HRS-5635: Hengrui bets on the world’s largest hepatitis B market, but both its timing and its posture deserve scrutiny

First, Hengrui itself. In 2024, Jiangsu Hengrui Pharmaceuticals had total revenue of about RMB 28 billion, net profit of about RMB 6.34 billion (up 47.3% year on year), and full-year R&D spending of about RMB 8.23 billion. In May 2025, Hengrui listed on the Hong Kong Stock Exchange, raising about HK$9.89 billion (about US$1.26 billion), the largest pharma IPO in Hong Kong in five years. In other words, this is a pharma leader that lacks neither money nor execution, and leads Chinese pharma companies in R&D spending.

But Hengrui’s “strength” has a direction. Its commercial muscle has grown in oncology, anesthesia, contrast agents and autoimmunity — a mature team built around the oncology departments and operating rooms of large hospitals. HRS-5635, however, is heading to infectious disease and hepatology departments. This is a department network Hengrui has not cultivated deeply before; KOL relationships, chronic disease follow-up systems and patient management pathways all have to be built almost from scratch. This “department mismatch” is the starting point for understanding the molecule’s entire commercial logic, and we will keep coming back to it.

This battlefield is tempting because of its size. China carries the heaviest hepatitis B burden in the world, with about 75 million people chronically infected, close to 30% of the global total. The proportion actually receiving standard antiviral treatment is not high, and even with standard treatment, the vast majority of patients can only “control” rather than “cure” the disease. Once “functional cure” is validated and written into guidelines, it corresponds to a market of tens of millions of people with markedly higher willingness to pay — because “stopping treatment” and “reducing long-term risk of cirrhosis and liver cancer” are outcomes of real monetary value to both patients and payers. This is the fundamental reason Hengrui is willing to enter.

Hepatitis B functional cure has been one of the hottest narratives in hepatology over the past decade. Existing nucleos(t)ide analogues (entecavir, tenofovir, etc.) can suppress the virus but barely clear the surface antigen, so patients often need lifelong therapy. That is exactly the appeal of small nucleic acid drugs — silencing viral protein expression directly at the RNA level, bringing HBsAg down, and then combining with immunomodulation to pursue a functional cure that is “maintained after stopping treatment”. HRS-5635’s choice of HBx as the target and mature GalNAc liver-targeted delivery is mechanistically sound. The benefit of targeting the X gene is that the HBx region is a shared sequence across multiple viral transcripts, so silencing it could in theory suppress multiple viral proteins, including surface antigen, more thoroughly; GalNAc conjugation is currently the most mature and best clinically validated liver-targeted delivery approach, and hepatitis B happens to be an ideal fit where “the lesion is inside the hepatocyte”. The combination with Peg-IFNα also makes sense — the small nucleic acid pushes antigen down while interferon wakes up an immune system long “tamed” by hepatitis B; one lowers, one raises, and this is currently the combination approach widely regarded in the industry as most likely to achieve functional cure.

But one should also see clearly that functional cure remains unconquered because the hepatitis B virus is so “cunning”. It lies latent for long periods in hepatocyte nuclei as cccDNA, an almost unclearable “template library”; worse, HBV DNA also integrates into the human genome, and a substantial share of HBsAg is continuously produced from this integrated DNA. Small nucleic acid drugs silence viral proteins at the RNA level and can push antigen very low, but as long as cccDNA and integrated DNA remain, the risk of rebound after stopping treatment is always there — which is why almost every player adds interferon or an immunomodulator, trying to rebuild the patient’s own immune control during the “window” of suppressed antigen. Targeting the shared HBx sequence could in theory cover transcripts from both cccDNA and integrated DNA, a potential mechanistic plus for HRS-5635, but whether it translates into a higher durable off-treatment cure rate can only be answered by data.

The problem is that the whole world is doing this, and many started earlier and are further ahead than Hengrui.

Note: status and data are a public compilation as of June 2026; refer to each company’s latest disclosures.

This compresses all the suspense into a single point: a functional cure rate of about 20% has now become the clear yardstick in this race — GSK’s bepirovirsen Phase 3 reached this level and is heading to approval; while the field as a whole cannot yet talk of “broadly reproducible high cure rates”, the yardstick is already standing there. Against this backdrop, can HRS-5635 deliver a clearly higher, or clearly “cleaner” (less combination, more durable off treatment) result? If so, it can overtake despite starting late; if it is just another “around 15%, needs combination” dataset, it will struggle to tell an independent story in a race that is already crowded and where the leader already has confirmatory data.

Turning back to China registration, HRS-5635’s hand is clear. On September 15, 2025, the CDE website publicly listed it as “proposed for Breakthrough Therapy Designation”, meaning the expedited review channel has opened; in April of the same year, its clinical trial in combination with Peg-IFNα was also approved, with monotherapy and combination advancing in parallel. The registration pathway for hepatitis B functional cure has gradually become clear in the industry — against a nucleos(t)ide analogue background, with HBsAg loss (and even seroconversion) as the key endpoint, regulators and clinicians now share a basis of consensus.

