Following the reshaping of the insulin industry landscape through centralized procurement, Gan&Lee Pharmaceuticals has completed a management transition, betting heavily on its GLP-1 pipeline while securing multiple significant overseas licensing deals. Market expectations for its business transformation have been rising accordingly. However, a wave of executive share sales, incentive targets barely met, and a sharp jump in R&D capitalization rates are exposing deeper operational concerns, suggesting the road to successful transformation is far from smooth.
Incentive Unlocking at the Margin and Accounting Choices Draw Scrutiny
In August 2026, seven core executives at Gan&Lee Pharmaceuticals announced plans to reduce their holdings, totaling approximately 840,000 shares, all sourced from previous equity incentive awards. The stated reason for the sales was uniformly personal debt repayment, with the combined cash-out value estimated at nearly 58 million yuan based on the closing price before the announcement. These equity incentives carried explicit net profit assessment thresholds: the company reported net profits of 340 million yuan in 2023, 615 million yuan in 2024, and 1.144 billion yuan in 2025, just barely clearing the 300 million yuan, 600 million yuan, and 1.1 billion yuan targets respectively. This "line-hugging" achievement of full vesting has sparked debate over the true quality of the company's earnings.
The controversy centers on the accounting treatment of R&D capitalization. Between 2023 and 2024, the company maintained a restrained R&D capitalization rate of 11% to 12%. In 2025, however, the rate surged dramatically to 51.74%, with capitalized R&D amounting to 694 million yuan for the year. Management attributed this to core pipeline programs advancing into Phase III clinical trials, thereby meeting capitalization criteria. Yet the domestic innovative drug industry typically operates at capitalization rates around 20%. If adjusted to reflect industry norms, 2025 net profit would fall below the incentive assessment threshold, potentially rendering the equity awards unvestable. The elevated capitalization rate implies that substantial R&D expenditures are being deferred for future amortization, which will continue to pressure profitability in the years ahead.
Accounts receivable also present a point of concern, with volatility in the figures. The decline in receivables in 2024 was explained as a result of intensified collection efforts, but in 2025, receivables surged again alongside revenue growth, raising questions about the sustainability of cash collection. Combined with executives opening a concentrated selling window immediately after incentive vesting, market participants need to closely monitor the pace of share sales and remain alert to potential divergence between reported book profits and actual operating quality.
Aggressive BD Expansion Overseas Meets Pipeline and Core Business Headwinds
With the post-centralized procurement landscape shifting industry competition toward cost and supply chain efficiency, the company's third-generation insulin products have entered a mature phase. Its ultra-rapid-acting and ultra-long-acting insulin candidates remain in clinical development, with no new products ready to take over the growth baton. This makes the GLP-1 candidate Bofeglutide a critical pillar for building a second growth curve, as the new management team has adopted a lightweight, licensing-based approach to overseas expansion.
The company has completed major licensing deals with Korea's JW Pharmaceutical and Italy's Menarini, among others. The Menarini transaction carries a potential total value of up to 726 million euros, and the substantial upfront payments can provide a short-term boost to reported profits. Additionally, the company's insulin products have received EU marketing authorization. However, it is important to recognize that high-value milestones in licensing agreements do not equate to confirmed revenue. Clinical progress, overseas regulatory approvals, and the commercialization capabilities of partners all influence whether milestone payments actually materialize. Industry-wide, milestone achievement rates for commercialization-stage targets tend to be low, meaning substantial potential deal values carry considerable uncertainty. By opting to license rather than build its own overseas commercial team, the company has secured rapid cash inflows but has also given up the opportunity to develop in-house international commercialization expertise.
Pressure on the domestic core business remains significant. In the first quarter of 2026, revenue declined 10.84% year-over-year, reflecting the constrained growth ceiling for the insulin base business under the centralized procurement framework. Bofeglutide is currently in Phase III trials, facing not only clinical efficacy and safety risks but also intense competition in the highly crowded domestic GLP-1 market, where numerous rivals are advancing in parallel. Even if development succeeds, the subsequent commercialization battle will be fierce.
Overall, Gan&Lee Pharmaceuticals stands at a crossroads in its industry transformation. It holds favorable BD deals, yet multiple risks are intertwined, including financial quality concerns, executive share sales, pipeline execution uncertainty, and weakening core business growth. The market should track two key variables going forward: the actual execution of executive share reductions, and whether Bofeglutide's clinical progress and commercialization expectations, both domestically and abroad, can be realized. These factors will ultimately determine whether the company's transformation can truly succeed.
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