The Hong Kong-listed innovative drug index (931787) has climbed over 10% since August, with a maximum rebound of more than 38% from its half-year low hit in early June. The current rally is primarily fueled by innovation milestones within the sector and active business development transactions, signaling a shift in the pricing logic of HK biotech stocks back toward the intrinsic value of corporate innovation. Genuine valuation restructuring now hinges on more definitive factors such as product volume growth, profitability realization, and successful overseas expansion.

Against this backdrop, HUA MEDICINE-B (02552) released its interim results for 2026 on August 20. Investors can assess the substance of the company's innovation delivery and the long-term value underpinning its solid fundamentals through the financial report, alongside progress in commercialization and R&D across its pipeline.

Steady growth in proprietary commercialization, with a financial structure entering a virtuous development track

Reviewing the 2026 interim scorecard, the core product of HUA MEDICINE, the world's first GKA drug HuaTangNing® (Dorzagliatin tablets), continues to accelerate in volume under its proprietary commercialization path. This drove substantial growth in revenue and gross profit, while a marked improvement in gross margin formally signals the company's entry into a stage of scaled development. In the first half, net sales of the core product HuaTangNing® reached RMB 378.9 million, up 74% year-on-year. The company's proprietary commercialization capabilities have now been fully realized, with product sales achieving rapid growth as HuaTangNing® enters a phase of scaled market expansion. Sales volume surged 73% to 3.055 million boxes, compared to 1.764 million boxes in the same period of 2025, a particularly impressive growth rate.

Furthermore, HuaTangNing® will maintain its National Medical Insurance catalog price until 2027, providing solid policy support for sales growth. Key regions that demonstrated strong performance in 2025, including Shanghai, Tianjin, Guangdong Province, and Beijing, sustained their robust growth momentum during the period. This underscores the broad patient recognition of the product's clinical benefits and its deep penetration potential within covered markets, laying a solid foundation for continued volume expansion.

Alongside rising sales, the company delivered commendable profitability, achieving a gross profit of RMB 234.3 million with a gross margin of 61.8%, up 7.6 percentage points from 54.2% in the same period of 2025. The margin improvement primarily stems from lower unit costs due to expanded production scale and reduced channel expense ratios following insurance listing, indicating that the company's commercialization efficiency is continuously optimizing. Notably, the profitability of the commercialization segment represents a landmark change in this interim report. Calculated as gross profit minus selling and distribution expenses, the commercialization segment posted a profit of RMB 107.4 million in the first half of 2026, doubling from RMB 53.7 million in the prior-year period. This signifies that the core product's self-sustaining cash generation capability has initially taken shape, a critical marker of an innovative drug company transitioning from R&D spending to a virtuous cycle. Selling expense management has also progressed, with the expense ratio stabilizing at 33.5%, reflecting a mature operational model focused on efficiency, moving away from the volatile expense phases of early high-speed expansion.

The financial structure is healthier and more stable. Excluding the one-off accounting impact from the termination of the Bayer collaboration, the company's loss from principal operations narrowed significantly. Meanwhile, cash reserves remained robust, with bank and cash balances of approximately RMB 1.0729 billion as of June 30, 2026. This ample cash buffer provides solid financial backing for HUA MEDICINE to simultaneously deepen domestic market penetration, advance global clinical R&D, and pursue international commercialization initiatives. To support commercialization expansion, the company has also expanded its specialized sales force and market/medical affairs teams, with optimized human resource allocation further strengthening market penetration.

While domestic commercialization advances rapidly, HUA MEDICINE has achieved milestone progress in core market rights and global expansion, building a solid barrier for the product's long-term commercial value. During the period, the company broke new ground in the Hong Kong and Macau markets, securing marketing approvals for Dorzagliatin (trade names: MYHOMSIS®, HuaTang Tablets® in Hong Kong and Macau) from the Hong Kong Department of Health and the Macau pharmaceutical authority. Rapid hospital and pharmacy distribution in Hong Kong followed, with the first prescription issued in August. This marks the official international debut of Dorzagliatin as a China-originated, world-first diabetes drug, initiating a journey to radiate from the Greater China hub to broader international markets. Additionally, the China National Intellectual Property Administration officially approved a patent term extension application for Dorzagliatin, extending the core patent's market exclusivity by five years. This critical measure significantly enhances the product's commercial certainty and market exclusivity value, continuously reinforcing its medium-to-long-term commercial moat.

Overall, HUA MEDICINE is transitioning from a research-oriented biotech to a commercial-stage pharmaceutical company delivering innovation value. Beyond clinical data validating the drug's efficacy, operational metrics such as market sales, gross margin, and segment profitability have fully confirmed the commercial sustainability and steady growth momentum of the world's first GKA drug.

