In-Depth Analysis of Yuekang Pharmaceutical (600705.SH): Three Consecutive Years of Net Profit Decline, When Will the Innovation Pipeline Contribute Revenue?

Based on collected public information and financial data, I conducted an in-depth analysis of the financial status and innovative drug pipeline of Yuekang Pharmaceutical (600705.SH).

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From the perspective of financial data, Yuekang Pharmaceutical is indeed facing severe profit pressure:

Year	Operating Revenue (RMB 100 million)	YoY Change	Net Profit (RMB 100 million)	YoY Change	Net Profit Margin
2021	190.84	+4.0%	44.71	-15.1%	23.4%
2022	181.55	-4.9%	29.17	-34.7%	16.1%
2023	169.39	-6.7%	2.90	-90.1%	1.7%
2024E	~50.0	-70.6%	1.24	-57.2%	~2.5%

1. Sustained Impact of Centralized Drug Procurement
   : With the in-depth advancement of the national centralized drug procurement policy, the company’s core products are facing substantial price reduction pressure, especially its cardiovascular generic drug product line which has been significantly impacted. [1]

2. Continuous Increase in R&D Investment
   : In 2024, R&D investment reached RMB 422 million, accounting for 11.16% of operating revenue, a significant increase from 1.96% in 2021. Expensed R&D expenditures have significantly eroded profits. [1]

3. Intensified Market Competition
   : The traditional generic drug business is facing fierce price competition, leading to a decline in gross profit margin from 52.6% in 2021 to approximately 40% in 2024. [1]

4. Impact of Asset Impairment
   : In 2023, the company accrued a large amount of asset impairment provisions, which had a significant impact on the current period’s net profit.

• Operating Cash Flow
  : In 2023, the net cash flow generated from operating activities was RMB 726 million, remaining positive, indicating that the main business has a certain cash-generating capacity. [0]
• Asset-Liability Ratio
  : The company’s liability ratio remains at a high level, and debt pressure deserves attention
• R&D Investment Intensity
  : The company has maintained high R&D investment for consecutive years, reflecting its strategic determination to transform towards innovation

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As of December 31, 2024, the company has a total of

, including: [1]

• Innovative Drugs in Development
  : 21 projects (accounting for 50%)
  • Nucleic Acid Drugs: 12 projects
  • Innovative TCM Drugs: 5 projects
  • Peptide Drugs: 3 projects
  • Chemical Drugs: 1 project
• Generic Drugs and Consistency Evaluation Projects
  : 21 projects

Product Name	Type	Indication	R&D Phase	Key Milestones
Hydroxysafflor Yellow A for Injection	Class 1 Innovative TCM Drug	Acute Ischemic Stroke	Under NDA Review	Expected to be approved for marketing in 2025
Tongluo Jiannao Tablets	Class 1 Innovative TCM Drug	Vascular Dementia	Under NDA Review	Expected to be approved for marketing in 2025
Zihua Wenfei Zhisou Granules	Class 1 Innovative TCM Drug	Post-Infection Cough	Under NDA Review	Expected to be approved for marketing in 2025
YKYY017	Peptide Drug	Broad-Spectrum Coronavirus Infection	Phase II Clinical Trial Completed	NDA to be submitted in 2025, expected to launch in 2026
YKYY015	siRNA Drug	Hypercholesterolemia	Phase I Clinical Trial in Progress	Phase III to be initiated in 2025-2026, expected to launch in 2027
CT102	Antisense Nucleic Acid Drug	Primary Liver Cancer	Phase IIa Clinical Trial	Phase II to be completed in 2025-2026

The company has built

, forming strong innovation barriers: [1]

• Nucleic Acid Drug Platform
  : China’s first “National and Local Joint Engineering Center for Nucleic Acid Drugs”
• AI Drug R&D Platform
  : Has submitted 4 AI drug algorithm patents
• Cell and Gene Therapy Platform
  : Layouts in cutting-edge treatment fields
• National Enterprise Technology Center
  : Recognized jointly by five national ministries and commissions

: The company has accumulated 317 patents, with 76 new patent applications and 63 new authorizations in 2024, continuously accumulating innovative achievements.

