Jinan Zhuocheng Bio-Tech Co., Ltd.

The veterinary active pharmaceutical ingredient (API) industry in China delivered a mixed performance in the first half of 2026. Among a sample of 15 companies, most reported year-on-year revenue growth, while more than half recorded declines in attributable net profit.

This divergence between revenue growth and profitability reflects a broader shift in the industry's competitive structure. Competition is gradually moving beyond production capacity and scale toward cost efficiency, differentiated product portfolios, supply-chain integration and regulatory capabilities.

Profit Divergence: Strong Product Performance Meets Margin Pressure

Profitability across China's veterinary API sector showed significant differentiation in the first half of 2026.

Sito Bio-Tech reported a 75.59% increase in attributable net profit, with its veterinary API business serving as a major contributor. Its Tylvalosin Tartrate API reportedly accounts for more than 50% of the market, while the company has also achieved internal supply of APIs for several macrolide products, including Tildipirosin, Tylvalosin, Tylosin and Tilmicosin formulations. Greater control over upstream raw materials helped raise its gross margin by nearly 15 percentage points to 47.91%.

SaiTo Bio-Tech reported a 157.37% increase in attributable net profit. Its animal-health business recorded substantial growth, with Neomycin Sulfate sales reaching a record high for the period, while new Tylosin and Tylvalosin products were successfully commercialized.

Yongan Pharmaceutical, meanwhile, benefited from changes in purchasing patterns associated with geopolitical developments. Its Taurine business experienced growth in both sales volume and pricing, while gross margin increased by more than 11 percentage points.

However, other companies faced greater margin pressure despite strong sales growth.

Guobang Pharma reported more than 2,500 tonnes of Florfenicol shipments during the first half of 2026, maintaining annual growth of more than 30% for several consecutive years. Its Tulathromycin sales increased by 310% year on year, yet overall attributable net profit declined by 25.07%.

These results illustrate an important characteristic of the current market: strong performance from an individual product does not necessarily translate into stronger overall profitability. Product pricing, production costs and the performance of other business segments continue to have a significant impact on corporate earnings.

Capacity Expansion Is Shifting Toward Cost Restructuring

While profitability remains under pressure, investment in production capacity continues.

A new Florfenicol production line operated by Chuannan Pharmaceutical, a subsidiary of Zhejiang Hisoar Pharmaceutical, passed acceptance testing and entered commercial operation. Hebei Chaoyaorun Biotechnology is also advancing the first phase of an expansion project with an annual veterinary drug capacity of approximately 3,330 tonnes, covering products such as Enrofloxacin, Enrofloxacin Hydrochloride and Sarafloxacin Hydrochloride.

Lukang Pharmaceutical has announced plans to invest approximately RMB 194 million in a continuous and intelligent manufacturing project for chemical APIs. The project aims to establish an integrated production model covering intermediates, APIs and finished formulations, with a focus on reducing production costs.

The current investment cycle differs from earlier capacity expansion. New projects are increasingly focused not simply on increasing output, but also on green manufacturing, continuous production, intelligent manufacturing and process optimization.

During the first half of 2026, Lukang Pharmaceutical implemented 12 major technical upgrading projects, including initiatives designed to increase API production while reducing costs. Revenue from its biomanufacturing products increased by 78.98% year on year.

Vertical integration is also becoming an important source of cost competitiveness.

Guobang Pharma's Florfenicol production capacity has reached approximately 5,600 tonnes per year. Its key intermediate D-ethyl ester is produced internally for captive use, allowing the company to control an important stage that accounts for an estimated 50–60% of the product's cost structure.

This intermediate-to-API integration model is increasingly being adopted by large manufacturers seeking greater control over production costs and supply stability.

Price Differentiation: Supply Control and Purchasing Patterns Matter

China's veterinary API prices followed an “M-shaped” pattern in 2025, with the overall annual increase limited to approximately 1.82%. However, individual products experienced substantially different price movements.

Tylosin Tartrate increased by approximately 27.65% over the year, while Tilmicosin increased by around 21.67%. Tiamulin and Mepiquat also recorded increases of more than 10%.

In contrast, Doxycycline Hydrochloride declined by approximately 17.71%, with its average price falling to a new low in the monitored period at the end of the year. Florfenicol also experienced significant competitive pressure, with market prices reaching historically low levels.

One of the important factors behind this divergence is the ability of suppliers to manage production and inventory.

Short-term procurement contracts and stocking strategies adopted by large livestock groups and pharmaceutical manufacturers can influence supply-demand conditions for individual products and contribute to relatively rapid price movements.

At the same time, continued investment in new capacity has increased concerns about future oversupply.

When supply is already relatively abundant, downstream buyers tend to adopt just-in-time purchasing and lower inventory strategies, which can further increase short-term pressure on market prices.

