Recently, Tonghua Dongbao corrected that the net profit attributable to shareholders of the listed company in 2024 was 11.6421 million yuan, a year-on-year decrease of about 99%. Previously, its forecast stated that the net profit for 2024 would be approximately 40.5277 million yuan, a year-on-year decrease of 96.53%.

This correction stems from a lawsuit - the "Changshulin" trademark infringement case lost, and the compensation directly impacted the net profit. Due to losing the second instance lawsuit against Ganli Pharmaceutical for trademark infringement and abnormal competition, Tonghua Dongbao has recently received the final civil judgment and is required to bear compensation and litigation costs totaling over 60 million yuan.

From the performance of Tonghua Dongbao in recent years, the reasons for its decline in performance are complex and diverse, including the price reduction of insulin procurement, inventory offsetting, asset impairment caused by the termination of research and development projects, and compensation for trademark infringement cases.

To change the performance dilemma, Tonghua Dongbao will seek new growth points in the metabolic disease ecosystem in 2024. However, whether Tonghua Dongbao can hold onto the basic insulin level in the short term and rely on new drugs to achieve curve overtaking in the medium to long term still needs to be verified by the market.

R&D performance is showing a red light

In recent years, Tonghua Dongbao's performance has fluctuated. On October 24, 2024, Tonghua Dongbao announced that it achieved revenue of 708 million yuan in the third quarter of 2024, basically returning to the same period in previous years, and net profit emerged from the quagmire of losses in the first half of the year, reaching 164 million yuan. According to the financial report, Tonghua Dongbao incurred a loss of 230 million yuan in the first half of 2024. In the same period last year, the net profit was still 485 million yuan.

The net profit has turned from profit to loss, and the forecasted annual net profit level has not reached the previous level, indicating that Tonghua Dongbao's performance is under significant pressure.

21st Century Business Herald reporters reviewed its previous financial reports and found that from 2021 to 2023, although Tonghua Dongbao achieved a net profit of over 1 billion yuan for three consecutive years, reaching 1.308 billion yuan, 1.582 billion yuan, and 1.167 billion yuan respectively, it has shown a downward trend in 2023.

The reasons for the decline in performance of Tonghua Dongbao are complex and diverse. According to the financial report, factors such as the price reduction of insulin procurement, inventory offsetting, asset impairment caused by the termination of research and development projects, and compensation for trademark infringement cases have collectively increased the pressure of declining performance.

In response to the significant decline in net profit, Tonghua Dongbao stated that during the reporting period, a new round of centralized insulin procurement began to be implemented in various provinces and cities across the country. The bidding prices of the company's insulin products have all decreased to varying degrees, resulting in a decline in sales revenue. At the same time, due to the widespread expectation of a price reduction for the company's products brought about by the new round of centralized insulin procurement, the company's commercial customers have controlled and adjusted their inventory, which has had a certain impact on the company's shipments, resulting in a year-on-year decline in sales revenue.

In March 2024, the "National Drug Centralized Procurement Document (Insulin Special Continuation) GY-YD2024-1" was issued, with a centralized procurement period of 3.5 years, from the date of implementation of the selection results to December 31, 2027. Compared to the two-year initial insulin procurement cycle, this insulin procurement cycle is longer and continues the process of accelerated replacement of domestic insulin.

Although the National Healthcare Security Administration emphasized that this continued procurement focuses on stabilizing supply, stabilizing prices, and controlling price differences, Tonghua Dongbao still faces pressure to lower prices for all products. According to the bidding results, the price of winter insulin has decreased by 43% compared to the first round of centralized procurement, and the winning bid is about 23.98 yuan/tube. In contrast, its competitor Ganli Pharmaceutical has chosen a price increase strategy in the 2024 insulin renewal procurement.

Tonghua Dongbao stated that with the help of more than 30% of the secondary allocation obtained in the national centralized procurement renewal, the admission of various insulin products, especially insulin analog products, to hospitals nationwide has been accelerated. Significant improvements and breakthroughs have been made in the admission of tertiary hospitals, further expanding the market coverage of the company's products.

However, the low price strategy also brings the dilemma of sacrificing profits. Tonghua Dongbao has stated that in the new round of insulin procurement, the overall price reduction of insulin products is around 15%.

In addition, Tonghua Dongbao terminated a research and development pipeline in 2024. Regarding this, Tonghua Dongbao has stated that in order to allocate R&D resources reasonably and focus on advantageous projects in the R&D pipeline, it has decided to terminate the clinical research and development work of BioChaperone Combo (also known as soluble glycyrrhizin lispro dual insulin injection, or THDB0207 injection).

According to the research and development progress disclosed by Tonghua Dongbao, the product was still in the phase II clinical trial stage when it was terminated. However, there are already multiple competing products on the market. Tonghua Dongbao holds a pessimistic attitude towards the prospects of further advancing the research and development of this product, believing that it is expected to face fierce market competition with Degu Mendong Double Insulin and its five biosimilars after its launch.

