Sinolink: Innovation is King in the Era of Group Procurement, Focus on Investment Opportunities in Domestic New Drugs.

Sinolink released a research report stating that the insulin market has returned to growth track after two rounds of centralized procurement. At the same time, centralized procurement has expanded the coverage of insulin by medical institutions and increased the medication penetration rate, laying the foundation for further iteration and upgrade of product structure. Insulin weekly preparation drugs represented by Icodec/Icosema have significant compliance advantages, and the domestic commercialization process is progressing smoothly, which is expected to drive further upgrade of domestic insulin product structure. Under the normalization background of centralized procurement, formulation varieties with strong innovative attributes and good competitive landscape are expected to contribute greater value to enterprises, suggesting continuous attention to investment opportunities corresponding to domestic new drugs. Sinolink's main points are as follows: Centralized procurement promotes the increase of domestic insulin penetration rate, and the market size will return to growth channel from 2024. The selected results of the first round of insulin centralized procurement will be implemented in May 2022, having a profound impact on the domestic insulin market: 1) Quantity/price: The average price of selected products in the first round of insulin centralized procurement decreased by 48%, greatly improving the accessibility of medication. Before the centralized procurement, the annual usage of insulin in public medical institutions nationwide was about 250 million units; after the centralized procurement, the usage of the selected insulin reached 650 million units in 22 months, with an average annual usage of about 350 million units, an increase of nearly 40%. 2) Scale: Influenced by the price reduction, the insulin market size in China in 2022/2023 is about 21.4/18.7 billion RMB, a year-on-year decrease of 21%/12%. Starting from 2024, with the stimulation of centralized procurement price reduction on insulin usage, and the further stabilization of the price system after the continuation of centralized procurement, the domestic insulin market size will resume growth, with the market size in 2025 reaching about 20.6 billion RMB. Centralized procurement will continue from May 2024, and the optimized rules are expected to maintain the stability of the insulin price system. Considering the essential nature of insulin, factors such as changes in China's population age structure and the improvement of medication penetration rate, the scale of China's insulin market is expected to continue growing sustainably. Non-centralized products support the performance of leading insulin companies during the centralized procurement period, and the commercial value of innovative varieties urgently needs attention. Novo Nordisk dominates nearly half of China's insulin market size. Due to adjustments in the price system and the volume reported in centralized procurement, the sales revenue of products within the centralized procurement scope of Novo Nordisk decreased from 11.013 billion Danish kroner in 2020 to 4.858 billion Danish kroner in 2025, a 56% decrease. However, due to the rapid growth of non-centralized products such as degludec insulin, degludec insulin liraglutide, and icode insulin, their domestic insulin business revenue in 2025 only decreased by 10% compared to the peak in 2020. Before the first round of centralized procurement, degludec insulin and degludec insulin liraglutide were the only products of the same type in the domestic market and were not included in the centralized procurement. In 2025, the sales revenue of these two products in the domestic market was 2.964 billion and 1.792 billion Danish kroner, respectively, accounting for 51% of Novo Nordisk's domestic insulin revenue. With the continuation of centralized procurement until the end of 2027, the key factor in the competition landscape is whether the product is included in the centralized procurement, emphasizing the urgent need to focus on the commercial value of innovative varieties of insulin companies. Icodec/Icosema introduces the era of insulin weekly preparations, focusing on investment opportunities in domestic innovative drugs. 1) Novo Nordisk's Icodec is the world's first approved basic insulin weekly preparation product, with significant advantages in efficacy and patient medication compliance compared to daily insulin preparations. Icodec was included in the national medical insurance catalog in 2024, and its commercialization in the Chinese market progressed rapidly, achieving sales revenue of nearly 310 million RMB in 2025. Apart from Icodec, the only other weekly preparation insulin products in global phase three clinical trials are Efsitora (Lilly) and GZR4 (Gan & Lee Pharmaceuticals.), with a good competitive landscape; among them, GZR4 had a lower incidence of hypoglycemia in phase two clinical trials at 2.4%/6.3%, which was lower than Icodec (not head-to-head); in phase three clinical trials, it significantly outperformed the daily insulin regimen in achieving the clinical target of HbA1c <7.0% or 6.5% without clinically significant (grade 2) or severe (grade 3) hypoglycemia, with the potential to achieve better safety than Icodec. 2) Combination formulations of basic insulin and GLP-1RA can simplify treatment regimens, effectively lower blood sugar levels, and reduce the risk of weight gain and hypoglycemia associated with insulin therapy. The representative product degludec insulin liraglutide achieved domestic revenue of nearly 2 billion RMB in 2025. Icosema was approved for domestic market in March 2026 as the first combination weekly preparation; GZR102 is the first domestic combination weekly preparation, with its GLP-1 component demonstrating superior glucose-lowering effects in phase two clinical trials compared to semaglutide, with the potential for better results. Risk Warning: Risks of R&D progress falling short of expectations, commercialization progress falling short of expectations, and intensified competition.