Jinan Zhuocheng Bio-Tech Co., Ltd.

A review of Hainan Haiyao’s 2026 interim report reveals a company facing a complex situation. Although it has established an integrated business chain covering anti-infective intermediates, APIs, and finished formulations, the advantages of this full-chain model have yet to translate into tangible financial performance.

The API business is one of the few segments still showing growth, but higher revenue has not translated into higher profits. Meanwhile, the formulation business has weakened significantly under the pressure of centralized procurement. In addition, depreciation from the newly commissioned industrial park is weighing heavily on earnings. The company’s net assets have turned negative, putting its financial risks firmly under the spotlight.

Performance Overview

In the first half of 2026, Hainan Haiyao recorded revenue of approximately RMB 321 million, down 28.65% year on year.

Net loss attributable to shareholders reached approximately RMB 212 million, while the non-GAAP net loss was RMB 252 million. Operating cash flow also declined significantly.

Net assets attributable to the parent company fell to approximately RMB -132 million, placing the company under significant financial pressure and within the range requiring close attention to potential delisting-related risks.

Revenue from the pharmaceutical manufacturing segment contracted substantially. Medical services remained relatively resilient, while most other businesses continued to shrink.

API Business: Revenue Grows Slightly, but Profitability Remains Elusive

Revenue from APIs and intermediates reached approximately RMB 62 million, up 4.05% year on year.

The company’s key products include anti-infective APIs such as cefoxitin, meropenem, and aztreonam, which are supplied both to its own formulation business and to external customers.

Stable demand for anti-infective drugs, together with the release of capacity from its new production base, helped support API revenue. However, intense competition in the anti-infective API market has made it difficult for product prices to rise.

At the same time, depreciation expenses from the new manufacturing facility have further squeezed margins. With weak downstream formulation demand, neither domestic sales nor exports have achieved simultaneous growth in both volume and price.

As a result, the “revenue growth without profit growth” problem remains unresolved.

Finished Formulations: Core Products Decline and Cephalosporins Enter a Cost-Revenue Inversion

The pressure on the formulation business has become increasingly apparent under China’s centralized procurement system.

Fengliao Changweikang, historically one of the company’s major profit contributors, saw revenue decline by 40.44% year on year, indicating a significant contraction in its core business.

Revenue from cephalosporin formulations dropped 41.44%, while gross margin fell to -8.75%. The business has effectively entered a situation where products may be sold at a loss due to centralized procurement price reductions combined with factory depreciation costs.

At present, the company has yet to introduce sufficient new products to fill the gap left by declining legacy products.

Production Capacity and R&D: Still in the Ramp-Up Stage

The Wuyang API Industrial Park in Chongqing has only recently entered the capitalization and production stage and remains in its capacity ramp-up period.

Utilization rates have not yet reached full capacity, while depreciation expenses remain substantial. Whether this business can turn profitable will largely depend on whether utilization can increase and whether manufacturing cost reductions can be successfully implemented.

The company’s pipeline includes anti-infective generic drugs as well as several innovative drug candidates, some of which have entered Phase II clinical development.

However, given the company’s current operating and financial conditions, R&D investment remains relatively limited. Most pipeline products are still some distance from commercialization and are unlikely to make a meaningful contribution to short-term earnings.

Industry Perspective

The company’s integrated “intermediate–API–formulation” business model has yet to translate into a clear competitive advantage.

The current business structure remains heavily dependent on a limited number of major products. Once these core products come under pressure, the company has relatively limited room to absorb the impact.

Combined with its debt burden and negative net assets, the company’s overall operating situation remains challenging.

Looking ahead, the market will likely focus on several key issues:

• Whether API gross margins can recover;
• Whether the decline in formulation sales and negative margins in cephalosporins can be reversed;
• Whether core products can regain volume;
• Progress in debt restructuring and cost reduction;
• Whether new product registration and commercialization projects can advance as planned.

For the API industry, Hainan Haiyao is a notable example of the challenges facing vertically integrated pharmaceutical companies: having the full industrial chain does not necessarily guarantee profitability. In a highly competitive anti-infective market, cost control, capacity utilization, product structure, and downstream demand may ultimately determine whether the full-chain model can create real value.