Eli Lilly in China will invest a total of $3 billion to expand the production capacity of weight-loss drugs

On March 12, Kanglong Chemical (300759) saw a simultaneous rise in both A-shares and H-shares, with A-shares reaching over an 8% intraday increase and H-shares surging more than 13%. The stock price increase was driven by news of its strategic partnership with Eli Lilly.

Previously, the multinational pharmaceutical giant Eli Lilly announced plans to invest a total of $3 billion (approximately 20.625 billion RMB) over the next ten years to expand its supply chain capacity in China, establishing a domestic production and supply system for oral solid formulations, and focusing on the production capacity for its first registered oral small molecule GLP-1 receptor agonist, orforglipron.

Eli Lilly revealed that this investment will combine internal expansion with external collaborations. On one hand, leveraging the technological and talent advantages of Lilly’s Suzhou factory to strengthen capacity synergy; on the other hand, partnering with multiple local manufacturers to release additional capacity. Additionally, Lilly stated that it has reached a strategic cooperation with Kanglong Chemical, initially investing $200 million (about 1.375 billion RMB) to support its technological development, with plans to gradually expand the scale based on future growth.

Following this news, on March 12, Kanglong Chemical’s A-shares opened 7.1% higher, with the stock price reaching over an 8% intraday increase before closing up 4.42% at 28.37 RMB per share. H-shares also surged over 13% during the day, closing at 20.16 HKD per share, up 8.39%.

It is understood that from 2024 to 2025, Eli Lilly will continue expanding its innovation and manufacturing footprint in China, including a $200 million (about 1.375 billion RMB) investment to expand the Suzhou plant, establishing a China Medical Innovation Center, and setting up Lilly Innovation Incubators in Beijing and Shanghai to support early-stage biotech startups in accelerating clinical translation. To date, Lilly’s total investment in China has approached $6 billion (about 41.249 billion RMB), focusing on high unmet needs in cardiovascular and metabolic health, neuroscience, oncology, and immunology.

In recent years, GLP-1 has become a hot track. By 2025, Lilly’s semaglutide will top the global “drug king” list with annual sales of $36.507 billion (about 250.982 billion RMB). The core focus of Lilly’s current investment, orforglipron, is the world’s first registered oral small molecule GLP-1 receptor agonist. By the end of 2025, Lilly China has submitted an application to the National Medical Products Administration (NMPA) for approval of orforglipron for the treatment of type 2 diabetes and obesity.

Zhang Yue, Chairman of Aoyou International, told Beijing Business Today that Lilly’s large-scale expansion in China aims to capture the oral GLP-1 market, build a localized supply chain, and strengthen its global competitive advantage.

Kanglong Chemical is also expected to benefit from this cooperation. The company stated that partnering with Lilly for the commercial production of orforglipron marks an important milestone for its formulation CDMO business.

For Kanglong Chemical, Zhang Yue believes that, from a financial perspective, this can directly boost the company’s performance and optimize cash flow. Additionally, becoming Lilly’s core manufacturing partner in China will help Kanglong penetrate the global supply chain and accelerate its expansion to international clients.

Financially, Kanglong Chemical’s performance is expected to decline in 2025. The earnings forecast shows that the company expects a net profit attributable to shareholders of between 1.614 billion and 1.686 billion RMB, a decrease of 6%–10% year-over-year. Kanglong Chemical explained that despite continued growth in its main business, the decline is mainly due to a decrease in non-recurring gains and losses. Last year, the disposal of equity in PROTEOLOGIX, INC. resulted in higher non-recurring gains and losses compared to this year.

Regarding these issues, Beijing Business Today sent an interview request to Kanglong Chemical, but as of press time, the company had not responded.