Key takeaway

In 2025, Kelun Pharmaceutical achieved operating revenue of 18.513 billion yuan, a year-on-year decrease of 15.13%; net profit attributable to shareholders of the parent company was 1.702 billion yuan, a year-on-year decrease of 42.03%; and net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses was 1.597 billion yuan, a year-on-year decrease of 44.99%. Performance was pressured by cyclical fluctuations in the antibiotic intermediate industry and adjustments to the product structure of infusion products. The company's leading position in the domestic large-volume infusion market remains solid. The generic drug segment achieved rapid growth relying on centralized procurement products. Although the antibiotic intermediate business saw a performance decline due to cyclical impacts, the industrialization process of synthetic biology continues to advance. The innovative drug segment achieved breakthroughs in both commercialization and clinical R&D: Kelun-Botaich's first ADC product achieved commercial scale-up, multiple core pipelines are steadily progressing in global clinical trials, and the overseas licensing collaboration with MSD. continues to deepen, opening up global market space for the company's long-term growth. We remain optimistic about the company's long-term development logic driven by the three wheels of infusion, generic drugs, and innovative drugs.

Event

Kelun Pharmaceutical released its 2025 Annual Report. The company achieved annual operating revenue of 18.513 billion yuan, a year-on-year decrease of 15.13%; net profit attributable to shareholders of the parent company was 1.702 billion yuan, a year-on-year decrease of 42.03%; and net profit attributable to shareholders of the parent company after deducting nonrecurring gains and losses was 1.597 billion yuan, a year-on-year decrease of 44.99%.

Brief analysis

Annual Report Performance Under Short-term Pressure, Fourth-Quarter Profit Returns to Positive Growth

Kelun Pharmaceutical released its 2025 Annual Report. The company achieved annual operating revenue of 18.513 billion yuan, a year-on-year decrease of 15.13%; net profit attributable to shareholders of the parent company was 1.702 billion yuan, a year-on-year decrease of 42.03%; and net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses was 1.597 billion yuan, a year-on-year decrease of 44.99%. The performance decline was mainly due to factors such as declining terminal demand in the infusion segment, the impact of centralized procurement on non-infusion preparations, and falling prices and reduced volumes of penicillin products from Chuanning Biotechnology.

The company's revenue decline in Q4 2025 narrowed significantly compared to the first three quarters, and quarterly profit returned to positive growth. This was mainly due to better overall shipments in the large -volume infusion business in Q4 driven by influenza demand, stabilized and recovering profi ts in the non-infusion preparations segment, and the recognition of licensing fees from the innovative drug segment in Q4.

Leading Position in Infusion Segment Remains Solid, Product Structure Optimization and Upgrading Steadily Progresses

By business segment, in 2025, the company's infusion therapy business achieved sales revenue of RMB 7.484 billion, a year-on-year decrease of 16.02%. The revenue decline was primarily due to the company's proactive optimization of its product portfolio, continuously advancing the replacement of semi-open infusion systems with higher value-added fully closed infusion systems, and scaling back capacity for low-margin conventional products. As a leading domestic large-volume infusion (LVI) company, the company maintained its industryleading market share. The sales proportion of closed infusion products further increased, with significant results from the transformation towards premium and differentiated products. Against the backdrop of normalized centralized procurement in the industry, the infusion business remains the company's stable cash flow foundation, leveraging economies of scale and cost advantages.

Non-Infusion Business: Revenue under year-on-year pressure, with structural divergence between generic drug adjustments and innovative drug volume growth

In 2025, the company's non-infusion business (including generic and innovative drug formulations) achieved sales revenue of RMB 8.867 billion, a year-on-year decrease of 13.91%, indicating short-term phased pressure on overall revenue. From a business structure perspective, the generic drug segment was impacted by multiple factors including the normalized implementation of national centralized procurement, a decline in terminal healthcare demand, failure to win bids for some products in centralized procurement, and intensified market competition. Both volume and unit price of traditional generic drug products faced pressure, becoming the main reason for the decline in non-infusion business revenue. Sales of mature generic product lines such as plastic ampoules and oral formulations also declined year-on-year, further increasing segment pressure. Meanwhile, the innovative drug business entered a commercialization realization phase. Four core innovative drugs, including SKB264, were successfully launched and achieved sales breakthroughs. Full-year innovative drug sales reached RMB 543 million. With the rapid expansion of the commercialization team and continuous improvement in channel coverage, the revenue contribution from innovative drugs increased significantly, partially offsetting the negative impact of the generic drug decline. Overall, the non-infusion business is in a transition phase characterized by adjustment in the existing generic drug portfolio and the rise of innovative drugs as a new growth driver. The structure is continuously optimizing, with long-term growth momentum gradually shifting from generics to innovative drugs.

