On April 26, Tonghua Dongbao Pharmaceutical Co., Ltd. (stock code: 600867, hereinafter referred to as "Tonghua Dongbao" or “the Company") released its 2024 Q1 report. During the reporting period, the Company recorded RMB 591 million in revenue, down 11.12% year-on-year. The net profit attributable to the owners of the parent company stood at RMB 215 million, representing a 14.28% year-on-year decline. In addition, the net profit attributable to the owners of the parent company, excluding non-recurring gains and losses, reached RMB 215 million, representing a 13.01% decrease over the previous year.

The declining performance was primarily due to a drop in insulin sales. With the impending implementation of a new round of volume-based procurement (VBP), the Company plans to replicate the measures it adopted during the initial round in the coming months. This includes a one-time write-off or refund of the difference between the original supply price and the new VBP price for insulin products already in circulation before this round's implementation. To minimize the workload associated with these one-time adjustments, the Company strategically slowed down the shipment of insulin products in the first quarter, resulting in a decrease in sales revenue.

For new product sales, during the reporting period, the Company's GLP-1 receptor agonist, Liraglutide injection, and the SGLT-2 inhibitor, Empagliflozin tablets, were progressively adopted by hospitals nationwide. These introductions have already started to generate sales revenue.

All Insulin Products Achieve Category A/A1 in the Latest VBP Round

Tonghua Dongbao actively responded to the National Healthcare Security Administration's call for the VBP of pharmaceuticals. According to the results from the latest round of the insulin VBP published on April 23, the Company's entire range of insulin products was preliminarily selected as Category A. Notably, its key insulin analogs, Insulin Glargine and Premixed Insulin Aspart (Aspart 30 Injection and Aspart 50 Injection), were categorized as A1.

This round notably included Tonghua Dongbao's flagship products, Premixed Insulin Aspart 30 and 50 injections, for the first time in the procurement process. Their selection as Category A1 is expected to significantly accelerate nationwide access and distribution of these products. The Company now offers a comprehensive portfolio of rapid-acting, basal, and premixed insulin products, encompassing both human insulin and insulin analogs, all of which have been recognized as Category A/A1 in the VBP program.

In addition to the contracted purchase volumes, the selected products will also be entitled to a portion of the remaining volumes chosen by medical institutions within the same procurement group. This includes the unallocated volumes demanded for Category B and C products and non-selected products, collectively amounting to over 33 million vials. This potential addition in purchase volume is expected to boost the Company's market share and help offset the adverse impacts of price reductions on its performance.

During this VBP round, the Company fulfills its corporate social responsibility by lowering drug prices to help reduce relevant out-of-pocket costs for people covered by medical insurances, lighten the financial burden on patients, and enhance drug accessibility and affordability. The Company will capitalize on this VBP round to further expand the sales of its insulin products, particularly insulin analogs, expedite market entry, and increase market share.

Clinical Research Accelerates in R&D Pipeline

Since the beginning of 2024, the Company has made significant clinical progress with several novel drugs. In January 2024, the first-in-class URAT1 inhibitor (THDBH130 tablets) for gout reached its primary endpoint in the Phase IIa clinical trial. In February 2024, the potential first-in-class XO/URAT1 dual inhibitor (THDBH151 tablets) achieved its primary endpoint in the Phase I clinical trial. In April 2024, the clinical trial application for weight loss indications using the dual GLP-1/GIP receptor agonist (THDBH120 injection) was accepted. This marks a significant milestone in which the Company's GLP-1 pipeline has reached the clinical trial stage for the treatment of overweight and obesity.

The Word of 2024: Strategic Expansion

2024 marks a pivotal year in the Company's strategic development. Tonghua Dongbao is embarking on a series of strategic initiatives to tap into broader markets, establishing a robust foundation for future growth. On the one hand, the Company is expanding the market presence of our existing products. As all insulin products of the Company have been categorized as A/A1 in the latest round of volume-based procurement (VBP), Tonghua Dongbao is capitalizing on its strong commercial capabilities to significantly boost the domestic market share of its insulin analogs. At the same time, the Company is accelerating the development of its international operations, expanding the global reach of our insulin and GLP-1 products. On the other hand, the Company is vigorously advancing a dual strategy of "Internal R&D and External Cooperation", continuously diversifying its product portfolio, extending its business horizons, entering new markets, and fueling a powerful new engine for robust growth.