Hualing Pharmaceuticals (02552) Annual Report 2025 Review: Exploring the Long-Term Growth Logic of the Leading GKA Company from Profit in the First Year

Since 2026, the Hong Kong stock pharmaceutical sector has been constantly volatile due to multiple external factors. Unlike the bull market for innovative drugs in 2025, which was mainly driven by expectations of single innovative targets and pipeline BD, investors in the current Hong Kong stock pharmaceutical sector are more willing to pay a premium for clear value realization. "Accelerating innovation - globalization of monetization - valuation enhancement" has gradually become the key logic for researching the "investment certainty" of innovative drug companies. This can be seen from the stock performance of Hualing Medicine (02552) the day after it announced its 2025 annual performance on the evening of March 26. After the opening, the stock price of Hualing Medicine soared, and by midday closing, it had risen by nearly 15.6%. Investors highly appreciate Hualing Medicine's commercialization and global layout capabilities in 2025, and the breakthroughs in research and development pipelines. In addition, with multiple certainties in favor, investors are positive. Welcoming the annual profit, laying a solid foundation for comprehensive commercialization Looking back at 2025, Hualing Medicine's growth trajectory is clear and strong: as a biopharmaceutical company in a steady growth stage, the company has resonated with three advantages of "commercialization ability, innovation barriers, and long-term layout" while achieving profit breakthroughs, continuously consolidating its leading position in the industry, and injecting strong power into long-term growth. In 2025, Hualing Medicine achieved revenue of 493 million yuan, a year-on-year increase of 93%, and pre-tax profit reached 1.106 billion yuan, achieving the company's first annual profit, which is the most direct highlight of Hualing Medicine's annual report. The core support for this breakthrough lies in two key variables: explosive growth in sales of the core product Huatangning (Dogleglitin tablets) and refined landing of operational efficiency and cost control. Behind this is the strategic dividend realization of the company's autonomous control of commercialization. From the revenue side, the flagship product Huatangning achieved annual sales of 4.011 million boxes, a year-on-year increase of 91%; revenue of approximately 493 million yuan, a year-on-year increase of 93%, and a stable unit price - this means that the growth in demand for Huatangning is not dependent on "price discounts, but on the recognition of the product's clinical value and improvements in patient accessibility brought by medical insurance coverage. Cost optimization reflects a qualitative change in the company's operational capability and serves as an important support for profit breakthroughs. Thanks to the continuous expansion of production scale and optimization of manufacturing processes, the company's gross margin in 2025 was 56.9%, an increase of 8.2 percentage points compared to 2024. More importantly, the refined control of sales expenses, with sales expenses as a proportion of revenue significantly decreased compared to 2024, is mainly due to the company terminating its cooperation with Bayer, avoiding high promotion costs, and instead achieving efficient promotion through its own sales team. The decrease in sales expenses directly increases profit margins, confirming the high execution capability of the company's autonomous commercialization team. On January 1, 2025, Hualing Medicine took over the commercial operation of Huatangning in China, becoming a crucial turning point for the company's development. After independent operation, the company built a professional team covering 10 sales regions nationwide and nearly 200 people, not only bringing about growth in sales and revenue but also giving the company absolute control over product pricing, market promotion, and channel layout, becoming the core confidence for long-term competition. In addition, through the introduction of AI-empowered digital commercialization platforms, Hualing Medicine's operational efficiency and sales productivity have significantly improved, achieving comprehensive coverage of hospitals, community health centers, and online channels. By the end of 2025, Huatangning had benefited over 500,000 patients through more than 3,000 hospitals, community health centers, pharmacies, and online channels, fully verifying the success of its commercialization system. In 2025, Dogleglitin was recognized by Chinese regulatory authorities as a national-level innovative drug and an effective treatment for chronic diseases. Huatangning successfully completed the original price renewal in the 2026-2027 National Medical Insurance Catalog, demonstrating the product's value and pricing power. In the context of normalized negotiations for innovative drug medical insurance and price pressure on most products, this fully demonstrates its unique advantages in terms of blood sugar control, safety, and applicability as the world's first GKA drug, filling a clinical gap in traditional blood sugar-lowering drugs. It is worth noting that, as a leading company in the development of the world's first GKA drug, Hualing Medicine's leading advantage lies not only in innovative products but also in the continuous construction of "commercial certainty." Two key developments in 2025 further strengthen its leading position in the GKA field. On the one hand, in February 2026, Dogleglitin (marketed in Hong Kong as MYHOMSIS, Hualing tablets) received market approval from the Hong Kong regulatory authority and is planned to be officially launched on the market in mid-2026. At the performance meeting, the company stated that more than 20 pharmacies in Hong Kong have been approved to sell the drug, and in 2026, market education and scientific promotion will be the main focus, with the subsequent goal of entering the public medical insurance system in Hong Kong. At the same time, the company submitted a new drug registration application to Macau in 2025, gradually advancing the expansion of the Asian market, marking the official entry of Huatangning into the Greater China region and accelerating global expansion. From an industry perspective, the global incidence of diabetes is steadily increasing, especially in the Asian region, where there is a large base of type 2 diabetes patients. As a new type of blood sugar-lowering drug, GKA drugs have a strong market demand, and Hualing Medicine is looking to expand into broader overseas markets, opening up new opportunities for long-term growth. On the other hand, in February 2026, the