H2 Net Profit Plummets 84%, Prompting UBS Target Cut
On March 26, UBS trimmed its price target for United Laboratories to HK$17.6 from HK$18.9, reacting to the company's weak 2025 financial results. For the full year, United Laboratories reported a 4% year-over-year revenue decline to RMB 132 billion, while net profit dropped 21.6% to RMB 21 billion, signaling significant pressure on the company's core business.
The second half of the year revealed a more severe downturn. Revenue in the six months ending December 31, 2025, fell 13.5% to RMB 57 billion. Profitability collapsed, with net profit for the period plummeting 84% year-over-year to just RMB 1.92 billion. This was driven by a sharp contraction in margins, as the gross margin fell by 13.7 percentage points and the operating margin compressed by 14.3 percentage points compared to the same period in the prior year.
UBT251 Pipeline Progress Offers Key Counterpoint
Despite the bleak earnings report, the company's future prospects hinge on its heavyweight drug candidate, UBT251, a tri-target agonist for obesity and type 2 diabetes. The drug's development is progressing globally in partnership with market leader Novo Nordisk. A global Phase 1b/2a clinical trial for the obesity indication began in the first quarter of 2026, with a Phase 2 trial for type 2 diabetes scheduled to start in the second half of the year. In China, United Laboratories plans to initiate Phase 3 trials for both indications in the third quarter.
This pipeline represents a critical long-term growth driver in the high-demand GLP-1 market. The partnership with Novo Nordisk provides significant validation, though it's notable that Novo Nordisk recently terminated its own GLP-1 drug, semaglutide, for an Alzheimer's indication after it failed in clinical trials. This development underscores the inherent risks of drug development but also reinforces the strategic focus on UBT251's core metabolic indications—obesity and diabetes—where the GLP-1 mechanism is already well-established.
Firm Guides Over RMB 10B in 2026 R&D Spending
To support its strategic pivot toward its drug pipeline, United Laboratories' management has guided for significant investment in 2026. The company plans for research and development expenses to exceed RMB 10 billion, alongside capital expenditures of RMB 18 billion. This aggressive spending plan highlights the company's commitment to advancing UBT251 and other pipeline assets as the central pillar of its future growth strategy, even as its legacy business faces financial headwinds.