It's not too late for a hero to break his arm, but this also means that the related R&D capitalization amount and prepaid commercial rights payment will be 'wasted'.

Do we need to increase the ecological balance of metabolic diseases?

In the eyes of the outside world, while Ganli Pharmaceutical, one of the "twin giants" of insulin, continues to maintain profit growth under the pressure of centralized procurement, Tonghua Dongbao's successive defeats seem particularly embarrassing.

In January 2025, Ganli Pharmaceutical announced that the net profit attributable to the owners of the parent company for the year 2024 would be between 600 million and 650 million yuan, an increase of approximately 260 million to 310 million yuan compared to the same period last year, and a year-on-year increase of 76.44% to 91.14%.

However, Tonghua Dongbao did not sit idly by, but actively sought change in 2024, attempting to change the performance differentiation with competitors by seeking new growth points in the metabolic disease ecosystem.

Tonghua Dongbao has made a layout in the field of GLP-1, DPP-4, and SGLT-2 hypoglycemic drugs, which continue to grow in market size. Among them, The DPP-4 class drug sitagliptin phosphate and the compound formulation sitagliptin metformin have obtained registration approval, while the SGLT-2 class drug empagliflozin and GLP-1 class drug liraglutide injection have been approved for market.

Tonghua Dongbao is particularly optimistic about GLP-1 products, believing that their improved compliance, multi-target effects, and long-lasting characteristics will become important directions for future development. From the pipeline list, two innovative GLP-1 drugs, oral small molecule GLP-1 receptor agonist (THDBH110 gel) and GLP-1/GIP dual target receptor agonist (injection THDBH120), are still among them. At the same time, Tonghua Dongbao is also promoting research on the latter's weight loss indications.

In terms of overseas market layout, Tonghua Dongbao is also accelerating the expansion of its international business map. Tonghua Dongbao stated that the company has partnered with Jianyou Co., Ltd. to jointly promote three insulin products, Gan Jing, Men Dong, and Lai Pu, to the US market; The marketing application for its insulin injection has also been accepted by the European Union.

However, there are strong competitors in the GLP-1 field. International giants such as Novo Nordisk and Eli Lilly have a first mover advantage, while domestic companies such as Hansen Pharmaceutical and Xinda Biotechnology are also accelerating their layout. Tonghua Dongbao's Liraglutide is facing challenges from both domestic and international pincers. Meanwhile, Tonghua Dongbao revealed in its 2024 interim report that its GLP-1/GIP dual target receptor agonist (THDBH120 for injection) is still in phase I clinical trials and its clinical efficacy is yet to be validated.

In terms of indication expansion, Tonghua Dongbao is also trying to expand from the field of diabetes treatment to a broader field of metabolic and endocrine disease treatment.

On January 21, 2025, Tonghua Dongbao announced that it had received the "Drug Registration Certificate" for Kaoxi tablets approved and issued by the National Medical Products Administration. Relying on Kaoxi tablets as a chemical oral medication in the field of gout treatment, it has a wide range of clinical applications, including osteoarthritis, primary dysmenorrhea, acute gouty arthritis, etc. It is currently the only COX-2 inhibitor approved for the treatment of acute gouty arthritis in China.

Gout has become the second largest metabolic disease after diabetes. According to Frost Sullivan's analysis, the number of gout/hyperuricemia patients in China will continue to increase in the future, reaching 52200 people/240 million people respectively in 2030, and the corresponding market size of gout drugs in China is expected to grow to 10.8 billion yuan.

According to data from MineNet, in 2023, the total sales revenue of Kaoxi tablets in public medical institutions and physical pharmacies in Chinese cities reached 410 million yuan, a year-on-year increase of 14.91%.

From this perspective, the approval of gout treatment drugs may become a new growth point in the field of metabolic diseases. For Tonghua Dongbao, this field is also a competition between original research enterprises and a group of generic drug companies, making it difficult to break through.

In order to diversify its layout, Tonghua Dongbao has also chosen to explore the consumer medical field. On May 7, 2024, Tonghua Dongbao announced a capital increase of 100 million yuan from its own funds to Junhemeng Biopharmaceutical (Hangzhou) Co., Ltd. (hereinafter referred to as "Junhemeng"), acquiring 8.6759% of its equity. Junhe Alliance is mainly engaged in the development of innovative recombinant protein drugs, with a total of 5 research and development pipelines including recombinant human growth hormone, recombinant long-acting growth hormone, recombinant botulinum toxin type A, recombinant human collagen type I, and recombinant human collagen type III.

In this field, Junhe Alliance's growth hormone and collagen pipelines need to face competition from mature enterprises such as Changchun High tech and Huaxi Biotechnology.

From this perspective, at a time of rapid transformation, Tonghua Dongbao is attempting to further expand its identity from an insulin leader. However, whether it can hold onto the basic insulin level in the short term and rely on gout drugs, GLP-1 innovative drugs, and other innovative drugs to achieve curve overtaking in the medium to long term remains to be verified by the market.