in 2023 caused some short-term volatility, the successive commercialization of innovative products starting in 2024, coupled with the rapid growth of exclusive drugs, has brought about a performance inflection point. Both revenue and profit growth turned positive in H1 2025. From a product standpoint, the company initially operated primarily as a CSO agent for imported original drugs. However, since beginning its transformation in 2018, it has rapidly enriched its product portfolio through overseas licensing, domestic partnerships, and independent R&D. Concurrently, it has focused on specialty areas, independently operating its skin health, ophthalmology, and Southeast Asia businesses, evolving into an innovative drug company with full-chain development.
Innovation: The revenue contribution from major exclusive/branded and innovative products exceeds 60%, with a focus on First-in-Class (FIC) and Best-in-Class (BIC) innovative drugs. Leveraging its "overseas licensing + domestic partnerships + independent R&D" mechanism, CMS has quickly assembled a pipeline featuring multiple global FIC and BIC innovative products. As of H1 2025, the company boasts nearly 40 innovative drug assets, including 5 commercialized innovative drugs, 6 in the New Drug Application (NDA) stage, and dozens in registrational clinical stages. Additionally, the company has developed approximately 20 in-house R&D candidates, with 5 already in clinical development and about 15 in the preclinical stage.
Internationalization: Expanding into Southeast Asian and Middle Eastern markets, overseas expansion is becoming the second growth curve. The company's overseas business focuses on emerging markets like Southeast Asia and the Middle East, which have large populations and significant unmet medical needs. CMS possesses full-chain capabilities encompassing product production, introduction, development, registration, and marketing. By H1 2025, it had submitted nearly 20 marketing applications for drugs and medical devices in Southeast Asia, the Middle East, and the Hong Kong, Macau, and Taiwan regions, covering dermatology, ophthalmology, oncology, and immunology. It has successfully commercialized products like Ruxolitinib cream in regions including Hong Kong and Macau.
Incubating Demai Pharmaceuticals; Skin Health Company to be Listed Separately. Focusing on specialties, CMS began independently operating its skin and ophthalmology businesses starting in 2021. Demai has built a comprehensive and differentiated product portfolio in dermatology, featuring three marketed drugs and several key R&D pipelines, including Ruxolitinib cream. In 2025, the company announced plans to spin off Demai Pharmaceuticals for a separate listing on the Stock Exchange, which would become the first independently listed business segment within the CMS Group.
Risk warnings include policy risks, R&D failure, promotion falling short of expectations, and supply risks.
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