CMSC: UNITED LAB (03933) is given a "strong recommendation" rating. After the initial success of innovative drugs, the follow-up pipeline is rich.

CMSC released a research report stating that UNITED LAB (03933) is expected to achieve revenues of 13.35 billion, 12.77 billion, and 13.93 billion yuan in 2025-2027, with net profits attributable to shareholders of 2.59 billion, 2.34 billion, and 2.52 billion yuan respectively, corresponding to P/E ratios of 11 times, 12 times, and 11 times. This is the first coverage, and a "strong buy" rating is given. The bank believes that the company's main business of antibiotics is expected to gradually stabilize, insulin and animal health will continue to develop new growth curves, and innovation will accelerate development, providing ample room for growth. The main points of CMSC are as follows: Antibiotic leader continues to innovate and lead new development After more than thirty years of steady development, UNITED LAB has formed a comprehensive pharmaceutical group with four major business segments including formulations, raw materials, biologics, and animal health, and nine production and R&D entities. The company has developed through antibiotic vertical integration, expansion into the endocrine field, and has now entered the third stage of innovative development. The bank believes that the company's main business of antibiotics is expected to gradually stabilize, and insulin, animal health will continue to open up new growth curves, with ample room for innovative accelerated development and growth. Innovation: The potential contribution of the 2 billion USD BD reached with Novo Nordisk for UBT251 is expected to continue, with multiple potential molecules in the pipeline. 1) MNCBD fully demonstrates the company's R&D strength: In March 2025, the company announced an exclusive licensing agreement with Novo Nordisk for UBT251's overseas rights, with the total transaction amount reaching up to 2 billion US dollars + tiered royalties based on annual net sales. The potential of GLP-1 class drugs is huge, with the market size continuing to move towards billions of dollars, and the R&D trend is towards target stacking and mechanism synergy development. UBT251 is a GLP-1/GIP/GCG triple receptor agonist with stronger weight loss efficiency, with Phase Ib trial data showing the best in its class: by the 12th week of dosing, the average weight of the highest dose group (6mg) decreased by 16.6% from baseline (adjusted for placebo effect). 2) Clinical catalysis: UBT251 has four indications (glycemic control, weight loss, MAFLD, CKD) in Phase II clinical trials domestically, and Novo Nordisk is expected to start Phase I clinical trials overseas in the first quarter of 2026, contributing to continued catalysis. 3) Pipeline potential: The company has layouts in areas such as immunology, metabolism, ophthalmology, and anti-infection, with UBT37034 (NPY2RA) in the weight loss pipeline having a differentiated advantage, positioning it for joint use with multi-target GLP-1 agonists for weight loss in populations with larger BMIs, and UBT48128 (oral GLP-1 small molecule) showing better preclinical data than Orforglipron, with potential for overseas expansion. Primary business: Short-term impact of declining antibiotic demand, insulin, animal health growth curve gradually clear. 1) Intermediate raw materials: Leading position, stable competitive landscape, short-term pressure due to weakened demand. The bank believes that the industry's competitive landscape is stable, with federal penicillin being the absolute leader, and with demand stabilizing, it is expected to stabilize and rebound. 2) Traditional formulations and insulin: The impact of centralized procurement has been resolved, and insulin has growth potential. The impact of centralized procurement of antibiotic formulations has been resolved, and the growth trend of insulin exports is promising, with several products such as DeGu, DeGu Winter Insulin, and others in the NDA/clinical stage, which are expected to contribute more incrementally in the future. 3) Animal health: Economic and companion animal businesses are driven by both factors, deepening the entire industry chain layout of raw materials and formulations, and is expected to enter a period of rapid development. Risk warning: Risks of new drug R&D falling short of expectations, risks of product price declines, policy risks, risks of hypothetical model parameters not being met.