The anti-corruption campaign and VBP intensify short-term disruption, but innovative drug leaders are further widening their lead
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The anti-corruption campaign and VBP intensify short-term disruption, but innovative drug leaders are further widening their lead
Bernstein believes that China's pharmaceutical anti-corruption campaign and the 12th batch of VBP create localized pressure on the industry, but innovative drug companies such as Kelun-Biotech and Innovent remain the strongest relative beneficiaries during the 2Q/1H26 earnings season.
- The current healthcare anti-corruption campaign is more focused on compliance and targeted governance than in 2023. It may affect academic promotion, physician interactions, and hospital access in the short term, but does not constitute a comprehensive freeze.
- The 12th batch of VBP covers 65 products. Hengrui and Hansoh have relatively high exposure within the covered scope, but the company-level earnings impact is considered manageable.
- Online retail demand for GLP-1 products is strong. Tirzepatide remains the leader, while Innovent's mazdutide is rapidly gaining share and is on track to achieve its approximately CNY2 Bn 2026 sales target.
- Kelun-Biotech benefits from the ramp-up of sac-TMT in the TROP2 ADC market, while Innovent benefits from growth in mazdutide and tafolecimab. Both are viewed as the strongest earnings performers among the covered companies.
- Hengrui's target price was lowered from CNY71 to CNY65, and Hansoh's target price was lowered from HK$47 to HK$44, mainly due to generic drug pressure and longer BD revenue recognition cycles.
Report interpretation
Overview
This report previews 2Q and 1H26 results for China's pharmaceutical and biotechnology industry. The key backdrop includes intensified healthcare anti-corruption efforts, the launch of the 12th batch of national VBP, expanding retail demand for GLP-1 products, and rapid uptake of innovative oncology drugs. The report believes the industry faces short-term pressure from promotion, access, generic drug pricing, and competition, but companies with strong innovation capabilities and clear product differentiation will continue to distance themselves from traditional pharmaceutical companies and me-too products.
Core views
First, the impact of the anti-corruption campaign is currently more localized and compliance-oriented rather than a comprehensive commercial freeze like in 2023. Second, VBP pressures certain mature products from Hengrui and Hansoh, but their overall earnings trajectories are not considered materially changed. Third, innovative areas such as GLP-1, TROP2 ADC, PD-(L)1 bispecific antibodies, PCSK9, and BTKi continue to grow strongly. Fourth, Kelun-Biotech and Innovent are considered the most certain strong performers during this earnings season; Hengrui and Hansoh need to absorb declines in generic drugs, intensifying competition, and slower BD revenue recognition.
Analysis framework
The report combines policy-event tracking, feedback from company management, online retail-channel data, sample-hospital sales data, product-level market-share changes, and valuation-model updates to assess the impact of policy disruptions, product competitive dynamics, and financial forecast revisions on covered companies.
Methodology notes
Distinguishing short-term promotional friction from long-term industry quality improvement
The report breaks down the impact of the anti-corruption campaign into short-term friction involving physician interactions, academic promotion, and hospital access, as well as a long-term trend toward prescription decisions based on efficacy, safety, and real-world evidence.
Mapping product-level revenue erosion to company-level earnings impact
The report assesses the pressure from the 12th batch of VBP on Hengrui's Sevoflurane and Hansoh's mature products, and evaluates whether this pressure can be offset by innovative drug growth.
Using channel data to validate growth in GLP-1 and key innovative drug categories
The report uses online retail sales from e-commerce platforms and Pharmcube sample-hospital sales to track changes in sales and market share across GLP-1, ADC, bispecific antibodies, PCSK9, and BTKi categories.
Multi-method target price assessment
The target price adjustments for Hengrui and Hansoh reference DCF, forward P/E, and EV/EBITDA methods, while incorporating changes in generic drug declines, innovative drug sales, and BD revenue recognition timing.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Kelun-BiotechStrong beneficiary of innovative drugs
- Strengths
- Sac-TMT continues to ramp up and gain share in the rapidly growing TROP2 ADC market, with clear commercial momentum.
- Weaknesses
- The company has relatively high reliance on key products, and product concentration creates earnings volatility risk.
- Comparison
- One of the companies with the clearest growth profile during this earnings season among the covered stocks.
- Risks
- Intensifying TROP2 ADC competition, slower-than-expected uptake, and weaker-than-expected expansion into subsequent indications.
- InnoventBeneficiary of a multi-product innovation platform
- Strengths
- Online sales of mazdutide are ramping rapidly, tafolecimab is gaining share in the PCSK9 market, and multiple innovative products are generating portfolio growth.
- Weaknesses
- Sintilimab faces share pressure in the PD-1 market, while the future of GLP-1 remains subject to pricing and reimbursement negotiations.
- Comparison
- Compared with traditional pharmaceutical companies, Innovent is less affected by the anti-corruption campaign, with growth driven more by genuine clinical demand and its product portfolio.
- Risks
- NRDL negotiation outcomes, GLP-1 price competition, and tighter regulation of online prescriptions.
- Jiangsu HengruiUndergoing innovative transformation but facing short-term pressure
- Strengths
- Large revenue base, continued support from new products in its innovative pipeline, and ongoing share gains from certain innovative drugs such as rezvilutamide.
- Weaknesses
- Generic drugs have been revised down to an approximately 10% annual decline from 2025 to 2028, while VBP and the anti-corruption campaign pressure short-term growth.
- Comparison
- Compared with Kelun-Biotech and Innovent, Hengrui carries a heavier legacy generic-drug business burden.