Antibiotic Intermediate & API Segment Underperforms Amid Industry Downturn; Synthetic Biology Builds a Second Growth Curve

Subsidiary Chuanning Biotechnology achieved operating revenue of RMB 4.616 billion in 2025, a year-on-year decrease of 21.17%, and net profit attributable to the parent company of RMB 765 million, a year-on-year decrease of 45.36%. The performance decline was mainly due to cyclical fluctuations in market demand for antibiotic intermediates and a decline in prices of major products. However, the company's cost advantages and technological barriers in the field of biological fermentation remain solid. Through process upgrades and energy-saving measures, production costs have been continuously optimized, maintaining strong profitability even during the industry's downturn. Simultaneously, the company is resolutely advancing its dual-drive strategy focusing on antibiotic intermediates and synthetic biology. It continues to increase R&D investment in synthetic biology, with projects like ergosterol and calcium pantothenate progressing steadily. Several highvalue- added synthetic biology products are entering the industrialization phase, poised to become a second growth curve beyond the antibiotic intermediates business.

Kelun-Biotech's Commercialization Accelerates, with Continuous Global Breakthroughs in ADC Pipeline R&D

In 2025, the subsidiary Kelun-Biotech achieved operating revenue of RMB 2.058 billion, a year-on-year increase of 6.47%, with revenue from innovative drug business steadily rising. Since its launch in 2024, the commercialization of the company's first ADC product, Sacituzumab Tirumotecan, has continued to accelerate. Its in-hospital penetration rates for indications such as triple-negative breast cancer and EGFRm non-small cell lung cancer have steadily increased. Clinical development for multiple other indications, including 1L wild-type non-small cell lung cancer and urothelial carcinoma, is advancing rapidly, promising to further expand the product's sales potential. Meanwhile, the company has a well-structured ADC pipeline. The marketing application for HER2-ADC A166 is progressing steadily, and several next-generation ADC products have entered clinical stages. The company has established a comprehensive presence across multiple popular targets including TROP2, Claudin18.2, and Nectin-4, positioning itself as one of the enterprises in China with the richest ADC pipeline and leading R&D progress.

The company's innovative drug business, centered on ADCs, has entered a harvest period, with Sac-TMT as the core growth engine. Since its launch in November 2024, it has gained approval for multiple indications including EGFRm NSCLC, TNBC, and HR+/HER2- breast cancer. In December 2025, along with other drugs, it was included in the national reimbursement drug list. Although a price adjustment in the second half of the year put pressure on apparent revenue, actual sales in H2 2025 still showed growth compared to H1. Clinically, multiple Phase III studies of Sac-TMT presented superior efficacy data at ESMO. Its combination with Keytruda for firstline NSCLC received Breakthrough Therapy Designation from the CDE. MSD is advancing i ts overseas development with MK-2870, having initiated 17 global Phase III clinical trials covering lung cancer, breast cancer, gastric cancer, gynecological tumors, etc. Overseas data readouts are expected as early as 2026, continuously realizing its global value. The company's ADC pipeline matrix is well-developed, with products such as SKB315, SKB410, and SKB518/FIC targets steadily advancing in clinical trials. Its differentiated presence consolidates its leading industry position.

Sac-TMT Phase III clinical trials are reading out results successively, with a comprehensive pipeline of innovative treatments

In 2025, the company presented clinical data for multiple core products at the ESMO Annual Meeting. Among them, two Sac-TMT clinical studies were selected for oral presentations: 1) A Phase III clinical trial of SKB264 versus platinum-based doublet chemotherapy in patients with EGFR-mutant NSCLC who progressed after EGFR-TKI treatment. Compared with chemotherapy, Sac-TMT demonstrated statistically significant and clinically meaningful improvements in both PFS and OS, reaffirming its best-in-class potential; 2) A Phase III clinical trial of SKB264 versus investigator's choice of chemotherapy in previously treated HR+/HER2- BC patients, showing superior clinical outcomes to chemotherapy. Additionally, a Phase III clinical trial of SKB264 in chemotherapynaive HR+/HER2- BC patients is currently underway. In November 2025, the company announced that the Phase III clinical trial of SKB264 in combination with Keytruda for PD-L1-positive NSCLC showed statistically and clinically significant improvements in PFS, with a positive trend observed in OS. This indication received Breakthrough Therapy Designation from the CDE in January 2026.

