Recently, Gan & Lee Pharmaceuticals announced a shareholder reduction plan involving seven key executives, including Chairman Chen Wei, Directors Song Weiqiang and Du Kai, as well as senior managers Xing Cheng, Yuan Zifei, Zou Rong, and Li Zhi. Each plans to sell up to 120,000 shares through centralized竞价 transactions within the next three months, totaling a maximum of 840,000 shares, or about 0.14% of the company's total shares. Based on the closing price of 68.2 yuan on the day before the announcement, each executive could cash out approximately 8.184 million yuan, with the combined total nearing 58 million yuan. This collective share reduction comes at a time when the company's 2025 annual report showed robust earnings growth, yet first-quarter 2026 results suddenly declined. Against the backdrop of three consecutive years of hitting equity incentive targets with precision, concerns arise over the true quality of the company's operations and the sustainability of its growth.

One-time gains combined with high R&D capitalization have enabled three rounds of equity incentive targets to be met exactly. Gan & Lee Pharmaceuticals initiated equity incentive plans after its listing, rolling out three rounds so far: the 2020, 2022, and 2024 restricted stock incentive plans. The latest reduction is directly linked to the 2022 and 2024 plans. In October 2022, following the first round of insulin centralized procurement and the company's first post-listing loss, it introduced the 2022 plan, setting performance targets of net profit no less than 300 million yuan for 2023, 600 million yuan for 2024, and 1.1 billion yuan for 2025. Actual results showed net profit attributable to parent of 340 million yuan in 2023 (13.33% above target), 615 million yuan in 2024 (2.5% above), and 1.144 billion yuan in 2025 (4% above)—all three years hitting the targets exactly. In February 2024 and June 2026, the company launched second and third rounds of equity incentives, setting targets for 2026 and 2027 at 1.43 billion yuan and 1.573 billion yuan, respectively, with significantly slower growth rates. The grant prices of 17.35 yuan per share for the 2022 plan and 18.09 yuan for the 2024 plan are far below current market prices, yielding paper gains of over 30 million yuan for each executive holding 520,000 shares.

Behind the precision in hitting targets lies a careful management of the income statement. Analyzing Gan & Lee Pharmaceuticals' 2025 profit composition, non-recurring items reached 364 million yuan out of the 1.144 billion yuan net profit attributable to parent, primarily from the sale of a 55% stake in its subsidiary Gan Medical Technology Jiangsu Co., Ltd. to Hengqin Ganling. This one-time asset disposal boosted current-period net profit, helping meet the 1.1 billion yuan equity incentive target. More notably, the company's R&D spending was heavily capitalized. In 2025, total R&D investment was 1.341 billion yuan, accounting for 33.08% of revenue, placing it among the highest in A-share biopharmaceutical companies. However, only 647 million yuan was expensed, while 694 million yuan—a capitalization rate of 51.74%—was capitalized. This practice defers R&D costs to future years, inflating current profits. If the industry average capitalization rate of 20% were applied, the company would need to add about 400 million yuan in expenses, which would prevent the 2025 net profit from reaching the 1.1 billion yuan incentive target. In the first quarter of 2026, revenue fell 10.84% year-on-year to 878 million yuan, while net profit attributable to parent plunged 38.29% to 192 million yuan. This decline occurs right after the 2025 equity incentives were unlocked, allowing executives to sell shares. The question arises: Is the profit shifting that helped meet incentive targets now being reversed, and does the executive team's decision to sell en masse signal that they believe high growth is unsustainable?

Insulin growth has hit a ceiling, and the GLP-1 pipeline faces significant hurdles. In terms of business, Gan & Lee Pharmaceuticals' recent earnings were driven by market share gains from national insulin procurement. During the first round of insulin procurement in 2022, the company slashed prices to win bids, with glargine dropping from about 150 yuan per pen to 48.71 yuan, and lispro from 23.98 yuan—a decline of over 60%. This led to a halving of revenue in 2022 and a net loss of 440 million yuan. However, procurement also expanded market share, with the company securing over 35 million pens in first-year procurement volume and covering over 10,000 medical institutions, significantly boosting access for its aspart series products. The volume effect triggered a V-shaped recovery. In the 2024 follow-up procurement, first-year procurement volume rose 32.6% to 46.86 million pens, while winning prices recovered, with glargine rising to 65.30 yuan and lispro to 35.55 yuan, achieving both volume and price growth. Yet, market share gains are not limitless. After two rounds of procurement, the domestic insulin market has been reshaped, with foreign brands' combined share dropping from about 70% pre-procurement to 48%, and domestic brands rising to 52%. Gan & Lee Pharmaceuticals' third-generation insulin procurement share is about 32%, compared to Novo Nordisk's 27%, Tonghua Dongbao's 11%, Eli Lilly's 11%, Sanofi's 10%, and Lianbang Pharmaceutical's 9%. The company has solidified its position as the domestic insulin leader, but further significant share expansion is limited. More critically, the procurement cycle for 2024-2027 is now in mid-execution, with the strongest volume growth phase waning. First-quarter 2026 domestic sales revenue fell by 205 million yuan year-on-year, signaling diminishing procurement benefits.

A more profound challenge than price cuts from procurement is the substitution effect of GLP-1 receptor agonists on the insulin market. In recent years, drugs like semaglutide and tirzepatide have surged globally due to their excellent glucose-lowering and weight-loss effects, with the global GLP-1 market exceeding $40 billion in 2025, growing far faster than insulin. In diabetes treatment pathways, GLP-1 RAs are typically used as second-line therapy after oral drugs fail, before insulin. As GLP-1 drug accessibility improves and prices drop, more type 2 diabetes patients will prioritize GLP-1 treatment, potentially lowering the long-term growth ceiling for insulin. Facing insulin growth stagnation, Gan & Lee Pharmaceuticals pins its future growth hopes on its innovative GLP-1 drug, Bofangluti (GZR18). This is a self-developed long-acting GLP-1 receptor agonist positioned as a biweekly injection, differentiating from the current mainstream weekly dosing. However, the GLP-1 track is the most crowded in the global pharmaceutical industry. In China, Novo Nordisk's semaglutide patent expired in March 2026, with over 20 generics awaiting approval, likely leading to sharp price declines. Innovent Biologics' mazdutide received approval in August 2025, and Sciwind Biosciences' enogratide entered the market in early 2026. Moreover, the biweekly differentiation may not be as significant as assumed. Weekly dosing already offers good patient compliance, making the improvement to biweekly marginal. Additionally, many companies are developing monthly or even longer-acting formulations, including Eli Lilly's triple-target drug retatrutide, advancing rapidly, suggesting that Bofangluti's position as the first biweekly GLP-1 may only be a temporary advantage. Insulin growth is not sustainable over the long term, and while the GLP-1 innovative drug holds potential, intense competition makes its eventual realization highly uncertain. The executive team's decision to sell shares at the peak of performance may itself be a market signal worth attention.