(Yicai) Aug. 22 -- Shares of Hengrui Pharmaceuticals rose after the leading Chinese drugmaker said profit and revenue surged in the first half, further reversing the earnings slump of recent years, thanks to the firm’s investment in innovative drugs.

Hengrui [SHA: 600276] closed 3.8 percent higher at CNY43.93 (USD6.16) a share in Shanghai today, after earlier gaining by as much as 4.6 percent.

Net profit jumped 49 percent to CNY3.4 billion (USD481 million) in the six months ended June 30 from a year earlier, the Jiangsu province-based firm’s half-year financial statement showed late yesterday. Revenue rose 22 percent to CNY13.6 billion (USD1.9 billion).

Earnings had been plagued by plunging revenue from generic drugs as a result of the Chinese government’s centralized bulk-buying program, which has slashed medicine prices. Hengrui’s income from one such drug fell CNY279 million (USD39.1 million) in the first half after it was included in the scheme.

The company’s revenue had tumbled 28 percent for the whole of 2021 and 14 percent in 2022, before rising 10 percent last year.

But with steady investment in research and development and the successful registration of new products, Hengrui’s innovative drug business, which accounted for more than half of its entire revenue in the January to June period, has begun to make up for falling income from its traditional generic drugs segment.

First-half R&D spending rose 26 percent to CNY3.9 billion, the equivalent of 28 percent of revenue and 112 percent of profit in the period. So far, Hengrui has spent CNY40 billion (USD5.6 billion) on R&D.

Thanks to this investment, Hengrui’s sales of novel drugs jumped 33 percent to CNY6.6 billion in the six months, while income from one of its 11 innovative treatments licensed overseas hit EUR160 million (USD178.3 million). The two accounted for 58 percent of total revenue.

A decline in costs also contributed to Hengrui’s earnings revival, as the company’s expenses-to-sales ratio inched down 0.5 percentage points to 29 percent in the second quarter compared with the previous three months.

Editors: Tang Shihua, Futura Costaglione