United Laboratories (03933.HK) Deep Dive: Operating Assets Fairly Priced, RMB 13 Billion Pipeline Valued at Zero
A company traded as a 6-APA commodity cyclical, sitting on a potentially massive GLP-1 triple-agonist option
United Laboratories currently trades at HKD 8.72, which puts the market cap at about HKD 17.2 billion. After doing a full sum-of-the-parts valuation, my conclusion is fairly simple: the operating assets, excluding the pipeline, are worth roughly HKD 8.7 per share. That is almost exactly where the stock trades today. In other words, the market is giving the UBT251 pipeline no value.
If the pipeline’s probability-weighted expected value does come through, which I estimate at roughly RMB 13 billion, fair value would be closer to HKD 16.3 per share. The important caveat is that the bottom of the range is also zero.
This article breaks down each segment of United Laboratories, looks at what the pipeline may really be worth, reviews management’s governance record, and explains why the stock went from HKD 15 back to HKD 8.7.
Company Structure: A Vertically Integrated Supply Chain
United Laboratories is not a typical pharmaceutical company. A better way to think about it is as a vertically integrated factory that turns corn into finished pills. The chain runs from corn to fermentation, penicillin industrial salt, enzymatic cleavage, 6-APA, chemical synthesis, amoxicillin API, formulation, and finally Amoxil capsules.
The company has three operating segments and one pipeline asset.
The upstream platform, made up of intermediates and APIs, has 6-APA capacity of 18,000 tonnes per year, or roughly 45% of global supply. The top three producers, United, Veyong, and Kelun-Biotech’s Chuanning, control 89% of the market. This is an oligopolistic commodity market. Prices are cyclical, but they have a cost floor: all three historical troughs have landed around RMB 135-145/kg.
Finished drugs include insulin analogues, anti-infective formulations, and animal health. Insulin analogues were a Category A winner in China’s national volume-based procurement program, or VBP, which is the government’s centralized drug purchasing system that pushes generic drug prices down through competitive bidding. That category had 2025 revenue up 57%. The anti-infective portfolio includes Amoxil, Tazocin generics, and Imipenem/Cilastatin, each with very different VBP outcomes. In animal health, Muyuan Foods accounts for 65.8% of segment revenue.
The pipeline is anchored by UBT251, a GLP-1/GIP/glucagon triple-receptor agonist licensed to Novo Nordisk for ex-Greater China rights in a deal valued at up to USD 2 billion.
Operating Asset Valuation: RMB 14.8 Billion = HKD 8.7/Share
Upstream Platform: RMB 5.5 Billion
The 6-APA pricing history shows a clean cycle: a 2016 trough at RMB 135/kg, a 2022 peak at RMB 370/kg, year-end 2025 at RMB 180/kg, and an early 2026 rebound to RMB 222/kg. A reasonable mid-cycle range is RMB 200-230/kg.
At mid-cycle pricing, combined upstream EBIT is about RMB 1.1 billion. I apply a 6x EV/EBIT multiple. That is above the 5x multiple I would use for a pure commodity business, because United has 45% market share, a low-cost position, 60% internal consumption, and regulatory barriers to entry. It is also below the 8x multiple I would reserve for a business with real pricing power. This business has no pricing power, 40% excess industry capacity, and very high operating leverage.
That operating leverage matters. When 6-APA prices fell from RMB 300 to RMB 180 in 2025, intermediate segment revenue declined 31.4%, but segment profit collapsed 79.4%. The amplification works in both directions.
Finished Drugs: RMB 6.5 Billion
Third-generation insulin analogues are worth around RMB 3.2 billion. Current revenue is around RMB 1.5 billion, normalized profit is roughly RMB 210 million, and a 14-16x multiple is fair. This is the only structurally growing business inside finished drugs. VBP Category A selection is driving volume-for-price substitution and taking share from multinationals. H1 2025 revenue grew 74.5% year over year. The catch is that the growth is volume-only because prices are locked by VBP, and Gan & Lee Pharmaceuticals and Tonghua Dongbao are direct competitors.
Amoxil and amoxicillin capsules are worth around RMB 450 million. United did not win the 2020 Batch 2 VBP tender and instead chose to sell through non-VBP channels, including retail pharmacies, private clinics, and self-pay markets. Revenue has held at roughly RMB 500 million per year, but it is declining at 5-6% annually, with H1 2025 down 6.3%. Amoxicillin has semi-OTC characteristics and naturally high retail channel exposure, so VBP hurt less than it would have for a pure hospital product. Still, long-term brand erosion is hard to reverse.
