Jinan Zhuocheng Bio-Tech Co., Ltd.

On the evening of October 22, 2026, Kelun Biotech (SZSE: 301301), a major Chinese producer of antibiotic intermediates, released its third-quarter report for 2026. According to the report, the company recorded revenue of RMB 2.883 billion and net profit attributable to shareholders of RMB 332 million in the first nine months of the year. In the third quarter alone, revenue reached RMB 785 million, while net profit attributable to shareholders totaled RMB 54.9246 million.

The company’s short-term performance was affected by periodic changes in supply and demand across the traditional antibiotic intermediate market. Demand for erythromycin thiocyanate weakened temporarily, while penicillin-related product prices remained low, putting pressure on revenue and profitability.

At the same time, the company continued to advance its synthetic biology business, technology development, and manufacturing efficiency initiatives. These efforts are gradually creating additional sources of growth. The company’s development reflects a broader direction being explored by some biomanufacturing businesses: maintaining the strengths of established manufacturing operations while using technological innovation and product portfolio development to pursue new growth opportunities.

1. Synthetic Biology Expands as a New Source of Growth

While the traditional antibiotic intermediate business continues to face cyclical pressure, Kelun Biotech is advancing a strategy that combines biological fermentation with synthetic biology. Its synthetic biology business is becoming an important part of the company’s efforts to enter new markets and diversify its revenue sources.

Jiangning Biotech, the company’s wholly owned subsidiary, serves as an industrialization platform for its synthetic biology operations. According to the figures provided in the original report, the subsidiary’s production base generated revenue of RMB 71.7599 million in the first half of 2026, representing a year-on-year increase of 221.38%. Compared with the adjustment period in 2025, its revenue contribution increased significantly, indicating an improvement in operating performance.

The first phase of the production base has been completed and is progressively moving toward full-capacity operation. Several products have achieved large-scale production and commercial sales, including bisabolol, 5-hydroxytryptophan (5-HTP), ergothioneine, squalane, inositol, phytosphingosine, and polyhydroxyalkanoates (PHA).

These products serve a range of application areas, including cosmetic ingredients, health supplement ingredients, and biodegradable biomaterials.

Ergothioneine has attracted particular attention. According to the original report, its approval process as a new food ingredient in China has entered a critical stage. If approval is granted, the product could gain access to additional applications in food, health supplements, and cosmetics, creating further opportunities for commercial development. The final approval status and permitted scope of use should be confirmed through official regulatory announcements.

From an industrial perspective, the development of synthetic biology depends on more than individual product breakthroughs. It requires coordination across strain development, process optimization, scale-up, quality control, and commercialization. By developing its production base and advancing product industrialization, Kelun Biotech is building a more integrated pathway from research and development to commercial manufacturing.

2. Technology Development and Smart Manufacturing Improve Production Efficiency

Research and process optimization are essential to establishing long-term competitiveness in biomanufacturing. Kelun Biotech continues to develop capabilities in high-throughput screening, AI-assisted fermentation optimization, molecular engineering tools for actinomycetes and streptomycetes, and the utilization of C1 and C2 feedstocks.

In smart manufacturing, the company has entered into a strategic cooperation arrangement with Shanghai Jincheng Technology to integrate artificial intelligence into fermentation operations and synthetic biology research.

According to the information provided in the original report, AI technology has been applied to dynamic control of pilot-scale fermentation tanks on the erythromycin thiocyanate production line. Average output was reported to be 3%–5% higher than that of conventional tanks. By predicting production parameters and enabling earlier process adjustments, the technology is intended to help identify process variations, reduce fluctuations, and support more data-driven production optimization.

On the R&D side, AI-assisted enzyme engineering is also being used to improve enzyme activity and research efficiency. Combining data analysis and predictive modeling with experimental validation can make process development more systematic and reduce some repetitive experiments, supporting potential improvements in development efficiency and manufacturing costs.

In December 2025, Kelun Biotech was also selected for the first batch of pilot-scale biomanufacturing capability platforms announced by China’s Ministry of Industry and Information Technology. Pilot-scale facilities play an important role in bridging laboratory research and industrial production by supporting technology validation, process scale-up, and engineering development.

Taken together, the integration of artificial intelligence, biological fermentation, and process engineering offers new opportunities to improve manufacturing performance. The long-term value of these technologies will depend on their ability to deliver consistent product quality, controllable production costs, and reproducible performance at commercial scale.

3. Traditional Operations Remain the Foundation of Cost Competitiveness and Supply Reliability

Although synthetic biology is creating new development opportunities, traditional antibiotic intermediates remain an important part of Kelun Biotech’s operating structure. During a period of industry adjustment, maintaining stable production while improving cost control and manufacturing efficiency remains essential.

The company benefits from its location in Yili, Xinjiang, where regional conditions provide certain advantages in industrial electricity costs, access to raw materials such as corn, and fermentation operations. The original report states that these key cost factors account for more than 60% of the company’s production costs. Such advantages can support cost management and operational resilience when market prices are under pressure. Actual competitiveness, however, also depends on raw material prices, energy costs, production yields, and market supply and demand.

In 2025, the company continued to implement automation upgrades and initiatives to improve production efficiency. According to the original report, 27 of 41 planned automation upgrade projects had been completed during the year. Through historical production data analysis and system improvements, the company further optimized yields and batch output for erythromycin thiocyanate, cephalosporin-related intermediates, and penicillin-related intermediates.

These initiatives support a more refined approach to manufacturing management and help strengthen the operational foundation of its traditional business.

The company’s erythromycin thiocyanate also obtained a Veterinary Drug Manufacturing License and a Veterinary Drug GMP Certificate issued by China’s Ministry of Agriculture and Rural Affairs. These qualifications provide a regulatory basis for expanding into the veterinary API market. Future commercial development will also depend on target-market demand, customer qualification requirements, and applicable regulations.

Cash flow is another important indicator of operational resilience. According to the original report, net cash flow from operating activities reached RMB 823 million in the first nine months of 2026, an increase of more than 44% year on year. Improved operating cash flow can support day-to-day operations and provide funding for R&D, manufacturing upgrades, and the development of new business areas.

When traditional product markets are under cyclical pressure, cost management, automation, quality control, and cash flow discipline remain important factors in maintaining operational stability and long-term competitiveness.

Conclusion: Integrating Established Manufacturing Strengths with Synthetic Biology

Kelun Biotech’s performance in the first nine months of 2026 highlights the different stages of development of its traditional antibiotic intermediate business and its emerging synthetic biology operations. The traditional business has been affected by changes in market demand and product prices, while the new business is expanding through production base development, product commercialization, and continued technology investment.

More broadly, the long-term competitiveness of biomanufacturing companies depends not only on existing production capacity and cost advantages, but also on their ability to develop products that meet market demand and translate research outcomes into stable, scalable commercial manufacturing.

For Kelun Biotech, key developments to watch include changes in demand and pricing for traditional products, capacity utilization and commercialization progress in synthetic biology, the practical impact of AI on manufacturing performance, and the contribution of new business lines to overall profitability.

As biomanufacturing technologies continue to advance, the integration of traditional fermentation with synthetic biology may create new opportunities for industrial upgrading. However, sustained commercialization takes time, and outcomes will depend on market demand, production costs, regulatory approvals, and the pace of business development.

For the company, the central challenge will be to maintain the strength of its established operations while continuing to improve its technological capabilities and expand the value of its product portfolio.