On July 11, Cailian Press reported that Gan & Lee Pharmaceuticals, which had lost in the competition for insulin dominance in 2022, turned around in the first half of this year with strategic adjustments, while another company forecasted a loss in the same period.

On the evening of the 10th, Tonghua Dongbao (600867.SH) released a performance forecast, expecting a net loss of 0.224 billion in the first half of the year. Compared with the same period of the previous year, it will decrease by 0.709 billion yuan. Previously, Gan & Lee Pharmaceutical (603087.SH) is expected to achieve a net profit of 0.29 billion yuan to 0.33 billion yuan in the first half of the year, an increase of 0.156 billion yuan to 0.196 billion yuan compared with the same period of the previous year, a year-on-year increase of 116.17% to 145.98%. Compared with each other, the performance of the two companies have diverged. As we learned from the reporter's interview, this may have a fairly close relationship with this year's follow-up insulin joint procurement, where Gan & Lee Pharmaceuticals raised its prices slightly with a more detailed pricing strategy. Industry experts believe that this change not only reflects the degree of competition in the insulin market but also highlights the importance of the strategic adjustments and coping abilities of companies when facing the follow-up joint procurement and maintaining the existing market competition in 2024.

From the perspective of performance, Tonghua Dongbao has lost its advantages, while Gan & Lee Pharmaceuticals has reversed its status. The reason may be glimpsed from the explanation of Tonghua Dongbao's declining revenue.

According to Gan & Lee Pharmaceutical's explanation, the strong performance is mainly due to the stable growth of domestic insulin products sales and a significant increase in non-recurring gains and losses compared with the previous year.

From the perspective of performance, Tonghua Dongbao has lost its advantages, while Gan & Lee Pharmaceuticals has reversed its status. The reason may be glimpsed from the explanation of Tonghua Dongbao's declining revenue.

Tonghua Dongbao explained that during the reporting period, the new round of insulin central procurement has started to be implemented in various provinces and cities nationwide. The prices of all the company's insulin products that won the bid have fallen to varying degrees, and sales revenue has fallen year on year, reducing the company's operating income by about 0.538 billion yuan. In addition, the price difference between the original supply price and the procurement price of all stock products in the circulation before the implementation of the bid will be written off or refunded in a lump sum, reducing the company's net profit by about 0.061 billion yuan. The soluble gan and glycation double insulin injection developed by the company's BD has been decided to terminate the research and development work, reducing the company's net profit for the first half of 2024 by 0.27 billion yuan.

Cailian Press learned from reporters that in November 2021, the National Drug Joint Procurement Office issued the Notice on the Announcement of the Results of the National Drug Centralized Procurement (Insulin Special) Selection, and all 6 products of Gan & Lee Pharmaceuticals won bids, and 3 of them won the first place in their respective groups, with an average price reduction of 60%, while all 5 products of Tonghua Dongbao won bids of group B, with an average price reduction of about 41%.

In 2022, in the first year of national insulin procurement implementation, Tonghua Dongbao achieved a net profit attributable to the parent company of 1.582 billion yuan, a year-on-year increase of 20.92%. In the same year, Gan & Lee Pharmaceuticals had a net loss attributable to the parent company of 0.44 billion yuan, which was the first year of net loss after the company went public. In 2021, Gan & Lee Pharmaceuticals just achieved its record high performance.

According to the analysis of experts interviewed by Cailian Press at that time, Gan & Lee Pharmaceuticals'performance decline was related to its aggressive joint procurement pricing strategy.

"(At that time) Gan & Lee Pharmaceutical's joint procurement pricing strategy was quite aggressive, with too low a profit margin. As a result, the profit pillar was weakened due to the shortage of supply to support the price, resulting in losses. In contrast, the joint procurement pricing strategy of Tonghua Dongbao is much more rational." Liu Mingrui, the general manager of a domestic biomedical company and a senior pharmaceutical industry expert, told Cailian Press.

"It is obvious that the this year's follow-up insulin joint procurement caused Tonghua Dongbao to lose its advantages, directly leading to this situation. In the existing insulin market in China, Gan & Lee Pharmaceuticals improved its procurement strategy and secured more shares with the right "bold moves". This is the victory of the procurement strategy, and also the result of being courageous." Liu Mingrui analyzed.

On April 23, the National Medical Insurance Bureau organized the follow-up purchase of insulin after the expiration of the national insulin procurement agreement in Shanghai. 13 domestic and foreign pharmaceutical companies, including Gan & Lee Pharmaceuticals, Hefei Tianmai, Jiangsu Wanbang, Tonghua Dongbao, Novo Nordisk, Lilly, participated in a total of 53 products, with a success rate of 92% and stable and decreasing prices, a further 3.8% decrease based on the first round of procurement. The results of the follow-up procurement selection will be implemented nationwide in May this year.

Among them, Gan & Lee Pharmaceuticals seems to have learned from the lessons of the first insulin procurement, and all six of its products and related specifications were selected in this round of procurement. Except for Lai Fu insulin injection (pen core) and recombinant human insulin mixed injection with protein zinc (25R), which are class B, all other varieties are class A.

Compared with the prices in the previous round of procurement, Gan & Lee Pharmaceuticals' proposed selected prices have all increased slightly to varying degrees. While its six products were selected, all of them saw price increases, especially its core product, Ganlu insulin, which increased by 34.1% to a selected price of 65.30 yuan per support in group A. The winter pre-mix (30R), winter meal, and second-generation pre-mix three products were selected in group A while increasing prices by 5.5%, 29.6%, and 44.8%, respectively.

On the other hand, all six products and related specifications of Tonghua Dongbao are proposed to be selected as class A or A1, and compared with the original price, the prices of all of its proposed selected products have decreased to a certain extent.

In addition, according to Gan & Lee Pharmaceuticals' financial report, after winning the bid for the follow-up procurement of insulin in 2024, the first year's demand for insulin-related products is 41.77 million supports, an increase of 25.13 million supports from the first year's demand in the previous procurement, and a growth rate of 151%. Among them, third-generation insulin products account for 24% of the overall demand, a 10 percentage point increase from the previous year, and the total number of products ranks second in the industry, second only to Novo Nordisk.

In addition, Gan & Lee Pharmaceuticals has also made some progress in international development. By the end of 2023, the company's insulin products had been approved in 20 foreign countries and officially sold in 18 countries. International sales revenue in 2023 was 327 million yuan, a year-on-year increase of 131.78%.

Although Gan & Lee Pharmaceuticals has not disclosed the proportion and growth rate of overseas performance in the first half of 2024, some brokerage research reports judge that the growth of overseas income is one of the reasons for the significant increase in Gan & Lee Pharmaceuticals' performance in the first half of 2024.