Currently, the company has a robust pipeline of innovative products. Other clinical-stage pipelines include: 1) SKB315 (CLDN18.2 ADC), currently in Phase 1b clinical trials for indications including GC/GEJC/PDAC; 2) SKB410/MK-3120 (Nectin-4 ADC), for which MSD has initiated four global Phase 1/2 clinical trials to treat advanced solid tumors (including bladder cancer). 3) SKB571/MK-2750, a novel bispecific ADC being codeveloped with MSD, primarily targets various solid tumors such as lung cancer (LC) and gastrointestinal (GI) cancers, with Phase II clinical trials currently underway in China. 4) SKB518, a novel ADC drug targeting a potential first-in-class target, is currently undergoing Phase II clinical trials in China. 5) SKB535/MK-6204, a novel ADC drug targeting a potential first-in-class target, is currently undergoing Phase I clinical trials in China. 6) SKB445, a novel ADC drug targeting a potential first-in-class target, is currently undergoing Phase I clinical trials in China. 7) SKB107, an RDC drug targeting bone metastasis in solid tumors co-developed with the Affiliated Hospital of Southwest Medical University, is currently in Phase I clinical trials.

Overseas collaboration continues to deepen, with the partnership with MSD opening up global commercialization opportunities.

The exclusive licensing collaboration between subsidiary Kelun-Biotech and MSD for ADC products including SKB264 continues to be implemented. In 2025, the company recognized R&D project revenue of RMB 808 million from MSD, and as of the reporting period end, had cumulatively received USD 729 million in payments under the agreement from Merck. MSD has now initiated global Phase III clinical studies for SKB264 as monotherapy or combination therapy for various cancers. The company is expected to continue receiving R&D milestone payments, and will also receive global sales royalties upon the product's future launch. The deepening collaboration not only brings stable cash flow but also expands the commercialization potential of the company's innovative drug pipeline from the domestic market to the global market.

MSD Phase III clinical trials underway, SKB264 overseas data to be read out soon

SKB264 is currently the most advanced product in the company's collaboration pipeline with MSD. In May 2022, the company entered into its first agreement with MSD, licensing out the overseas rights of SKB264. The company received a total of USD102 million in upfront payments and potential milestone payments of up to USD1.16 billion. SKB264 is being developed as MK-2870 in MSD's pipeline. Starting in 2025, MSD will initiate Phase III clinical trials for ovarian cancer and TNBC, with 17 Phase III clinical trials currently planned. MSD's planning and rapid development of MK-2870 as a monotherapy or in combination therapy further demonstrates the company's confidence in the product. Overseas clinical data is expected to be read out sequentially starting in 2026.

2026 will be rich in catalysts for Kelun Pharmaceutical, with intensive milestones expected for global clinical trials and regulatory filings of its core pipelines. In the first half of 2026, the company will see important clinical data releases and regulatory approvals for several core assets, including key efficacy data for multiple indications of SKB264 to be presented at ASCO, potential marketing approval for the HER2 ADC A166, and batch approvals for generic drugs to continue advancing. Concurrently, the global Phase III clinical trials for SKB264 in collaboration with MSD will accelerate comprehensively, and high-value-added synthetic biology products will achieve scaled production successively. In the second half of 2026, the company will focus on advancing multiple clinical data readouts and pipeline R&D progress, including key data readouts from several global Phase III trials for SKB264, successive disclosures of Phase I/II data for next-generation ADC pipelines, and continued fulfillment of overseas collaboration milestone payments.

Risks:

Market Risks: On one hand, drug sales face industry competition, with risks of price reductions and market share erosion. Additionally, the entire industry is subject to policy impacts from medical insurance, tendering, and centralized procurement, placing continuous sales price pressure on pharmaceutical manufacturers.

Industry policy risks: Changes in research design requirements, prices, volume-based procurement policies, and in the scope and proportion of medical insurance reimbursement brought about by industry policy adjustments, such as major changes in the centralized procurement policy, medical insurance policy, or policies related to the review and approval of innovative medicine.

R&D Underperformance Risk: New drug R&D and innovation are characterized by high investment, long cycles, and low success rates, resulting in relatively high risks. The drug development process encompasses numerous complex stages, including drug design, synthesis, biological screening, preclinical trials (pharmacology, toxicology, etc.), drug formulation and stability testing, scale-up trials, human clinical trials, regulatory approval and marketing, and post-market surveillance. Any deviation in decision-making or technical error during this process can significantly impact drug development and may even lead to failure.

Slower-than-expected approval: Extension of the approval period due to factors such as the need for supplementary materials and changes in the approval process.

Less-than-expected sales: Newly launched drugs face risks such as uncertainties in market access, market acceptance, product competitiveness, competitive landscape, and market demand. New drugs may also see a risk of lower-than-expected sales.