Differentiated Products and Vertical Integration

Under a challenging market environment, companies with differentiated products and deeper supply-chain integration may have greater flexibility in managing cost and pricing fluctuations.

The sulfonamide API segment, for example, is gradually becoming more concentrated. Manufacturers with integrated production chains, consistent quality control and large-scale manufacturing capabilities can obtain greater control over production and supply.

Haisheng Pharmaceutical has developed a relatively extensive production chain covering sulfonamide APIs and intermediates. Its ability to synthesize key intermediates internally can reduce dependence on external supply and help mitigate the impact of supply shortages.

The Flavomycin segment also shows a relatively concentrated competitive structure, with the leading three companies reportedly accounting for more than 70% of the domestic market.

Entry barriers in this segment include veterinary GMP compliance, environmental approvals and veterinary drug product approval requirements. These regulatory and technical requirements can make it more difficult for smaller manufacturers to enter the mainstream supply chain.

In the macrolide API segment, Sito Bio-Tech has developed an integrated model extending from APIs to finished formulations. Its reported market share in Tylvalosin Tartrate exceeds 50%, while internal API supply for several formulation products provides additional flexibility in managing production costs and market fluctuations.

Regulatory Requirements Are Becoming More Important

Regulatory developments are another factor that could influence the competitive structure of the veterinary API industry.

In 2026, China's Ministry of Ecology and Environment released a draft revision concerning the environmental management registration of new chemical substances. The proposed changes may affect the previous exemption arrangements applicable to certain sectors, including veterinary API-related substances.

Under the proposed framework, chemical substances that are not included in China's Inventory of Existing Chemical Substances may be subject to new chemical substance environmental management registration, regardless of their ultimate application.

If implemented as proposed, veterinary API manufacturers could face additional environmental compliance requirements alongside existing veterinary drug regulatory procedures.

For certain new substances, the additional registration process could increase development timelines and testing costs, depending on the substance category and data requirements.

For veterinary pharmaceutical manufacturers, this would further emphasize the importance of regulatory planning at the early stages of product development.

The broader regulatory trend is also significant: environmental management is increasingly focused on the characteristics and potential risks of individual substances rather than simply their industrial classification.

As a result, regulatory compliance is becoming an increasingly important component of competitiveness in the veterinary API sector.

A Changing Competitive Structure

Taken together, these developments indicate that China's veterinary API industry is undergoing a structural adjustment.

Large manufacturers with established high-volume products, integrated intermediate production and scale-based cost advantages have greater capacity to absorb price fluctuations.

A second group consists of manufacturers with differentiated products and established positions in specific market segments but relatively limited vertical integration. Their performance may be more sensitive to raw-material prices and changes in market pricing.

Smaller manufacturers facing intense product homogenization, limited economies of scale or increasing compliance requirements may encounter greater pressure as GMP, environmental and product-registration requirements continue to develop.

The global veterinary API market is estimated to have reached approximately USD 28.59 billion in 2025 and is projected to reach around USD 34.13 billion by 2032, representing a compound annual growth rate of approximately 2.6%. While overall market growth is relatively moderate, structural opportunities remain across different application areas.

Antibiotic APIs, antibacterial APIs and antiparasitic APIs continue to represent important product categories, while demand for higher-value applications, including companion-animal and aquaculture medicines, is also developing.

From Capacity Competition to Cost, Product and Compliance Capabilities

For veterinary API manufacturers, 2026 represents an important stage in the industry's transition.

The traditional growth model based primarily on increasing production capacity and expanding individual products is becoming less sustainable. Future competition is increasingly likely to depend on three areas.

The first is depth of cost control: whether key intermediates can be produced internally, whether manufacturing processes can be continuously optimized, and whether energy and environmental costs can be managed effectively.

The second is breadth of the product portfolio: whether manufacturers can establish competitive positions across multiple veterinary API segments and reduce dependence on a single product.

The third is regulatory capability: whether companies can meet increasingly complex GMP, environmental and registration requirements while maintaining efficient product development and commercialization processes.

The resulting market structure is therefore becoming more differentiated. Production scale remains important, but it is increasingly being combined with vertical integration, process technology, product differentiation, quality management and regulatory compliance.

For international buyers, these changes also make supplier evaluation more comprehensive. Production capacity alone may no longer provide a complete picture of a manufacturer's competitiveness. Factors such as manufacturing integration, quality consistency, regulatory documentation, supply reliability and long-term production stability are becoming increasingly relevant when assessing veterinary API suppliers.

The veterinary API industry is therefore moving toward a more capability-driven competitive model, in which cost efficiency, product specialization and compliance infrastructure increasingly determine long-term competitiveness.