Clear R&D pipeline hierarchy, with long-term value entering a delivery phase

Currently, the R&D pipeline of HUA MEDICINE is shifting from early-stage development to a multi-node delivery phase, which, alongside commercialization data, is the most noteworthy aspect of this interim report. For first-in-class innovative drugs, post-approval marketing marks the starting point for building a clinical evidence system. Continuous tracking of real-world and clinical study data is essential to solidify the product's differentiated positioning, expand indications, and support the pipeline. The top-line results of the HMM0601 nationwide multicenter large-scale real-world study, presented at the 2026 ADA Annual Meeting, constitute a critical post-marketing evidence supplement for Dorzagliatin. The study, conducted across 80 clinical centers in China, enrolled 2,024 patients with type 2 diabetes, with an average disease duration of 7.9 years. Over the 52-week treatment period, no drug-related serious adverse events (SAEs) were observed, and no severe hypoglycemia events occurred; the incidence of clinically significant hypoglycemia was below 1%; no new safety risk signals emerged compared to Phase III trials; and glycated hemoglobin (HbA1c) decreased significantly from baseline, with a markedly higher proportion of patients achieving the HbA1c <7% target. These results provide strong evidence for the favorable safety profile and stable glycemic control efficacy of Dorzagliatin. Interim data from the prospective real-world study HMM0701, focusing on complex cases, also showed that Dorzagliatin significantly improved glycemic control, enhanced beta-cell function, and reduced insulin resistance even in patients with severely poor time-in-range, offering a robust theoretical basis for a novel blood glucose management approach in complex type 2 diabetes cases in clinical practice.

Regarding the pipeline, HUA MEDICINE is fully advancing the clinical boundaries of the glucokinase activator (GKA) target. In the diabetes segment, for the GCK-MODY indication affecting approximately 1.7 million Chinese patients, the company has completed the clinical trial protocol design and plans to submit an Investigational New Drug (IND) application within the year, potentially filling a significant unmet clinical need. In the broader frontier of diabetes prevention, the company is conducting the SENSITIZE 3 clinical study in Hong Kong, a world-first initiative exploring new pathways to prevent diabetes at its source. The company is also actively developing new directions such as neurodegenerative diseases and frailty, with related clinical studies on the agenda, greatly expanding the therapeutic potential of GKA drugs. Meanwhile, development of the second-generation GKA drug HM1005 has achieved important breakthroughs. As a novel molecular entity with improved physicochemical properties, it features a sustained-release formulation supporting once-daily dosing, enhancing convenience and compliance, prolonging efficacy, and restoring impaired GLP-1 secretion function to support round-the-clock glycemic stability. A Phase Ib multiple ascending dose (MAD) study is underway in the United States, with five dose-escalation cohorts completed; HM1005 demonstrated generally favorable tolerability in completed cohorts.

In combination therapy and next-generation product development, HUA MEDICINE has demonstrated forward-looking strategic positioning. Preclinical data presented at the 2026 ADA Annual Meeting showed that combination regimens of Dorzagliatin with an oral small-molecule GLP-1 receptor agonist, thyroid hormone receptor agonist, and pan-PPAR agonist exhibited significant synergistic effects and complementary mechanisms across multiple dimensions, including glucose lowering, weight reduction, lipid modulation, and improvement of fatty liver and liver fibrosis. This opens broad possibilities for developing combination therapies with superior efficacy and better tolerability. It is evident that from near-term commercial volume growth, to mid-term indication expansion, and to long-term globalization and next-generation product development, HUA MEDICINE is steadily building a comprehensive treatment blueprint covering the full lifecycle and multi-dimensional metabolic diseases, leveraging its deep scientific expertise and efficient execution capabilities.

Conclusion

Amid recent marginal pressure on the US dollar's credit and heightened allocation momentum for Hong Kong stocks, the HK-listed innovative drug sector has demonstrated notable new highs. In this critical window where capital and industrial trends converge for HK biotech, the substance of innovation value delivery will determine the sector's next direction. Companies capable of releasing true hardcore innovation value are poised to stand out. Given that HUA MEDICINE's proprietary commercialization has achieved scaled implementation, innovation value continues to be validated, commercial launch in Hong Kong and Macau represents a key breakthrough in overseas markets, and its rich clinical evidence base and multi-layered pipeline reserves provide ample support for future development, the company's allocation value becomes increasingly apparent as market sentiment warms and the sector trend reversal is confirmed. The company is expected to demonstrate considerable upside potential to market investors.