Hanmi Pharmaceutical’s Operating Profit Plunges 96% Amid China’s Regulatory Restrictions

Beijing Hanmi, Hanmi Pharmaceutical’s Chinese subsidiary, saw its operating profit fall to 600 million won in the second quarter of 2026.

Hanmi Pharmaceutical said on the 28th that Beijing Hanmi Pharmaceutical Co.’s second-quarter revenue totaled 60.7 billion won and operating profit was 600 million won. Revenue fell 29.9% from the same period a year earlier, while operating profit declined 96.6%. The operating margin dropped to 0.9% from 19.3% a year earlier.

Pre-tax profit swung to a loss of 1.1 billion won. The company had posted a profit of 16.8 billion won in the second quarter of last year.

Net profit was just 100 million won. That was a 99.5% decrease from 15.5 billion won in the same period a year earlier.

The decline was steeper when measured in local currency. Second-quarter revenue totaled 270.01 million yuan, down 39.7%. That was nearly 10 percentage points greater than the decline measured in won.

The won’s weakness partially masked the deterioration in results. Operating profit in yuan shrank 99.7% to 232,000 yuan.

The two measures pointed in completely opposite directions for net profit. The company posted a profit of 100 million won on a won basis, but recorded a net loss of 1.809 million yuan on a yuan basis.

The drop from the previous quarter was also substantial. First-quarter revenue was 106.4 billion won and operating profit was 23.6 billion won. In a single quarter, revenue fell 42.9% and operating profit dropped 97.6%.

Through the first quarter, Beijing Hanmi had been in a recovery phase. Revenue rose 10.3% year over year and operating profit increased 107.7%, restoring double-digit growth. The gains reflected expanded sales of the pediatric digestive medicine Mami Ai and the adult product Maichang’an, combined with favorable exchange-rate effects.

Hanmi Pharmaceutical cited the seasonal off-season and the intensifying impact of China’s volume-based procurement program as the reasons for the weak performance.

China’s volume-based procurement program is a drug-price reduction policy under which the government conducts centralized tenders and directs supply to companies offering the lowest prices. Beijing Hanmi’s main products include Mami Ai, the expectorant and antitussive Yitanjing, and the constipation treatment Litong, which are pediatric and respiratory products. These products are used in China’s public-hospital prescription market, making them either direct targets of volume-based procurement or subject to indirect effects.

The pressure from the program has intensified with each round. The 11th national volume-based procurement round resulted in average drug-price reductions of about 70%. The 12th round, covering 65 products, began in June, and company registration closed on July 13.

Price rules were also revised beginning with the 12th round. An “anchor point rule” was introduced, limiting the highest price to 1.8 times the benchmark, and winning bid prices were made confidential.

The latest results are the opposite of the trend seen a year earlier. Last year, Beijing Hanmi posted revenue of 402.4 billion won and operating profit of 77.7 billion won, surpassing 400 billion won in revenue for the first time since its establishment in 1996.

Beijing Hanmi has served as a source of cash for Hanmi Pharmaceutical. Hanmi Pharmaceutical owns a 73.68% stake in Beijing Hanmi and received a dividend of 28.4 billion won this year based on a 50% payout ratio calculated from net profit. In 2023, Beijing Hanmi accounted for 44% of consolidated operating profit.

Hanmi Pharmaceutical’s overall results, meanwhile, were reported at record levels on the same day. Second-quarter consolidated revenue was 467.2 billion won and operating profit was 131.1 billion won, up 29.3% and 116.9%, respectively. Cumulative first-half revenue was 860.2 billion won, with operating profit of 184.7 billion won.

The gap was created by a licensing agreement with Eli Lilly for the obesity drug sondepeglutide. An upfront payment of approximately 112.9 billion won was recognized temporarily in second-quarter revenue.

Hana Securities estimated actual second-quarter revenue excluding the upfront payment at 379.1 billion won and operating profit at 42.5 billion won. DS Investment & Securities described the core business excluding the upfront payment as a “pause period.”

The domestic business held up. First-half outpatient prescription revenue totaled 561.6 billion won, maintaining the No. 1 position for eight consecutive years. Rosuzet, a treatment for dyslipidemia, rose 10.1% to 61.6 billion won, while the antihypertensive Amozartan Family generated 37 billion won.

Hanmi Fine Chemical, Hanmi Pharmaceutical’s active pharmaceutical ingredient subsidiary, posted second-quarter revenue of 24 billion won, up 4.4%. Operating profit increased 76.7%. Growth was supported by exports of active pharmaceutical ingredients to Japan and an increase in new contract development and manufacturing organization (CDMO) orders.

Beijing Hanmi has set its response strategy on expanding its market share within product categories subject to volume-based procurement competition. The company plans to secure growth momentum by focusing on products not covered by volume-based procurement and accelerating new drug development.

It is also working to expand its product portfolio into chronic diseases. The approach involves adding hypertension and diabetes products to its pediatric and respiratory-focused portfolio. Beijing Hanmi operates a network covering approximately 9,000 hospitals and more than 200,000 health care professionals in China.

Hanmi Pharmaceutical invested 60.3 billion won in research and development in the second quarter, equivalent to 12.9% of revenue.

The company said, “We expect to achieve the highest revenue in the company’s history this year.” Eflpeglenatide, a GLP-1 obesity drug slated for launch at the end of the year, is being cited as a variable for second-half performance.