patent term extension (PTE) application for Dogleglitin was approved, extending the exclusive rights in the mainland Chinese market until April 2034 - providing a nearly 10-year "market protection period" for Huatangning. Currently, there are no other approved GKA drugs on the market globally, and Hualing Medicine, with the first mover advantage of Dogleglitin, has become the undisputed "absolute leader" in the GKA race, further enhancing the company's commercial certainty, attracting more medical institutions and patients to choose Huatangning, and providing stable income support for the company's future research and development investments. Continuous breakthroughs in innovative pipelines open up long-term growth ceilings In recent years, driven by the logic of technological advantages transforming into market advantages, Hualing Medicine has achieved continuous and verifiable growth. However, the real moat that has forged Hualing Medicine's position in the biopharmaceutical field is the differentiation competitive advantage built by its years of heavy investment in hardcore innovation. By the end of 2025, the company's cash balance reached 1.092 billion yuan, maintaining a stable funding chain. This not only supports the continuous expansion of the existing commercial layout but also provides sufficient funding guarantee for future research and development investments and global market expansion, forming a virtuous cycle of "research and development - commercialization - profit - re-research and development". In terms of research pipelines, Hualing Medicine's layout has always focused on the core advantage of "using Dogleglitin as the core, extending product value, and expanding the boundaries of treatment". The company focuses on extending to multiple indications for unmet clinical needs, and building a matrix of "core products + pipeline reserves" to provide continuous impetus for long-term growth. The deepening of real-world studies is solidifying the clinical value barriers of core products. In 2025, the company made significant progress in the real-world studies of HMM0701 and HMM0601, continuously confirming the key role of Dogleglitin in improving glucose-dependent insulin secretion and demonstrating its efficacy in diabetes prevention, relief, delay, or prevention of diabetes-related complications. The value of these real-world research data not only enhances the clinical acceptance of the product but also provides solid evidence for the expansion of new indications in the future, and further consolidates Hualing Medicine's academic authority in the field. At the same time, based on the characteristics of GKA drugs targeting multiple points and the mechanism of action in maintaining blood sugar stability, the company continues to explore the potential of the core product Dogleglitin. With the continuous deepening of clinical research, new indications, including rare diseases like MODY-2, diabetes prevention, neurodegenerative diseases, etc., are constantly expanding. The company plans to launch relevant clinical studies to extend the value proposition beyond metabolic diseases, further expanding the product boundaries. Furthermore, based on the outstanding data from phase III clinical trials and actual applications of Dogleglitin in combination with metformin, the company is accelerating the development of a fixed-dose combination (FDC) of Dogleglitin and metformin for type 2 diabetes patients who are not effectively controlling blood sugar with metformin alone, to further improve patient compliance. The company has submitted an IND application to the NMPA. In addition, commercial production processes under GMP have been successfully initiated to prepare for key bioequivalence studies for the launch of new drugs in 2027. Clinical studies show that the combination of Dogleglitin and metformin can better control blood sugar, reduce postprandial blood sugar, improve fasting blood sugar, and provide new clinical value for optimizing blood sugar stability endpoints. Of particular note, breakthroughs have also been made in the development of second-generation GKA drugs - a novel molecular entity with improved physicochemical properties designed for sustained-release formulations, supporting once-daily dosing for the treatment of obese patients. The company has initiated a multiple ascending dose (MAD) study of Dogleglitin in the United States to explore the efficacy and mechanism of action of the second-generation GKA in blood sugar stability control. The first patient was enrolled in December 2025, and top-line data is expected to be released in mid-2026. According to the performance meeting, the company's BD team is also seeking opportunities for license-in, prioritizing assets in the field of metabolic diseases (lipid metabolism + sugar metabolism synergy) and age-related diseases (sarcopenia, early cognitive impairment), and promoting cooperation based on the internal team's knowledge reserves. Conclusion In 2026, for the first time, the government work report of the National Two Sessions clearly included the biopharmaceutical industry in the national "emerging pillar industry" sequence, on par with integrated circuits, aerospace, and the low-orbit economy. This move signifies a historic leap in the strategic role of the biopharmaceutical industry, releasing a clear policy signal to strengthen top-level design and accelerate industrial upgrading, injecting certainty into the long-term development of the industry. It can be expected that the explosive growth in 2025 is just the beginning of Hualing Medicine's core product commercialization bringing continuous profits. The company will continue to expand the scale of the commercialization team, reserve professional teams and channel resources for new products in the research pipeline, and the trend of profitability in commercial operations will continue to grow. With the further increase in Huatangning's market penetration rate, its profit scale is expected to continue to expand. The revaluation of capital often occurs when a company crosses a single cycle and demonstrates systemic hematopoietic ability. Today, Hualing Medicine has established a systemic value realization system of "research + commercialization" by transitioning from "Chinese original drugs" to the "global GKA leader" through the decisive transition. The company can not only comprehensively expand its international footprint based on the highly competitive global first-in-class new drug Dogleglitin, but also leverage this first-in-class advantage in the GKA race to feed back local innovation research and commercial hematopoiesis, thereby endowing the company with a high risk-resistant capability and long-term valuation premium.