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are expected to be approved for marketing in 2025:

• Hydroxysafflor Yellow A for Injection
  : Cardiovascular and cerebrovascular field, peak revenue potential of approximately RMB 500 million
• Tongluo Jiannao Tablets
  : Neuropsychiatric field, peak revenue potential of approximately RMB 300 million
• Zihua Wenfei Zhisou Granules
  : Respiratory system field, peak revenue potential of approximately RMB 200 million

: The total peak revenue potential of innovative TCM drugs is approximately . Considering the volume release and market penetration in the first year of launch, it is expected to contribute in revenue in 2025.

is expected to launch in 2026:

• Indication: Broad-spectrum coronavirus infection (including COVID-19, SARS, etc.)
• Advantage: Unique mechanism of membrane fusion inhibitor that is not affected by virus mutations
• Peak revenue potential of approximately
  RMB 800 million

: With the volume expansion of TCM new drugs, the innovative drug segment is expected to contribute in revenue.

is expected to launch in 2027:

• Targets the PCSK9 gene, a potential best-in-class ultra-long-acting siRNA lipid-lowering drug
• It is the only domestic PCSK9 siRNA project of its kind approved for IND in the United States
• Peak revenue potential of approximately
  RMB 1.5 billion

is expected to launch in 2027:

• China’s first fully independently developed antisense nucleic acid drug
• Treats primary liver cancer, filling a gap in the field
• Peak revenue potential of approximately
  RMB 1 billion

: Starting from 2027, the total peak revenue potential of the innovative drug pipeline can reach , which is expected to create a “New Yuekang”.

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1. Firm Transformation Towards Innovation
   : The proportion of R&D investment has increased from 2% to 11%, demonstrating clear strategic transformation determination
2. Scarce Technology Platforms
   : Platforms such as nucleic acid drugs and AI drug R&D have differentiated competitive advantages
3. Improved Pipeline Echelon
   : A sound R&D echelon has been formed from pre-clinical to NDA review
4. Solid Patent Barriers
   : 317 patents have built a relatively complete intellectual property moat

1. Risk of R&D Failure
   : Innovative drug R&D has a long cycle and high risk, with the possibility of failure
2. Uncertainty in Launch Time
   : The NDA review time is uncertain and may be delayed
3. Commercialization Challenges
   : Challenges exist in innovative drug market access, medical insurance negotiations, etc.
4. Cash Flow Pressure
   : Sustained R&D investment poses a test to cash flow
5. Sustained Impact of Centralized Procurement
   : Traditional business may continue to be under pressure

Time Node	Catalyst	Expected Impact
Q1-Q2 2025	Approval of 3 TCM new drugs	Valuation reconstruction, performance inflection point
Full Year 2025	Completion of Phase II data readout of YKYY017	Clinical validation, improved pipeline value
2026	Approval and launch of YKYY017	First blockbuster innovative drug contributes revenue
2026-2027	Initiation of Phase III clinical trial of YKYY015	Milestone of core product

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1. Performance pressure is a fact, but the transformation direction is correct
   : The three consecutive years of significant net profit decline of Yuekang Pharmaceutical is the dual result of the impact of centralized procurement and increased R&D investment, but the company is firmly transforming into an innovative drug enterprise.
2. 2025 is expected to be a performance inflection point
   : 3 Class 1 innovative TCM drugs are expected to be approved for marketing in 2025, and are expected to contribute revenue growth starting from the second half of 2025.
3. The value of the innovation pipeline is gradually emerging
   : From a peak revenue potential of RMB 1 billion in 2025 to RMB 2.5-3 billion in 2027, the innovative drug pipeline is transitioning from the R&D investment phase to the harvest phase.
4. Medium- to long-term investment potential is promising
   : With the successive launch of innovative drugs, the company is expected to achieve a revaluation from a generic drug enterprise to an innovative drug enterprise.

• Short-Term (Within 1 Year)
  : Focus on the approval progress of 3 TCM new drugs and the 2024 annual report performance
• Mid-Term (1-2 Years)
  : Focus on the clinical progress and commercialization preparation of blockbuster products such as YKYY017
• Long-Term (2-3 Years)
  : As the innovative drug pipeline gradually delivers results, the company is expected to usher in a valuation recovery market

: Innovative drug R&D falls short of expectations, new drug launch is delayed, market competition intensifies, industry policy changes.

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[1] 2024 Annual Report Abstract of Yuekang Pharmaceutical Group Co., Ltd. - QQ.com (https://file.finance.qq.com/finance/hs/pdf/2025/03/15/1222807864.PDF)

[2] 2024 Semi-Annual Report of Yuekang Pharmaceutical Group Co., Ltd. - Qixin (https://qxb-pdf-osscache.qixin.com/AnBaseinfo/cdd1f61099f0a8bdc97248436f21b81d.pdf)

[3] 2024 Annual Report of Yuekang Pharmaceutical Group Co., Ltd. - CNINFO (http://dataclouds.cninfo.com.cn/shgonggao/2025/2025-03-15/0d2f86e300e011f0b161fa163e957f7a.pdf)

[4] 2025 Semi-Annual Report of Yuekang Pharmaceutical Group Co., Ltd. - CNINFO (http://static.cninfo.com.cn/finalpage/2025-08-29/1224610083.PDF)