Goldman Sachs: Huadong Medicine: Growth in innovative products as medical aesthetics decline weighs on third-quarter performance

Why was third-quarter profit below Goldman Sachs' forecast?

In the third quarter of 2026, the company reported revenue of 10.952 billion yuan, down 0.3% year on year and broadly in line with Goldman Sachs' earlier forecast of 11.188 billion yuan. Net profit was 911 million yuan, down 2.4% year on year and below the bank's forecast of 974 million yuan.
The profit shortfall had two sources: the EBIT margin was 10.2%, below Goldman Sachs' forecast of 10.5%; and the non-operating loss was 66 million yuan, also higher than the bank's forecast of 31 million yuan.

In the first three quarters of 2026, revenue from innovative products and licensing reached 2.53 billion yuan, up 48.3% year on year and accounting for 21.8% of pharmaceutical manufacturing revenue.
The in-licensed PARP inhibitor senaparib continued to gain volume after its inclusion in the medical insurance reimbursement list, reaching nearly 1200 hospitals and more than 450 pharmacies. CAR-T therapy Carzey received 169 valid orders in the first three quarters, including 59 in the third quarter; more than 100 supplemental and commercial insurance plans improved access to reimbursement.
Domestic gross sales of the in-licensed ustekinumab biosimilar exceeded 400 million yuan in the first three quarters, up approximately 100% year on year, with prescriptions covering more than 2000 hospitals.

The medical aesthetics business continued to contract: revenue for the first three quarters was 906 million yuan, down 42.2% year on year, with domestic revenue down 54.2% and overseas revenue down 31.6%. Goldman Sachs estimated third-quarter revenue at approximately 255 million yuan, down around 44% year on year, with limited signs of recovery.
New products have made progress: the botulinum toxin product Rytelo, launched in June, entered more than 3000 medical aesthetics clinics, with cumulative sales of nearly 100 million yuan; hyaluronic acid filler MaiLi Precise was approved in August. Goldman Sachs expects new products to provide incremental opportunities, but their near-term contribution may not fully offset weakness in the existing medical aesthetics portfolio.

Goldman Sachs lowered its 2026 net profit forecast from 3.599 billion yuan to 3.558 billion yuan, a reduction of 1.1%; it lowered its 2027 forecast from 4.146 billion yuan to 4.105 billion yuan, a reduction of 1.0%.
The bank lowered its 12-month target price from 35 yuan to 34 yuan and maintained its neutral rating. Goldman Sachs considers the company's valuation reasonable, reflecting its expectation of a 21% compound annual growth rate in earnings from 2023 to 2029.