The innovative drugmaker's newfound profitability marks its transition into a new stage characterized by stability and virtuous development cycles

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Key Takeaways:

• InnoCare posted an annual profit of 644 million yuan, driven by licensing and product sales, achieving profitability two years ahead of plan
• The company has made significant strides in global expansion, including an out-licensing agreement with Prolium Bioscience

A confluence of factors, including market liquidity, investor composition, and cross-border capital controls, have led to significant valuation gaps between companies listed in Hong Kong and their concurrent listings on China's A-share markets in Shanghai and Shenzhen. InnoCare Pharma Ltd. (9969.HK; 688428.SH) offers one such case, as its Hong Kong shares consistently trade at roughly half the valuation of its Shanghai listing. That could present potential upside for the Hong Kong shares, particularly as the company continues to evolve into a more stable business with diverse revenue streams and consistent profits.

InnoCare's 2025 annual report, released on March 25, included its first full-year profit, coinciding with the company's 10th anniversary — a milestone signaling its evolution from biotech startup to a mature, independent biopharma player.

Despite attracting strong market attention for its big business development deals, the company remains relatively undervalued. InnoCare now stands at a "triple inflection point," with profitability achieved, globalization enhanced, and core pipelines progressed, marking a new stage in its development.

Self-sustaining growth

Its latest report shows InnoCare's revenue last year rose 135% to 2.38 billion yuan ($344 million). More importantly, it recorded an annual profit of about 644 million yuan, representing a swing of more than 1 billion yuan from its loss of 453 million yuan in 2024. The inflection point was notable as it was achieved two years ahead of the company's original forecast, demonstrating its transition into a self-sustaining entity no longer reliant on external financing.

InnoCare also differs from some of its peers that achieved early profitability by relying on one-time upfront payments from partnerships. By comparison, InnoCare's march to profitability has been jointly propelled by a dual engine of licensing deals and direct product sales. On the commercial front, the company's drug sales reached 1.44 billion yuan last year, up 43.4%.

InnoCare's profit breakthrough owes to two main factors: continued revenue growth driven by expanding indications for its main revenue engine Orelabrutinib, and significant cash inflows from licensing agreements with partners such as Zenas BioPharma (ZBIO.US). This not only improves the company's revenue and profitability but also reflects the establishment of a fully integrated value chain encompassing R&D, clinical trials, commercialization, and licensing.

Orelabrutinib continued its strong momentum, now included on China's National Reimbursement Drug List for all four of its indications. Its approval as a first-line treatment for chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL) earlier this year further expanded its addressable patient base and revenue potential.

The company's other commercialized drug, Tafasitamab, was approved in May 2025 and launched in September, and is the first CD19 monoclonal antibody in China for treatment of relapsed-refractory diffuse large B cell lymphoma (R/R DLBCL). Both Tafasitamab and Orelabrutinib are targeted therapies for hematological malignancies, strengthening InnoCare's overall competitiveness in B-cell lymphoma treatment.

Beyond those two approved products, InnoCare is also developing Mesutoclax, a novel BCL2 inhibitor, as a key follow-on asset within its hemato-oncology portfolio. As the first BCL2 inhibitor to receive breakthrough therapy designation in China, Mesutoclax has been advancing rapidly through multiple registrational clinical studies in China and globally.

A Phase Three trial evaluating the combination of Mesutoclax with Orelabrutinib for first-line treatment of CLL/SLL has completed patient enrollment. The fixed-dose combination regimen is designed to deliver improved responses in treatment-naïve patients and holds significant potential to overcoming treatment-resistant mutations. Mesutoclax also has big potential in the field of acute myeloid leukemia (AML) and myelodysplastic syndromes (MDS).

The company is also leveraging its two internally developed TYK2 inhibitors to expand into the dermatology therapeutic area, which covers large patient populations including atopic dermatitis, psoriasis, and vitiligo.

InnoCare's R&D pipeline has now entered a new phase, with clearly emerging "second growth curves" from new products moving closer to commercialization that will help to sustain the company's newfound profitability.

Accelerating global expansion

InnoCare's globalization strategy made significant progress in 2025. On Oct. 8, the company entered into a collaboration with U.S.-based Zenas BioPharma, with a potential total deal value of more than $2 billion. This transaction set a new record for out-licensing deals from China within the small molecule autoimmune segment. Following announcement of the partnership, Zenas' shares nearly doubled within just over two months, reflecting confidence in the big potential of Orelabrutinib.

The partnership comes as therapeutic applications for Orelabrutinib expand beyond hematological malignancies into autoimmune diseases, which represents an even larger market opportunity. InnoCare's advanced clinical development programs in this market segment currently target three indications: multiple sclerosis (MS), primary immune thrombocytopenia (ITP), and systemic lupus erythematosus (SLE).

In particular, the global market for MS treatments is vast and represents a major potential growth opportunity for multinational pharmaceutical companies. The market is currently dominated by biologics, exemplified by CD20 monoclonal antibodies, with annual sales reaching into the tens of billions of dollars and growing rapidly. As a BTK inhibitor with differentiated properties, Orelabrutinib could have strong potential as a new MS treatment, pending regulatory approval.

In other collaborations, InnoCare entered into an out-licensing agreement with Prolium Bioscience in January 2025 for the CD20xCD3 bispecific antibody ICP-B02. In the latest development of this collaboration, Prolium initiated a single ascending dose study for the drug candidate in early March this year and plans to commence a global multi-center Phase I/II clinical study for systemic sclerosis in the second quarter.

A number of investment banks, including Goldman Sachs, Citic Securities, and Ping An Securities, have assigned InnoCare "buy" ratings. They generally believe the company's long-term growth is being driven by three main factors: continued commercialization and expansion of Orelabrutinib; major overseas potential for its autoimmune disease pipeline; and the gradual realization of the value of its R&D pipeline. Meanwhile, collaborations with companies such as Zenas have boosted the company's finances and further validated the global competitiveness of its drug development capabilities.

For InnoCare, achieving annual profitability marks not only a pivotal financial breakthrough but also shows the company's operations have entered a virtuous cycle characterized by sustained expansion fueled by revenue-generating products and a pipeline of new drug candidates. From an investor perspective, the company now looks like a mature biopharma entity that combines profitability with strong growth potential.

The company possesses core assets like Orelabrutinib, whose sales are rapidly expanding as it enters new global markets and expands into additional indications. It has also established sustainable growth pathways through major collaborative deals. In addition, it possesses a comprehensive R&D pipeline spanning both oncology and autoimmune disease areas, with products at all stages of development.

That said, the stock still looks relatively undervalued for such a high-growth company that has just achieved profitability. The Hong Kong-listed shares currently trade at a modest price-to-sales (P/S) ratio of approximately 14. That implies potential upside for the shares – if it can continue to operate profitably and continue delivering strong revenue growth through new collaborations.

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