Kanglong Integrated Pharmaceutical Services, which secured a major Eli Lilly weight-loss drug order, still can't outperform WuXi AppTec

(Source: Yuan Media Exchange)

Author | Hu Qingmu

After AstraZeneca, another global pharmaceutical giant is increasing its investment in the Chinese market.

Lilly officially announced recently that it will add $3 billion to its supply chain investment in China over the next ten years; at the same time, it also committed $200 million to a strategic partnership with Kanglong Chemical, with a clear core goal—jointly promoting the domestic commercialization and production of the oral GLP-1 weight-loss drug Orforglipron.

In the past two years, the GLP-1 track has continued to explode, and Lilly’s investment undoubtedly brought a “timely rain” to Kanglong Chemical, which is also seen by industry insiders as a heavyweight “ticket” for Kanglong Chemical to open the door to high-end formulation manufacturing. Once the news broke, the capital market responded immediately, with Kanglong Chemical’s stock price opening up about 7%, and many investors optimistic, believing this is an excellent opportunity for Kanglong Chemical to join the ranks of top global CXO (Contract Manufacturing Organization) companies.

However, some opinions suggest that this cooperation, while seemingly promising, is actually focused solely on the production of Orforglipron. Even with Lilly’s fast track, the gap between Kanglong Chemical and domestic peers like WuXi AppTec remains significant and cannot be bridged in the short term.

Riding Lilly’s coattails

Since the beginning of 2026, global pharmaceutical giants have been increasing their investments in China.

First, AstraZeneca announced plans to invest over 100 billion RMB (about $15 billion) in China by 2030, expanding R&D and manufacturing layouts comprehensively. This billion-yuan investment covers the entire value chain from drug discovery, clinical development to manufacturing, and involves deep cooperation with local companies like Huayuan Medicine and CSPC, focusing on cutting-edge tracks such as ADCs and small molecules.

Following closely, Lilly also announced that it will add $3 billion to its supply chain investment in China over the next decade, and has also committed $200 million to a strategic partnership with Kanglong Chemical.

The consecutive moves by these two international pharmaceutical companies into China reflect confidence in the maturity and market potential of the domestic biopharmaceutical industry, as well as recognition of the comprehensive service capabilities of local CXO companies. Securing Lilly’s core pipeline cooperation is undoubtedly a significant breakthrough for Kanglong Chemical.

Unlike traditional CXO companies that mainly provide outsourcing services, this time Lilly’s $200 million investment deeply binds its core pipeline—the formulation production of the oral GLP-1 weight-loss drug Orforglipron. Kanglong Chemical’s involvement extends from simple commercial production to preclinical scale-up and formulation process development.

In the current context of fierce global competition in GLP-1 drug development and an overcrowded track, Kanglong Chemical has precisely targeted the incremental market brought by this heavyweight client, Lilly.

Domestic pharmaceutical companies like Huadong Medicine and Hengrui Medicine have already entered Phase III clinical trials for oral small-molecule GLP-1 drugs, and globally, giants like Novo Nordisk, AstraZeneca, and Roche are competing. However, Lilly’s market position, built on its weight-loss “king drug” semaglutide (with sales of $36.5 billion in 2025) and the outstanding data of Orforglipron, is regarded as a leader in this track.

The core advantages of Orforglipron lie in its efficacy and convenience. The Phase III head-to-head clinical trial results announced in September 2025 showed that after 52 weeks of treatment, Orforglipron was superior to Novo Nordisk’s oral semaglutide in both blood sugar reduction and weight loss. Additionally, the drug does not require fasting, is not restricted by diet or water intake, and has higher patient compliance.

Lilly China submitted a marketing application for Orforglipron for the treatment of type 2 diabetes and obesity to the National Medical Products Administration (NMPA) at the end of 2025. Industry experts are highly optimistic about its commercial prospects, with Citigroup predicting its long-term sales peak could exceed $40 billion. Securing the commercial production of this product effectively provides Kanglong Chemical with a stable growth engine for its formulation CDMO business in the coming years.

It should be noted that, although this cooperation is significant, Kanglong Chemical’s role is mainly as an “executor” of Lilly’s technical standards. This model means its growth logic is closely tied to the market performance of Orforglipron. If the clinical progress of this drug falls short of expectations or Lilly adjusts its supply chain strategy, Kanglong Chemical will also be affected.

Regarding whether it can leverage this to enter Lilly’s core supply chain or how to respond if product sales fall short, Yuan Media Exchange sent inquiries to Kanglong Chemical’s secretariat, but has not received a reply as of press time.

Therefore, compared with WuXi AppTec’s extensive and diversified global ecosystem collaborations, Kanglong Chemical still has a gap.

Strengths still lag

The most direct reflection is in scale and profitability, which are no longer on the same level.

