China Healthcare_ Insulin 3Q25 wrap-up_ Ample room for domestic substitution in insulin analogs

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.