Summary of the Conference Call Transcript Industry Overview - The conference call focuses on the **insulin industry in China**, highlighting the significant opportunities for **domestic substitution** following two rounds of **Volume-Based Procurement (VBP)** [1][1]. Key Companies Discussed 1. **Gan & Lee Pharmaceuticals** - Revenue for 3Q25 was **Rmb980 million**, reflecting a **5% year-over-year increase**. However, this was below Goldman Sachs estimates of **Rmb1,140 million** [8][8]. - Net profit for the same period was **Rmb235 million**, also missing estimates of **Rmb309 million** [8][8]. - The company is optimistic about achieving its full-year net profit target of **Rmb1.1 billion**, implying **Rmb280 million** in net profit for 4Q25, supported by expected orders from Brazil [8][8]. - Revised price target (TP) is set at **Rmb73**, down from **Rmb77**, with a **Buy** rating maintained [8][8]. 2. **Tonghua Dongbao (THDB)** - THDB reported 3Q25 revenue of **Rmb806 million**, a **14% year-over-year increase**, exceeding Goldman Sachs estimates of **Rmb724 million** [17][17]. - Net profit surged to **Rmb984 million**, a **500% year-over-year increase**, driven by investment gains from divesting Amoytop Biotech [17][17]. - The company’s sales performance was bolstered by expanding market share in insulin analog products [17][17]. - Revised price target is **Rmb10**, up from **Rmb9**, with a **Neutral** rating maintained [17][17]. Market Dynamics - The localization rates for insulin analogs have increased in 2Q25 compared to 1Q25: - **Insulin glargine**: 51% (unchanged) - **Insulin aspart premix**: 22% (up from 19%) - **Insulin aspart**: 17% (up from 15%) [1][1]. - There is a belief that there is still ample market space for further domestic substitution in the coming years [1][1]. Growth Drivers - **Gan & Lee** is focusing on: - Exporting insulin biosimilars to the US and EU - Continuing to substitute imports in the Chinese market - Expansion into emerging markets [19][19]. - **THDB** is promoting its new third-generation insulin products in private hospitals and pharmacies, which are not affected by the VBP policy [20][20]. Financial Estimates - **Gan & Lee** updated estimates for 2025 to 2027 show a slight decrease in revenue and net profit projections: - 2025 Revenue: **Rmb4,202 million** (down from **Rmb4,400 million**) - 2025 Net Profit: **Rmb1,101 million** (down from **Rmb1,173 million**) [16][16]. - **THDB** updated estimates show significant increases: - 2025 Revenue: **Rmb2,762 million** (up from **Rmb2,689 million**) - 2025 Net Profit: **Rmb1,281 million** (up from **Rmb408 million**) [18][18]. Risks and Catalysts - **Gan & Lee** faces risks such as slower-than-expected launches of insulin biosimilars in the US and R&D progress [23][23]. - **THDB** has upside risks related to stronger-than-expected ramp-up of its third-generation insulin products and faster approval of insulin biosimilars in the US [24][24]. Conclusion - The insulin market in China is experiencing significant growth opportunities, particularly for domestic manufacturers like Gan & Lee and Tonghua Dongbao. Both companies are positioned to benefit from increased localization and market share expansion, despite facing various risks and challenges in the evolving regulatory landscape.