HuaLing Pharmaceuticals (02552) Interim Report: First-time profit during the performance period, commercial transformation will enter a period of harvest.

Since the beginning of this year, the biopharmaceutical sector has become the sector with the highest stock price doubling in the A-share and Hong Kong stock markets. Based on industry trends and business breakthroughs, Hualing Medicine (02552), an innovative drug company specializing in diabetes treatment, has doubled its stock price since the beginning of the year, reaching a new high for the year on July 22 at HK$4.17. In fact, the rise in the stock price of Hualing Medicine is a concrete manifestation of the current bullish market for innovative drugs in the Hong Kong stock market. Despite recent technical fluctuations, the overall trend shows that the stock price and market value of Hualing have not yet reached the peak of this round of market trends, indicating that there is still a huge potential for further growth. The reason for this is that, unlike the previous bullish market for innovative drugs driven by policy, the core driving factor of the current bullish market for innovative drugs in the Hong Kong stock market emphasizes more on the company itself. "Hardcore innovation - global realization - performance verification" has become the key logic for assessing the "investment certainty" of innovative drug companies. This is also the important reason why the stock price of Hualing Medicine has doubled since the beginning of the year, and it is the starting point for investors to analyze the company's mid-term performance projections for 2025. Based on the latest disclosed mid-term financial and business progress, Hualing Medicine not only achieved profitability for the first half of the year, but also accelerated the commercialization of its core product Huatangning (Doxeran tablets) and expanded its research pipeline, demonstrating its strategic stability and growth potential in the field of diabetes treatment. During the first half of 2025, Hualing Medicine achieved a double breakthrough in financial data and business progress, thanks to the comprehensive control of the commercialization of its core products and cost efficiency optimization. During the period, Hualing Medicine achieved a total revenue of about 217.4 million yuan, a year-on-year increase of 112%. Due to the confirmation of a one-time deferred income of 1.2435 billion yuan from the termination of the exclusive promotion service agreement with Bayer on January 1, 2025, the company's pre-tax profit for the first half of the year reached 1.1839 billion yuan. At the same time, the company has taken on the commercialization responsibility on its own since this year, significantly optimizing its cost structure: sales expenses accounted for 29.5%, much lower than the 59.5% in the same period of 2024. Additionally, with the expansion of production scale and the improvement of cost efficiency, the gross profit margin increased by 7.7 percentage points year-on-year to 54.2%, continuously opening up profit margins. Furthermore, as of June 30, the company held a cash balance of 1.0228 billion yuan, laying a solid financial foundation for future research and market expansion. From an operating perspective, the company's flagship product Huatangning has shown remarkable performance. Starting from 2025, under the transition of commercialization responsibility of Huatangning in China back to Hualing Medicine, the sales volume of Huatangning reached 1.764 million boxes, a 108% increase compared to the same period last year, with a net sales revenue of 217.4 million yuan, a 112% increase year-on-year. Behind the market volume of this product lies the strategic determination and growth potential of Hualing Medicine in the field of diabetes treatment. It is worth noting that as the world's first glucose kinase activator (GKA), Huatangning fills the gap in global GKA research with its innovative mechanism of "repairing glucose sensors". Since its launch, Hualing has actively conducted real-world studies on Doxeran(BLOOM) with over 80 centers nationwide and 2,000 Type 2 diabetes patients, with follow-up on more than 1,000 patients completed. In the real-world environment, the BLOOM study further proves the effectiveness, widespread availability, and safety of Doxeran. In terms of market expansion, the surge in medical insurance coverage and internationalization strategy will collectively drive the growth of Hualing's performance. Since Huatangning was included in the national medical insurance in 2024, there has been a significant increase in prescriptions at secondary and tertiary hospitals in 2025, enhancing patient access and medication adherence. At the same time, the company has accelerated its layout in Greater China and Southeast Asia, having submitted the registration application for 75mg Doxeran(MYHOMSIS/Hualing tabletsTM) in Hong Kong to drive the product into global market competition. What is particularly noteworthy is that the long-term competitiveness of Hualing Medicine not only lies in the penetration of Huatangning into the existing market but also in the research pipeline built around "diabetes and metabolic diseases": from compound preparations to combination therapy, overlaying the development of second-generation GKA, the "depth" and "breadth" of the pipeline layout are gradually becoming evident. Firstly, there is continuous development of existing products. For patients who cannot control their blood sugar even with a high dose of metformin (>1500mg per day), the company is developing a fixed-dose combination of Doxeran and metformin. The previous DAWN clinical study confirmed that the combination of the two can reduce patients' glycated hemoglobin (HbA1c) by over 1% and postprandial blood sugar by over 5mmol/L, with a low hypoglycemia rate of only 0.8%, addressing the clear potential demand in the clinical field. In August 2025, the company has completed the pre-IND submission data for this compound preparation and is expected to start a bioequivalence (BE) study in early 2026, which, if successful, will become another core product after Huatangning. Secondly, there is expansion in indications and combination therapy. The company is exploring combination therapy regimens of Doxeran with GLP-1 receptor agonists, DPP-4 inhibitors, and SGLT-2 inhibitors through the collection of real-world evidence and concept validation studies in animal models. This synergistic effect can not only improve glucose-lowering effects but also expand indications to metabolic disorders such as obesity and metabolic-associated fatty liver disease (MASH), breaking through the single track of diabetes treatment and entering a broader market. In terms of international cooperation, a Phase I clinical study initiated by a researcher supported by Hualing Medicine is being conducted at the University of Pennsylvania to evaluate the efficacy and safety of Doxeran in patients with cystic fibrosis-related diabetes (CFRD). The trial has been approved by the US Food and Drug Administration (FDA), marking a crucial step in the company's international exploration in its advantageous field. Moreover, as a leading enterprise in the global GKA research field, Hualing Medicine has not stopped at its current achievements with Doxeran: as of now, the global research and development of second-generation GKA has entered a critical stage. Based on the preliminary success of the Phase I dose escalation study in the United States, the company plans to initiate a multiple dose escalation Phase I study at the end of 2025 or early 2026, further consolidating its technological barriers in the GKA field and laying a foundation for long-term global competition. In conclusion, the performance of Hualing Medicine in the first half of 2025 is essentially the resonance result of "commercialization capability realization" and "research pipeline realization". From the current standpoint, Hualing Medicine has demonstrated the effectiveness of its product efficacy and commercialization landing through its performance in the first half of the year, while the multi-dimensional layout of its research pipeline provides more possibilities for its long-term development in the field of metabolic diseases, making it worthy of long-term investor optimism.