- Risks
- Greater-than-expected VBP price reductions, intensifying competition among innovative drugs, and further delays in BD revenue recognition.
- HansohRising innovative drug mix but modest model downgrade
- Strengths
- Innovative drugs contribute nearly 80% of revenue, while aumolertinib benefits from expansion of the third-generation EGFR-TKI market.
- Weaknesses
- Mature products remain affected by VBP and genericization pressure, while BD revenue recognition cycles have lengthened.
- Comparison
- Overall commercial performance is relatively stable, but its growth inflection is less pronounced than that of Kelun-Biotech and Innovent.
- Risks
- EGFR-TKI competition, expansion of VBP coverage, and weaker-than-expected recognition of licensing revenue.
- BeOne MedicinesOverseas commercialization growth stock
- Strengths
- BRUKINSA's share of the U.S. BTKi market increased from 30% to 36%, continuing to take share from IMBRUVICA.
- Weaknesses
- Performance is more dependent on overseas market competition and the sustainability of commercialization for key products.
- Comparison
- Unlike companies focused on Chinese hospital channels, BeOne's key highlight is its increasing share of the U.S. BTKi market.
- Risks
- U.S. BTKi competition, pricing pressure, and slowing overseas sales growth.
- Akeso, Zai Lab, Sino Biopharm, CSPCMarket-Perform covered stocks
- Strengths
- Remain within the coverage universe, with some products supported by innovative drug or mature-product portfolios.
- Weaknesses
- The report does not identify them as the strongest performers during this earnings season; some face uncertainty related to competition, valuation, or product uptake.
- Comparison
- Compared with Outperform-rated stocks, their risk/reward appeal is weaker or catalysts are less pronounced.
- Risks
- Below-expectation commercialization, intensifying competition, policy pressure, and insufficient valuation recovery.
Key data
- Coverage of the 12th batch of VBP65 drug productsOfficially launched on 2026-06-23, focusing on off-patent drugs in major categories such as cardiovascular, oncology, and metabolic diseases.
- Potential sales erosion for Hengrui SevofluraneApproximately CNY0.5–1.3 BnExpected cumulative impact over the next 2 to 3 years. Significant at the product level but manageable relative to a revenue base exceeding CNY30 Bn.
- 1H26 online retail sales of the three major GLP-1 productsNearly CNY3 BnIncludes tirzepatide, mazdutide, and semaglutide.
- 1H26 online retail sales of TirzepatideApproximately CNY1.8 Bn, approximately 60% shareRemains the category leader in the tracked GLP-1 market.
- 2026 online sales forecast for MazdutideApproximately CNY1.3–1.5 BnIf online sales account for approximately 60%–70% of total retail sales, the company's approximately CNY2 Bn full-year target remains achievable.
- TROP2 ADC sample-hospital sales growth+149% YoYKelun's sac-TMT continues to gain share.
- PD-(L)1 bispecific antibody sample-hospital sales growth+198% YoYIvonescimab is rapidly becoming an important contributor.
- PCSK9 sample-hospital sales growth+75% YoYInnovent's tafolecimab continues to gain share.
- BRUKINSA U.S. BTKi shareIncreased from 30% in 4Q25 to 36% in 2Q26BeOne Medicines continues to take share from IMBRUVICA in the U.S. BTKi market.
- Hengrui target price adjustmentCNY65, previous value CNY71The new target price implies approximately 17% upside.
- Hansoh target price adjustmentHK$44, previous value HK$47The new target price implies approximately 35% upside.
Impact & implications
The investment implication is accelerating industry divergence: compliance pressure and procurement are more unfavorable for companies dependent on promotional intensity, mature generic drugs, or commoditized products, while innovative drug companies with clinical differentiation, genuine demand, and strong commercialization capabilities are more resilient. During the near-term earnings season, Kelun-Biotech and Innovent have the highest growth visibility; Hengrui and Hansoh retain long-term innovation-transformation value, but near-term models need to reflect generic drug declines and slower BD revenue recognition.
Risks
- Healthcare anti-corruption enforcement exceeds expectations, disrupting academic promotion, hospital access, and prescription growth.
- Price reductions or winning-bid dynamics in the 12th batch of VBP are unfavorable, causing mature-product revenue erosion to exceed model assumptions.
- Further tightening of regulation on GLP-1 online prescriptions and internet hospitals affects the sales pace of mazdutide, tirzepatide, and semaglutide.
- Homogeneous competition among innovative drugs intensifies, particularly in CDK4/6, PCSK9, IL-17, and PD-1.
- Recognition cycles for upfront payments and milestones from BD licensing transactions continue to lengthen, reducing long-term revenue forecasts.
- Expansion of the Pharmcube sample-hospital coverage may affect the comparability of historical absolute sales.
What to watch
- Sales ramp-up of Kelun-Biotech's sac-TMT and commercialization progress for Innovent's mazdutide in 2Q and 1H26 results.
- Final winning-bid results, price reductions, and provincial rollout pace for the 12th batch of VBP.
- Whether healthcare anti-corruption efforts escalate from localized compliance inspections to a broader freeze on hospital activities.
- MAZ-related NRDL negotiation results in November–December 2026 and their impact on 2027 hospital-channel uptake.
- The pace of Hengrui's generic-drug decline, the competitive landscape for innovative drugs, and the timing of BD revenue recognition following the BMS transaction.
- VBP pressure on Hansoh's mature products and whether the share of innovative drug revenue can continue to increase.
- Whether BeOne's BRUKINSA continues to expand its share of the U.S. BTKi market.