China performance diverged significantly, while China innovative drug licensed assets continued to gain validation from multinational pharma

Overview

By comparing the second-quarter 2026 results and management call commentary of Merck, Pfizer, Eli Lilly and Novo Nordisk, the report assesses multinational pharmaceutical companies' operating trends in China and the global development progress of China-origin innovative drug assets. Overall, China market performance diverged: Merck was dragged down by weak demand, while Eli Lilly and Novo Nordisk benefited from GLP-1 product ramp-up. Oncology and metabolic disease assets licensed by Chinese pharma companies to multinational pharmaceutical companies continued to make clinical and development progress.

Core views

First, commercialization capabilities in China and reimbursement access have become important factors behind performance divergence, with Mounjaro's inclusion in the National Reimbursement Drug List driving a substantial increase in Eli Lilly's China sales. Second, value validation of China innovative drug assets is accelerating: sac-TMT has achieved key phase 3 endpoints, PF4404 has entered multiple clinical trials, and IBI3028 and MK-2010 are also receiving continued investment from multinational pharmaceutical companies. Third, GLP-1 and multi-target metabolic drugs remain major growth and competitive arenas, but risks from price declines, intensifying competition and R&D failures should not be ignored.

Analysis framework

The report uses cross-company quarterly results comparison, management call interpretation, key product sales breakdown, clinical pipeline catalyst tracking and Chinese partner mapping to translate multinational pharmaceutical companies' operating data into investment implications for Chinese healthcare companies.

Methodology notes

• Performance analysisQuarterly results look-through analysis

  Compare revenue, profit, China market revenue and key product growth rates

  Identify each company's operating momentum and performance differences in China through YoY growth, regional sales and product sales data.

• Industry chain analysisInnovative drug licensing relationship mapping

  Map multinational pharma pipeline progress to Chinese licensors

  Focus on the potential impact on companies such as Kelun Biotech, 3S Bio, Innovent, Sinobiopharma and United Laboratories after licensed assets enter pivotal clinical trials, regulatory filing or global development stages.

• Valuation methodsDiscounted cash flow model

  Estimate intrinsic value by discounting future cash flows and incorporating a perpetual growth rate

  The target prices for Sinobiopharma, Innovent and Kelun Biotech are all based on discounted cash flow models, assuming weighted average costs of capital of 9.5%, 10.3% and 10.8%, respectively, and perpetual growth rates of 3.0%, 4.0% and 4.5%, respectively.

• Catalyst analysisClinical and regulatory milestone tracking

  Track key trial readouts, regulatory submissions and product launch timing

  Key milestones include sac-TMT's priority review application, retatrutide regulatory filing, CagriSema data disclosure and clinical readouts for multi-target metabolic drugs.

Asset mapping & comparison

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

• Kelun Biotech (6990 HK)

  sac-TMT partner, benefiting from Merck's advancement of global clinical development

  Strengths

  The TroFuse-005 phase 3 trial met the primary endpoints of overall survival and progression-free survival, and lung cancer trial results also strengthened management confidence.

  Weaknesses

  Value realization is highly dependent on subsequent filing, approval and commercialization performance of the partnered drug.

  Comparison

  Compared with licensed assets that are still in early-to-mid stages, sac-TMT has entered a stage closer to regulatory value realization.

  Risks

  Sales ramp-up below expectations, unsatisfactory clinical progress and delays in regulatory approval.

• 3S Bio (1530 HK)

  Licensed PF4404/SSGJ707 to Pfizer

  Strengths

  Pfizer has initiated nine trials, including two phase 3 studies; early non-small cell lung cancer data showed a relatively high response rate.

  Weaknesses

  The report did not provide complete safety, control-arm and long-term follow-up data for this asset.

  Comparison

  Development coverage and trial numbers are expanding rapidly, but regulatory certainty remains lower than that of sac-TMT, which has already achieved key phase 3 endpoints.

  Risks

  Inconsistent results in subsequent trials, and competitive PD-1 and VEGF therapies squeezing market space.

• Innovent (1801 HK)

  Licensed IBI3028, a bispecific dual-payload antibody-drug conjugate, to Pfizer

  Strengths

  It received explicit mention from Pfizer management, reflecting multinational pharma's continued investment in antibody-drug conjugate platforms.

  Weaknesses

  The report did not disclose key clinical efficacy data for IBI3028 or a clear regulatory timeline.

  Comparison

  The platform and pipeline have strong potential, but the degree of near-term clinical validation is lower than that of sac-TMT.

  Risks

  Intensifying competition in GLP-1 drugs, centralized procurement of biosimilars and setbacks in IBI363 clinical development.

• Sinobiopharma (1177 HK)

  Through the acquisition of LaNova, it captures value related to MK-2010, which has been licensed to Merck

  Strengths

  Merck plans to move MK-2010 into late-stage clinical development, which should help validate the value of LaNova's assets.

  Weaknesses

  Returns from licensed assets remain affected by the pace of clinical development and decisions by the multinational partner.

  Comparison

  It has the highest potential upside among the three Buy-rated stocks disclosed in the report.

  Risks

  Sales weaker than expected and failure to complete new out-licensing transactions.

• United Laboratories (3933 HK)

  Collaborating with Novo Nordisk to develop UBT251

  Strengths

  UBT251 is a triple agonist of GLP-1, GIP and GCG, entering the high-growth metabolic disease arena.

