Pharmaceutical stocks' gross profit margin observation: 14 stocks surpass Kweichow Moutai, Haichuang Pharmaceutical tops the list with 98.62%

As AI · Why is the high gross profit margin of innovative pharmaceutical companies difficult to turn into profit?

With the completion of the 2025 annual reports of A-share listed companies, the gross profit margin of pharmaceutical stocks has attracted attention. Wind data shows that among A-share pharmaceutical stocks, 18 have a gross profit margin above 90%, including 14 stocks with gross profit margins exceeding Kweichou Moutai. Among them, Haichuang Pharmaceutical has the highest gross profit margin at 98.62%. In addition, most companies with gross profit margins over 90% are innovative drug companies, including 6 that are still unprofitable in the science and technology growth sector.

Industry insiders believe that the core reason for the high gross profit margins of innovative drug companies lies in their pricing power unaffected by ordinary market competition and relatively low material costs. However, even with very high gross profit margins, many innovative drug companies still face huge R&D investments and sales expenses in the early stages, often resulting in net losses. In comparison, the overall gross profit margin of pharmaceutical distribution companies is relatively low. Moreover, in 2025, companies like Heyuan Bio and Treasure Island even reported negative gross profit margins.

Pharmaceutical stocks dominate the top three gross profit margins in A-shares

Wind data shows that among individual A-share stocks, the top three gross profit margins in 2025 are all pharmaceutical stocks.

Specifically, in 2025, Haichuang Pharmaceutical, Shouyao Holdings, and Ailis took the top three spots for gross profit margin among A-share pharmaceutical stocks, with 98.62%, 96.93%, and 96.83%, respectively.

Kweichou Moutai is renowned for its high gross profit margin, with a margin of 91.18% in 2025. Among pharmaceutical stocks, 14 stocks have gross profit margins exceeding Kweichou Moutai. Besides the three mentioned above, this includes Dizhe Medicine, Wuwu Biology, Tibet Pharmaceutical, and others.

Looking at the growth in gross profit margins, Haichuang Pharmaceutical and Sansheng Guojian saw significant increases. Haichuang Pharmaceutical’s gross profit margin in 2024 was only 8.43%. In 2025, Sansheng Guojian’s gross profit margin increased from 74.5% in the same period last year to 92.07%.

Haichuang Pharmaceutical’s sharp increase in gross profit margin in 2025 is mainly due to the launch of new drug products in 2025, which also drove a significant increase in the company’s operating income. Financial data shows that Haichuang Pharmaceutical achieved operating income of 20.4699 million yuan in 2025, a year-on-year increase of 5480.11%.

It is understood that in May 2025, Haichuang Pharmaceutical’s first self-developed drug for late-stage prostate cancer, Hanana’an (generic name: deenzalutamide soft capsules), was approved for market by the National Medical Products Administration and was included in the national medical insurance drug list in December 2025.

In its 2025 annual report, Haichuang Pharmaceutical stated that last year’s operating income was mainly from small amounts of intermediate sales and other income. Therefore, the income structure and gross profit margin level have changed. In 2025, the gross profit margin of Haichuang Pharmaceutical’s drugs reached as high as 99.79%.

Regarding related issues, Beijing Business Daily reporters sent interview requests to Haichuang Pharmaceutical, but as of press time, no response has been received.

For Sansheng Guojian, the company received a license fee payment of 2.8 billion yuan from Pfizer for Project 707 in 2025, which was recognized as revenue, leading to a significant increase in licensing and other income compared to the same period last year, also boosting the company’s gross profit margin.

High gross profit margins are mostly seen in innovative drug companies

Beijing Business Daily notes that most high-margin pharmaceutical companies are innovative drug companies.

Wind data shows that 18 stocks have gross profit margins over 90%, such as Dizhe Medicine at 95.73%, Zhixiang Jintai at 93.02%, Zejing Pharmaceutical at 90.42%, Maiwei Biology at 90.27%. Additionally, companies like Nuocheng Jianhua, Bailitianheng, and Shenzhou Xuebao also have gross profit margins above 90%.

