Guosheng Securities has initiated coverage on HUA MEDICINE-B (02552) with a "Buy" rating, highlighting its core product dorzagliatin as the world's first glucose kinase activator (GKA) drug approved in 2022. Following the company's full commercialization rights recovery in 2025, sales have surged, with H1 revenue up 110% year-on-year, and profitability boosted by deferred income from Bayer. Leveraging its unique drug development mechanism, the company is advancing its second-generation GKA using sustained-release technology and has submitted a clinical application to the FDA, marking its global expansion. Key insights from Guosheng Securities include:

**Company Background** HUA MEDICINE has dedicated 14 years to overcoming the challenges of GKA drug development. Since 2003, GKA emerged as a novel oral anti-diabetic target, but most related pipelines failed. Roche’s Piragliatin was discontinued in Phase II due to liver cell damage, while Merck’s MK-0941 was halted for hypoglycemia and triglyceride abnormalities. HUA MEDICINE launched dorzagliatin in 2012, achieving Phase II success in 2018 and completing two Phase III trials in 2020. Approved in 2022, dorzagliatin became the first GKA drug in half a century.

**Sales Surge and Leading Mechanism** Post-2025, HUA MEDICINE terminated its exclusive promotion agreement with Bayer, taking full control of commercialization. H1 2025 revenue reached RMB217 million (+110.17% YoY), with deferred income of RMB1.244 billion from Bayer driving pre-tax profit to RMB1.184 billion. Clinical studies show dorzagliatin’s binding mechanism differs from MK-0941, offering unique advantages.

**Second-Generation GKA and Global Expansion** Building on dorzagliatin, the company is developing a second-generation GKA using sustained-release technology to prolong efficacy. An FDA application was submitted in late 2023. Early data indicates HM-002-1005 rapidly converts to dorzagliatin, enhancing patient compliance and 24-hour glucose control.

**Financial Forecast** As a rare innovative drug player in Hong Kong, HUA MEDICINE boasts a robust pipeline and sales team. Guosheng projects 2025–2027 revenue at RMB543 million, RMB862 million, and RMB1.142 billion, with net profit at RMB1.113 billion, RMB77 million, and RMB114 million. The 2025 fair value estimate is HKD8.586 billion, warranting a "Buy" rating.

**Risks**: Clinical/sales delays, policy changes, and revenue estimation uncertainties.