  Weaknesses

  Phase 2 trial readout is not expected until the end of 2027, limiting near-term data catalysts.

  Comparison

  It remains at an earlier development stage compared with commercialized Mounjaro and Wegovy.

  Risks

  Clinical failure, first-mover advantages of similar products and intensifying competition in the field.

• Eli Lilly (LLY US)

  An important beneficiary of growth in China's GLP-1 market

  Strengths

  Mounjaro quickly became the category leader in China after reimbursement access, and retatrutide achieved positive results in three phase 3 trials.

  Weaknesses

  The report did not assign a stock rating, and rapid growth creates a higher comparison base for subsequent periods.

  Comparison

  China sales growth was significantly higher than that of Merck and Novo Nordisk.

  Risks

  Market competition, reimbursement and pricing changes, regulatory filing or global rollout delays.

• Novo Nordisk (NOvOB DC)

  A major participant in China's GLP-1 market

  Strengths

  China sales maintained double-digit growth, Wegovy volumes rose rapidly, and CagriSema and multi-target pipelines provide subsequent catalysts.

  Weaknesses

  Overall net profit declined, and Wegovy price cuts weakened realized selling prices.

  Comparison

  Growth in China was lower than Eli Lilly's, but it has a mature product portfolio and multiple subsequent metabolic pipelines.

  Risks

  Price pressure, uncertainty in FDA review, clinical readouts below expectations and intensifying competition.

Key data

• Merck second-quarter 2026 resultsSales of USD16.6bn, up 5% YoY; net loss of USD1.3bnNet profit was USD4.4bn in the same period of 2025.
• Merck China revenueUSD368mn, down 10% YoYManagement attributed this to continued weak demand.
• Pfizer second-quarter 2026 resultsSales of USD15.0bn, up 3% YoY; net loss of USD248mnNet profit was USD2.9bn in the same period of 2025.
• PF4404 early clinical dataConfirmed objective response rate of approximately 68%, median progression-free survival of approximately 12.4 monthsData came from selected key doses in a phase 2 trial in PD-L1-positive non-small cell lung cancer.
• Eli Lilly second-quarter 2026 resultsSales of USD23bn, up 48% YoY; net profit of USD7.1bn, up 25% YoYBoth revenue and earnings achieved relatively rapid growth.
• Eli Lilly China salesUSD941mn, up 93% YoYMainly driven by rapid volume ramp-up after Mounjaro was included in the National Reimbursement Drug List.
• Foundayo salesUSD98mnThis oral small-molecule GLP-1 product was newly launched in the second quarter of 2026, and management plans to roll it out to major global markets in 2027.
• Novo Nordisk second-quarter 2026 resultsSales of DKK78.5bn, up 2% YoY; net profit of DKK21bn, down 21% YoYRevenue grew slightly, but profit came under pressure.
• Novo Nordisk China salesDKK4.97bn, up 16% YoYWegovy and Ozempic sales were DKK334mn and DKK1.4bn, respectively, up 106% and 10% YoY.
• Sinobiopharma valuationCurrent price HKD4.93, target price HKD8.26, potential upside of approximately 67.5%Buy rating; current price as of 2026-08-06.
• Innovent valuationCurrent price HKD90.95, target price HKD123.17, potential upside of approximately 35.4%Buy rating; current price as of 2026-08-06.
• Kelun Biotech valuationCurrent price HKD508.00, target price HKD612.66, potential upside of approximately 20.6%Buy rating; current price as of 2026-08-06.

Impact & implications

Multinational pharmaceutical companies' continued advancement of China-origin assets indicates that the global licensing model for China's innovative drugs is shifting from transaction-value driven to driven by clinical data, regulatory progress and commercialization capabilities. For relevant Chinese pharma companies, success in pivotal trials could raise expectations for milestone payments, sales royalties and subsequent licensing; however, in hot areas such as GLP-1, price pressure and intensifying competition may weaken the contribution of sales ramp-up to profit.

Risks

• Drug demand in China is weaker than expected, putting pressure on multinational pharmaceutical companies' China revenue.
• Competition in GLP-1 and antibody-drug conjugate arenas is intensifying, potentially depressing prices and market share.
• Reimbursement negotiations, volume-based procurement and biosimilar policies may weaken product profitability.
• Failure of pivotal clinical trials, safety issues or delays in regulatory approval.
• Chinese pharma companies fail to complete more out-licensing transactions, or milestones and sales royalties come in below expectations.
• Price reductions may prevent volume growth from being fully converted into revenue and profit growth.
• Target prices are based on forecasts and discounted cash flow assumptions; actual results deviating from forecasts may lead to valuation downgrades.

What to watch

• Detailed data from sac-TMT's TroFuse-005 and progress on the priority review application in the second half of 2026.
• Subsequent data from OptiTROP-Lung05 and OptiTROP-Lung06 and lung cancer indication development plans.
• Enrollment, efficacy and safety data from the two phase 3 studies of PF4404/SSGJ707.
• Specific timelines for IBI3028 and MK-2010 entering late-stage clinical development.
• Mounjaro's market share, pricing and sales sustainability after reimbursement-driven ramp-up in China.
• Progress on retatrutide's regulatory filing in the first quarter of 2027, and Foundayo's global rollout in 2027.
• Detailed CagriSema data and FDA review results in the second half of 2026.
• Phase 2 trial readouts for Novo Nordisk's triple agonist in the first half of 2027 and UBT251 at the end of 2027.