Summary of Key Points
Kanghong Pharmaceutical experienced a decline in both revenue and net profit in the first half of 2026, primarily due to a significant reduction in revenue from its main cash cow, Kangbaxip. This eye disease medication, which once competed with foreign companies, is now facing multiple challenges: the emergence of new dual antibody drugs, the competition from biosimilar drugs, healthcare price cuts, and increased value-added tax (VAT). To reduce its dependence on this single product, the company has turned to gene therapy and the development of innovative oncology drugs. However, these projects are still in the clinical phase, which means they have a long development cycle and carry high risks, making it difficult to quickly reverse the company's declining performance. Kanghong Pharmaceutical is currently in an awkward position where its traditional sources of revenue are weakening, while new growth drivers have not yet taken hold.
1. The Core Product Kangbaxip: From a Cash Cow to a Burden
Kangbaxip has been the lifeblood of Kanghong Pharmaceutical, driving the company's growth over the past decade. Revenue from biopharmaceuticals increased from 267 million yuan in 2015 to 2.443 billion yuan in 2024. However, in the first half of 2026, revenue from Kangbaxip decreased by 18.13% year-on-year and accounted for 50.54% of the total revenue, significantly dragging down the overall performance. In simple terms, it's like the main pillar of the company's income suddenly falling ill, affecting the entire family's financial situation.
2. Fierce Market Competition: New Competitors Stealing Business
Kangbaxip's fortunes have taken a turn for the worse due to the emergence of two new competitors:
- Dual Antibody Drugs Outperforming Single Antibodies: Roche's Fariximab is a dual antibody drug that targets two targets simultaneously, requiring injections only every three months, making it more appealing to patients. It was also included in the healthcare insurance program at the end of 2024, making it more affordable and thus gaining a larger market share. In 2025, this drug generated sales of 5.09 billion US dollars, a 12% increase, demonstrating its popularity.
- Biosimilar Drugs Competing for Market Share: Generic versions of Kangbaxip (such as Abexip and Ranibizumab) have been approved, offering lower prices and competing for the mid-to-low-end market. More new drugs are expected to be launched in the next 2-3 years, further eroding Kangbaxip's market share. It's like having two new, cheaper restaurants in the same neighborhood, attracting customers away from your business.
3. Policy Challenges: Price Cuts and Higher Taxes Eroding Profits
In addition to competition, policies have dealt a blow to Kangbaxip:
- Healthcare Price Cuts: During the 2025 healthcare negotiations, the price of Kangbaxip was reduced. Although sales increased slightly after the price cut, the additional sales did not compensate for the reduced profit, indicating limited room for market share growth.
- Increased VAT: Since January 2026, the VAT on non-oncology biopharmaceuticals has risen from 3% to 13%. For example, if a drug originally cost 100 yuan, the company used to pay 3 yuan in taxes, but now it has to pay 13 yuan, resulting in a 10% decrease in profit. This is like having to offer discounts to customers while also paying higher rent to the landlord, leaving less profit.
4. Transitioning to Gene Therapy and Innovative Drugs: A Long and Difficult Road
Kanghong Pharmaceutical is aware that it cannot rely solely on Kangbaxip and has started exploring gene therapy and innovative oncology drugs:
- Gene Therapy: Two drugs (KH631 and KH658) for macular degeneration are in the second phase of clinical trials, and another drug for heart disease has just been approved for clinical testing. However, the development cycle is long, with an estimated time to market of 2-3 years, and there is a possibility of further delays.
- Innovative Oncology Drugs: Two drugs for advanced solid tumors are in development, but the competition in this field is intense, with many similar drugs already on the market globally, making it challenging to stand out.
The problem is that these new areas require the establishment of new sales teams and the reapplication for healthcare insurance coverage, essentially meaning the company needs to start from scratch. Whether Kangbaxip can hold its own during this 3-year “blank period” is uncertain.
Conclusion
Kanghong Pharmaceutical is facing a difficult situation where its traditional sources of revenue are declining, and new growth options are still in the early stages. The decline of Kangbaxip is an inevitable trend, and the transition to new areas is both time-consuming and challenging. Whether the company can survive the next few years depends on the speed of Kangbaxip's decline and the progress of its new drug development. Currently, the challenges outweigh the opportunities.
(The entire analysis is written in plain language, making it easy for non-financial professionals to understand Kanghong Pharmaceutical's current situation and challenges.)