In 2024, WuXi AppTec’s annual revenue reached 39.24 billion RMB, with a net profit of 9.45 billion RMB. In the same year, Kanglong Chemical’s revenue was 12.28 billion RMB, with a net profit of 1.793 billion RMB. WuXi AppTec’s revenue scale is about three times that of Kanglong Chemical, but its net profit is five times higher. This gap also indirectly reflects that a larger scale not only brings higher income but also indicates stronger cost control, higher operational efficiency, and more substantial profit margins.

Although WuXi AppTec’s net profit fluctuated significantly due to non-recurring gains and losses from asset disposals, its revenue scale and per capita efficiency, driven by the scale effect, still outperform Kanglong Chemical overall.

In 2023, WuXi AppTec’s per capita revenue was 981,100 RMB, while Kanglong Chemical’s was 568,500 RMB, with WuXi being 1.7 times higher. By the first half of 2025, WuXi’s per capita efficiency was 549,800 RMB, and Kanglong Chemical’s dropped to 281,200 RMB, widening the gap to nearly twofold. This is a core manifestation of how scale effects translate into strong profitability. WuXi’s moat, built on “scale” and “efficiency,” remains difficult to challenge.

The gap between the two companies is also reflected in customer structure and global layout.

As the industry leader, WuXi AppTec has built a vast global customer network. By the end of 2024, it served about 6,000 clients worldwide. In comparison, Kanglong Chemical served about 3,000 clients globally in the same period.

In terms of customer quality, revenue from the top 20 global pharmaceutical companies for WuXi was 16.64 billion RMB, nearly 7.6 times the 2.189 billion RMB from similar clients for Kanglong Chemical. This highlights WuXi’s deeper and broader cooperation with top-tier pharma.

Additionally, WuXi AppTec’s over 20 years of industry experience has accumulated massive drug R&D data. Its core advantage lies in integrating AI algorithms with high-throughput automation experiments to build a self-iterating digital loop that significantly shortens R&D cycles. Whether in traditional fields like peptides and small molecules or in frontier tracks like ADCs, cell and gene therapies, WuXi has made forward-looking strategic layouts.

In contrast, Kanglong Chemical, although having some accumulation in the CXO field, still lags in data assets, AI integration, and responsiveness to emerging tracks.

Industry landscape remains difficult to change

Beyond the objective gaps between the two companies, the Matthew effect in the CXO industry is becoming more pronounced.

Currently, the global CXO industry is undergoing profound reshuffling and consolidation. In an environment of capital winter and more rational R&D investment, pharmaceutical companies demand unprecedented efficiency, cost-effectiveness, and certainty from outsourcing R&D. This has accelerated resource concentration toward leading companies, with market share increasingly leaning toward top players.

WuXi AppTec is the biggest beneficiary of this trend. Despite complex external conditions, its revenue from the top 20 global pharma companies in 2024 still grew against the trend to 16.64 billion RMB, with extremely high customer stickiness. This is driven by its integrated platform’s strong siphoning effect: clients seeking R&D efficiency and supply chain security prefer to entrust projects to giants capable of providing “end-to-end” solutions.

This “the strong get stronger” logic continuously reinforces WuXi’s scale, data, and customer network advantages, expanding its moat.

In this context, Kanglong Chemical’s growth resilience appears weaker. In the first three quarters of 2025, its net profit attributable to the parent declined about 20% year-on-year, and full-year net profit is forecasted to decline 6%-10%, mainly due to the decline in non-recurring gains and losses.

(Company announcement screenshot)

The profit pressure on Kanglong Chemical stems from a dual squeeze of “price decline on the revenue side” and “rigid cost increases.” On one hand, in the fiercely competitive small-molecule CDMO segment, the company has been forced into price wars to compete for limited orders, causing its gross margin to fall from 37% in 2020 to 34% in 2025, gradually squeezing profit margins.

On the other hand, early expansion led to multiple bases converting into fixed assets, with depreciation expenses for fixed assets and biological assets rising from 372 million RMB in 2022 to 829 million RMB in 2024, sharply increasing rigid costs. In the context of industry demand slowdown, high fixed costs push up unit production costs, directly eroding core profits.

During the profit pressure phase in 2024, Kanglong Chemical’s net cash flow from operating activities dropped from 2.754 billion RMB in 2023 to 2.577 billion RMB, while accounts receivable increased from 2.242 billion RMB to 2.409 billion RMB, experiencing both cash flow contraction and high receivables, exposing credit risks from downstream customers.

As of the first three quarters of 2025, its net operating cash flow was 2.436 billion RMB, slightly better than 2024, but accounts receivable remained high at 2.467 billion RMB, continuing to occupy substantial working capital and indicating weakened downstream payment ability.

Therefore, even with the fast track with Lilly, Kanglong Chemical still faces a challenging road. In the increasingly pronounced Matthew effect in the CXO industry, whether it can carve out an irreplaceable survival space remains to be seen over time.

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