Core products under pressure, CSPC PHARMA's revenue and profit both decline in the first three quarters

CSPC PHARMA explains that this is mainly due to the continuous impact of industry policies such as centralized procurement of drugs and price adjustments of drugs included in the national medical insurance drug catalog.

Key Points:

• CSPC PHARMA adopts a comprehensive low-price strategy in centralized procurement, with 8 out of 15 products selected at the lowest price.
• While the innovative drug sector generally rises, CSPC PHARMA's stock price has fallen more than 35% in the past two and a half months.

Molly

The transformation path of the established pharmaceutical giant CSPC PHARMA (1093.HK) is experiencing a painful period of shrinking traditional business and a lack of returns from its innovative pipeline. Despite CSPC PHARMA's continuous investment in research and development, the conversion of innovative results still requires more time. Meanwhile, the traditional finished drug business is accelerating its decline due to a significant drop in prices after core products were included in centralized procurement, putting pressure on the company's performance.

CSPC PHARMA's latest 2025 Q3 performance report shows that the company's total revenue for the first three quarters is 19.891 billion yuan, a year-on-year decrease of 12.32%; profit attributable to shareholders is 3.511 billion yuan, a year-on-year decrease of 7.1%. This is another continuation of the company's ongoing performance decline, with a 7.8% drop in revenue for the entire year of 2024 and a 25.4% year-on-year decline in net profit, marking the first dual decline in revenue and profit in ten years.

The decline in performance is mainly dragged down by the finished drug business, which accounts for the largest share of the business, with revenue of 15.45 billion yuan, a year-on-year decrease of 17.2%, accounting for about 77% of total revenue. The decline in specific therapeutic areas is even more alarming, with revenue from the highest proportion of central nervous system drugs plummeting by 21.6%, revenue from anti-tumor drugs crashing by 56.8%, a 22.7% decline in anti-infective drugs, and a 17.8% drop in cardiovascular drugs. CSPC PHARMA explains that this is mainly due to the continuous impact of industry policies such as centralized procurement of drugs and price adjustments of drugs included in the national medical insurance drug catalog.

In the tenth batch of national organized centralized procurement of drugs executed in 2025, CSPC PHARMA adopted a comprehensive low-price strategy, being referred to as the "price butcher" in the industry, with a total of 15 products including Apomorphine tablets and enteric-coated aspirin included in the procurement. The National Healthcare Security Administration revealed at the centralized procurement symposium held in December 2024 that 8 out of the 15 products selected by CSPC were chosen at the lowest price, due to CSPC PHARMA's ability to ensure stable product quality while improving efficiency through self-produced raw materials and intelligent manufacturing.

Among them, the core product Doxorubicin Liposome has significantly impacted performance due to its drastic price reduction in centralized procurement. The price of this drug has already dropped by about 23% in the 2024 Beijing-Tianjin-Hebei "3+N" alliance procurement, and in the tenth batch of national procurement executed in 2025, the winning bid price further dropped to 98 yuan per unit, a 97% decrease compared to the winning bid price of around 3,500 yuan in the alliance procurement. Research reports from CMB International indicate that the price reduction of this single product is expected to have an adverse impact of about 1-1.5 billion yuan on revenue in 2025

External Authorization Cooperation Fails to Halt Stock Price Decline

In response to the impact of centralized procurement, CSPC PHARMA is fully promoting its strategic transformation from generic drugs to innovative drugs. In the first three quarters, CSPC PHARMA's R&D expenses amounted to 4.185 billion yuan, accounting for 27.1% of the revenue from finished drug business, an increase of 7.9% year-on-year. The management expects R&D spending in 2026 to grow by 15% to 20% year-on-year. So far this year, CSPC PHARMA has had 3 new products approved for market launch, 8 product applications accepted, received 5 breakthrough therapy designations, and approved 42 clinical trials.

Regarding external authorization, on July 30, CSPC PHARMA reached an agreement with the U.S. company Madrigal Pharmaceuticals to grant global development and commercialization rights for its self-developed oral GLP-1 drug SYH2086 to the latter. CSPC PHARMA will receive a $120 million upfront payment, as well as up to $1.955 billion in development, regulatory, and commercial milestone payments. Additionally, CSPC PHARMA announced on June 13 that it had reached a strategic cooperation with AstraZeneca, receiving an upfront payment of $110 million, with a potential total transaction amount of $5.3 billion. These collaborations not only bring cash flow to CSPC PHARMA but also demonstrate the international recognition of its innovative drug pipeline.

However, the high-profile BD transactions cannot conceal the decline in CSPC PHARMA's profitability, as the company's gross margin has decreased for five consecutive years, from 72.3% in 2020 to 65.6% in the first three months of 2025. In the capital market, while the innovative drug sector has generally risen, CSPC PHARMA's stock price has fallen by more than 35% in the past two and a half months.

Several brokerage firms have also lowered their target prices for CSPC PHARMA. China International Capital Corporation stated that considering the increased R&D investment, it has lowered CSPC PHARMA's net profit for this year and next year by 12% and 15% to 4.76 billion yuan and 5.353 billion yuan, respectively, and reduced the target price by 15% to HKD 11. Nomura Securities believes that CSPC PHARMA's third-quarter revenue of 6.618 billion yuan is far below the market expectation of 7.4 billion yuan. Considering the underperformance in drug sales and the delayed recognition of income from cooperation projects, it has lowered its target price from HKD 10.09 to HKD 9.11