However, high gross profit margin does not necessarily mean high profitability. Wind data shows that among these companies with gross margins over 90%, 6 are in the science and technology growth sector and are still unprofitable. Taking Haichuang Pharmaceutical as an example, in 2025, its net profit attributable to shareholders was about -137 million yuan. This is mainly because innovative drug companies need to invest heavily in R&D during early development stages. In 2025, Haichuang Pharmaceutical’s R&D expenditure accounted for over 500% of operating income, and sales expenses increased significantly due to new drug launches and promotion.

Deng Yong, director of the Law and Innovation Transformation Center for Health and Medical Law at Beijing University of Chinese Medicine, told Beijing Business Daily that innovative drug companies have a unique cost structure. Developing innovative drugs requires more than ten years and huge funds for R&D and clinical trials, which are high fixed costs. After drug approval and market launch, marginal production costs are extremely low. In mass production, the cost of raw materials per box of medicine is minimal, forming a basis for high gross profit margins.

Additionally, Deng Yong mentioned that innovative drug companies have strong pricing power. Their business models are asset-light; most do not build their own factories but outsource manufacturing to CMO (Contract Manufacturing Organization) partners, significantly reducing operating costs. Some revenue comes from licensing and R&D services, with no physical production costs, further increasing gross profit margins. Lastly, accounting rules influence this: R&D expenses are expensed in the current period and not included in product operating costs, with only production costs accounted for during manufacturing, objectively inflating gross profit margins. Unprofitable growth companies have no capacity amortization pressure, making gross margins more prominent.

Economist and new financial expert Yu Fenghui told Beijing Business Daily that when analyzing a pharmaceutical company’s gross profit margin, one should first consider its product portfolio and the lifecycle stage of each product. New products often have higher gross margins because they are under patent protection. When patents expire, generic drugs enter the market, and the gross margin of original drugs drops significantly. Second, it’s important to examine the company’s R&D investment ratio and its impact on cost structure. High R&D investment may compress short-term net profit but is crucial for long-term competitiveness and high margins. Finally, comparing gross profit margins with industry peers can help assess the company’s pricing power and cost control efficiency.

And Yuan Bio and Treasure Island report negative gross profit margins

In stark contrast to innovative drug companies, the gross profit margins in segments like pharmaceutical distribution and traditional Chinese medicine are generally low.

Wind data shows that in 2025, Yuan Bio and Treasure Island reported negative gross profit margins, at -14.52% and -2.86%, respectively. This reflects significant pressure in cost control, product pricing, or market competition for some companies.

Yuan Bio stated in its 2025 annual report that during the reporting period, the gross profit margin of its cell and gene therapy CDMO business was -79.17%, an increase of 35.35 percentage points from the previous year; mainly because CDMO order prices remain low, and after the full operation of the Lingang industrial base, depreciation, amortization, and manufacturing costs are high, and capacity utilization takes time to ramp up, making it difficult to quickly reduce costs in the short term, resulting in a large negative gross profit margin for the CDMO business. The regenerative medicine service business had a gross profit margin of -8.85%, up 69.74 percentage points from the previous year, mainly because this is a new business in early development stages with a small scale.

Treasure Island’s gross profit margin in 2025 decreased compared to the previous year mainly due to delays in the nationwide Chinese patent medicine centralized procurement policy and a decline in the prices of major products.

Additionally, pharmaceutical distribution companies like Nanjing Pharma, Jiashitang, and Jiuzhoutong also have relatively low gross profit margins. Industry insiders believe that the pharmaceutical distribution industry generally has low gross margins due to multiple intermediate links, weak bargaining power, and high logistics costs.

Overall, the gross profit margin landscape of A-share pharmaceutical stocks in 2025 presents a “double-edged sword.” Innovative drug companies leverage exclusive products and pricing advantages to maintain high margins, but profitability realization still takes time; meanwhile, some traditional pharmaceutical and distribution companies face cost and market pressures.

Beijing Business Daily reporter Ding Ning