G&L’s Rising Profit Shows Insulin Is a Good Business to Be In, for Now

Beijing-based Gan & Lee (G&L) Pharmaceuticals Co. Ltd.’s first-half profit attributable to shareholders jumped nearly 15% to 307.6 million yuan ($44.5 million) thanks to strong sales as the synthetic insulin pioneer more than tripled its business overseas.

G&L’s revenue climbed 25% year-on-year in the first half to 1.2 billion yuan, including a notable 279.85% year-on-year increase in foreign revenue, which hit 26.8 million yuan, according to its latest financial report published Monday.

Still, G&L’s performance this year belies the challenges that the company faces stemming from its near total dependence on insulin sales as rising operating costs cut into profit margins and government moves threaten to push down prices.

Founded in 1998, G&L, which went public in June in Shanghai, has taken advantage of its veteran status to position itself as a key developer in researching, manufacturing and commercializing recombinant human insulin biotechnology and insulin analogues — also known as third-generation insulin, which is produced to be more efficient, safer and more flexible than animal insulin and human insulin.

Since it was founded, the company has relied almost exclusively on insulin sales to make money, with 95.1% of revenue coming from the medication in 2019, according to the company’s IPO prospectus.

This poses an issue for the company for two reasons. The first is cost. In its latest financial statement, the company reported operating costs were up 47.15%. At the same time, it probably can’t bank on prices staying high for much longer

Last month, China’s National Health Security Administration held a panel on planning centralized purchasing of biological products such as insulin and blood products in the latest sign that insulin and related products will be less lucrative for G&L.

“It is highly likely that the price of insulin will come down in the near future as the government is eyeing centralized purchasing and authorizing more companies to enter the market,” said a fund manager specialized in pharmaceutical industry.

Still, the company does have reason to be sanguine. Global demand for insulin has surged during the coronavirus pandemic as diabetics patients stock up on the medication and international pharmaceutical companies increase orders.

In the domestic market, G&L’s first-half revenue rose 29.55% year-on-year thanks to government policies that aim to ensure patients with diabetes and high blood pressure have access to their medication.

Contact editor Michael Bellart (michaelbellart@caixin.com).

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