The real registration difficulty is not “can it be filed” but “how the endpoint counts”. The core controversy around functional cure is durability after stopping treatment — once HBsAg is cleared, will it relapse after stopping? This determines how long follow-up the confirmatory study needs, and the time gap between Breakthrough Therapy and actual approval. Hengrui’s advantage is that it has enough cash and execution to fight this kind of confirmatory battle requiring long follow-up and a sizable sample, which many biotechs do not.

Hengrui has always excelled at using its vast China sales network to maximize the return on a new drug — its sharpest weapon for the past two decades. But HRS-5635 is precisely an exception to that playbook, for the same reason: department mismatch.

Hengrui’s most valuable commercial asset is the hospital network, academic influence and sales force it has built up over years in oncology departments and operating rooms. The main battlefield for hepatitis B is infectious disease and hepatology — an almost entirely separate set of hospital touchpoints, KOL systems and chronic disease management logic. Hengrui’s existing sales force overlaps very little with this system, meaning that to commercialize HRS-5635 it will largely have to “start from scratch” rather than “piggyback”. That is a completely different level of difficulty from dropping a new oncology drug into its ready-made oncology team and rolling it out the next day.

Overseas is a different logic. Hengrui has no global commercial capability in hepatitis B/hepatology, and overseas markets are guarded by players such as GSK, J&J and Vir with their own siRNA or ASO assets. The realistic path abroad is to replicate Hengrui’s already-proven “NewCo / regional licensing” model — keeping Greater China rights in its own hands (because this is the world’s largest hepatitis B market and the value anchor), and licensing out rights to the US, Europe and elsewhere by region.

Hengrui is no stranger to this playbook. It has already packaged its GLP-1 pipeline into an overseas company via a NewCo and brought in international capital, and it has also struck an Lp(a)-related licensing deal with Merck (recognizing about €160 million in related revenue in the first half of 2024). These precedents show Hengrui has the ability and willingness to realize a molecule’s global value through the combination of “self-commercialize in China + license overseas”. But there is an essential difference between this hepatitis B program and GLP-1: GLP-1’s biggest pie is in the US, so “keep China, sell overseas” monetizes secondary markets; hepatitis B’s biggest pie is in China, so overseas licensing is more “icing on the cake” than the main course. That is also where the difficulty lies — the most natural global buyer is actually GSK, but it already holds a complete combination of bepirovirsen plus an siRNA and has almost no reason to buy another similar asset; most other potential acquirers also have their own hepatitis B small nucleic acids in development. This will significantly lower HRS-5635’s out-licensing leverage; Hengrui’s only bargaining chip remains a functional cure dataset that is sufficiently striking and differentiated.

Manufacturing small nucleic acid drugs is different from the small molecules and monoclonal antibodies Hengrui is familiar with. Oligonucleotide synthesis, purification and quality control vary widely in capacity and quality across domestic CMOs, and dedicated production lines and GMP inspections are new risk points. More critical is the delivery platform — ownership of core intellectual property for GalNAc conjugation is a key variable determining a nucleic acid drug’s BD valuation and freedom to operate (FTO). Whether Hengrui’s delivery system is fully proprietary or has a licensing background is not clear from public information, and this is an unavoidable question in due diligence. The good side is that Hengrui has ample funds and a tradition of building its own capacity; building this dedicated line is not a question of money but of time and experience.

Judging from Hengrui’s publicly disclosed key pipeline and commercial base, HBV is not at the core of its strategy — oncology and metabolism (especially the GLP-1 series) are. HRS-5635 looks more like a flagship piece Hengrui has placed on the new technology platform of nucleic acids, using an indication with high unmet need and high visibility to validate platform capability.

This positioning has its advantages: because it is not a “must-win battle”, Hengrui can actually fight it from a relatively relaxed posture — an R&D budget of RMB 8.2 billion means resources are not a constraint, and if key clinical data disappoint, downgrading or converting to an out-license would have limited impact on overall company valuation. But the cost is that when resources, management attention and commercialization investment need to be prioritized between oncology blockbusters and this hepatitis B piece, the latter will most likely rank lower. For an asset that needs to “start from scratch” to build a commercial system, this uncertainty in priority is itself a risk.

HRS-5635 is an asset easily carried away by the grand narrative of “the world’s largest hepatitis B market + functional cure”. Take the narrative apart and its real portrait is: a mechanistically solid but clearly late-starting follower small nucleic acid drug, entering a fairly crowded race in which the leader has already delivered confirmatory data first; backed by a company with extremely deep resources but lacking commercial muscle on this particular battlefield.

This does not mean it has no value. For Hengrui, HRS-5635’s real significance may be twofold: in the optimistic case, a sufficiently differentiated set of functional cure data could secure it a place in China’s huge market and realize overseas value through regional licensing; and even in the neutral case, it helps Hengrui build liver-targeted nucleic acid platform capability, paving the way for later metabolic and lipid-lowering pipelines. How far it can go will ultimately depend on a set of numbers not yet revealed — and on whether Hengrui is willing to seriously take the commercialization course for a battlefield outside its comfort zone.