GLP-1 Retail Boom Amid Slowing Growth in Innovative Drugs

Overview

Bernstein released its quarterly sales tracking report for China's pharmaceuticals and biotechnology sector. The report highlights a significant slowdown in overall and innovative drug sales growth in 2025, with hospital channels pressured by volume-based procurement (VBP) and macroeconomic factors, while retail channels showed resilience. Meanwhile, the GLP-1 segment experienced explosive growth in retail, emerging as the sector's brightest spot. The firm maintains its view of structural divergence, favoring companies with core innovative assets and strong commercialization capabilities.

Core views

GLP-1 retail boom: In Q1 2026, China's GLP-1 retail sales surged 58% QoQ. Eli Lilly's tirzepatide contributed the most, soaring 187% QoQ, followed by Innovent/Lilly's mazdutide, up 51%. As these drugs currently rely mainly on retail channels, the growth reflects robust demand. Innovent's total product sales reached RMB3.8 billion (up 15% QoQ), with mazdutide estimated to contribute at least RMB150-200 million. Slowing growth in innovative drugs, shifting channel dynamics: China's total drug sales in sample hospitals and retail channels fell 1% YoY in 2025 to RMB1.35 trillion. Innovative drug sales grew 5% YoY to RMB410 billion, but the pace slowed significantly compared to previous years (+12%, +9%). The drag came from hospital channels (up only 1% YoY), while retail channels (up 14% YoY) partially offset the weakness. Divergent performance of key products: Innovent's PCSK9 inhibitor saw rapid growth post-NRDL inclusion, with Q4 2025 sales up 62% QoQ and market share jumping to 23%. Junshi's PD-1 gained share through expanded indications and improved commercialization. Third-generation EGFR-TKIs and HER2 ADCs remained high-growth areas, while traditional targets and products at risk of VBP (e.g., Hengrui's sevoflurane and butorphanol) faced sales declines or share losses.

Analysis framework

The firm employed a 'top-down and bottom-up' data tracking framework. First, it used third-party sample hospital and retail data to assess macro trends in overall and innovative drug markets, identifying core challenges (hospital pressure, retail growth). Next, it drilled down into specific therapeutic areas (e.g., GLP-1, PD-1, ADCs) and key products, tracking quarterly sales growth and market share shifts to validate commercialization. Finally, it evaluated product potential and pricing risks based on NRDL and VBP policies, leading to differentiated ratings.

Methodology notes

• Industry Analysis FrameworkVolume-Price Breakdown

  Pharmaceutical sales volume-price analysis

  When analyzing drug sales data, the firm distinguishes between 'volume growth' and 'price erosion' amid policy changes (e.g., NRDL price cuts, VBP). For instance, slower innovative drug growth partly reflects NRDL impacts, while GLP-1 retail growth highlights volume-driven new product demand.

• Industry Analysis Framework

  Sample hospital data scaling and adjustment

  Third-party 'sample hospital' data represents only a portion of the actual market. The report notes that such data requires scaling by 150%-300% to estimate true market size, with potential underestimation for newer drugs, necessitating cross-validation with company disclosures.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Innovent Biologics (1801.HK)

  Core products GLP-1 and PCSK9 exceed expectations

  Strengths

  Mazdutide retail boom, PCSK9 post-NRDL share rise to 23%

  Weaknesses

  PD-1 faces intense competition

  Comparison

  Top-tier commercialization among biotechs

  Risks

  GLP-1 competition intensifies

• Hengrui Pharmaceuticals (600276.SH)

  Diverse innovative pipeline but older products face VBP risks

  Strengths

  AR inhibitors, CDK4/6 oncology drugs maintain growth

  Weaknesses

  Anesthesia/analgesia products (e.g., sevoflurane) face VBP risks and sales declines

  Comparison

  Traditional pharma transitioning to innovation

  Risks

  Further sales erosion for high-VBP-risk drugs

• Junshi Biosciences (1877.HK)

  PD-1 product gains market share

  Strengths

  Toripalimab expands indications, commercialization improves

  Weaknesses

  Profitability and pipeline depth need validation

  Comparison

  PD-1 share gains amid sector slowdown

  Risks

  Overall PD-1 growth slows

Key data

• Q1 2026 GLP-1 retail sales QoQ growth+58%Tirzepatide +187%, mazdutide +51%
• 2025 innovative drug sales YoY growth+5%Slowed from +12% in 2024
• 2025 retail channel innovative drug sales YoY growth+14%Outperforming hospital channels' +1%
• Innovent Q1 2026 total product salesRMB3.8 billionUp 50% YoY, 15% QoQ

Impact & implications

The report concludes that China's pharmaceutical sector has moved beyond broad-based growth into structural divergence. Hospital channel weakness and VBP normalization cap growth for generics and mature innovative drugs, while retail growth offers new opportunities for consumer-facing products (e.g., GLP-1 for weight loss/diabetes). For companies, differentiated pipelines and cross-channel (especially retail) commercialization will determine future valuation premiums.

Risks

• Continued slowdown in innovative drug hospital sales
• VBP expansion leading to significant sales declines for existing products
• Discrepancies between sample data and actual market size

What to watch

• GLP-1 drugs (e.g., mazdutide) penetration from retail to hospital channels
• Upcoming official sales disclosures from Innovent and others
• Sales stabilization for traditional products at VBP risk (e.g., Hengrui's anesthesia line)