The Tazocin generic, piperacillin-tazobactam, is worth only around RMB 70 million. Revenue collapsed from roughly RMB 670 million to RMB 294 million, down 56.5%, after United won the Batch 8 VBP tender in 2023. Profit is now close to zero. United’s winning bid was RMB 27.65 per unit, while NCPC bid RMB 15.63. United is not the lowest-cost producer here, so the product is effectively negligible in valuation.
Imipenem/Cilastatin is worth about RMB 200 million. Current revenue is roughly RMB 270 million, and the product is expected to be included in the upcoming Batch 11 VBP. MSD currently dominates the market with a 64% share, while United has passed bioequivalence testing. If United can take share from MSD after VBP, the medium-term setup could be positive, similar to the insulin story.
Animal health is worth roughly RMB 1.4 billion. Mid-cycle revenue is around RMB 1.5 billion, EBIT is about RMB 180 million, and a 7-9x multiple is reasonable. Three new manufacturing bases, in Inner Mongolia, the Henan joint venture with Muyuan, and Zhuhai, are coming online in H2 2025. Muyuan owns 40% of the Henan JV, which reduces key customer concentration risk. The core weakness is still cyclicality.
The remaining products add approximately RMB 1.2 billion.
VBP + AMR: Two Structural Headwinds
VBP compresses prices. Antimicrobial resistance policy, or AMR policy, compresses volumes. Together they create an irreversible squeeze on United’s anti-infective business.
China’s inpatient antibiotic utilization rate fell from 59.4% in 2011 to 36% by 2019. VBP procurement quotas for antimicrobials are set 10-30% lower than for other drug categories. The renewal mechanism is also now institutionalized: Batches 1-8 have been consolidated into a unified renewal cycle ending in late 2028. Once prices come down, they do not go back up.
United’s anti-infective formulations can survive because of integrated cost advantages. They cannot thrive.
Equity Bridge: RMB 2.8 Billion
At year-end 2025, United had RMB 10.6 billion in cash plus RMB 630 million in pledged deposits, for total cash and pledged deposits of RMB 11.2 billion. Subtract bank borrowings of RMB 5.0 billion and supplier finance arrangements of RMB 2.2 billion, and you get the company’s self-reported “net bank balance” of RMB 4.0 billion. After further deducting lease liabilities of RMB 10 million, minority interests of RMB 80 million, proposed dividends of RMB 510 million, and roughly half of contracted but unpaid capex commitments at RMB 650 million, the adjusted bridge comes to about RMB 2.8 billion.
The RMB 2.2 billion supplier finance arrangement is easy to miss. Economically, United is using bank-intermediated bills to delay payments to suppliers. Management itself deducts the amount when calculating net cash.
The UBT251 Pipeline: Expected Value RMB 13 Billion, But the Range is Zero to RMB 32.3 Billion
Clinical Data
The China obesity Phase II study enrolled 205 patients over 24 weeks and showed maximum mean weight loss of -19.7% versus -2.0% for placebo. The China T2D Phase II study enrolled 211 patients over 24 weeks and showed maximum HbA1c reduction of -2.16% versus -1.77% for semaglutide 1mg, with weight loss of -9.8% versus -4.8% for semaglutide.
On glucose lowering, UBT251 at 6mg numerically outperformed Eli Lilly’s retatrutide at 12mg in Phase II, with -2.16% versus -2.02%. But milligram comparisons across different molecules are not meaningful. Molecular weight, receptor affinity, and pharmacokinetics all differ, so “6mg versus 12mg” is pharmacologically meaningless. The right comparison is clinical outcome at each molecule’s optimal dose.
On weight loss, retatrutide has already shown -28.7% in Phase III at 68 weeks. UBT251 only has 24-week data at -19.7%. Longer-duration data will have to come from Phase III.
The Novo Deal Structure
United retains Greater China, meaning mainland China, Hong Kong, Macau, and Taiwan. It is responsible for its own Phase III, manufacturing, and commercialization there. Novo Nordisk gets the rest of the world and is responsible for its own development and commercialization outside Greater China.
United receives three forms of economic return from Novo: a USD 180 million upfront payment already received, equal to RMB 1.44 billion and recognized in 2025 financials; future milestone payments of up to USD 1.8 billion, tied to development and commercial progress; and tiered royalties on ex-Greater China net sales. The royalty rates were not disclosed, but industry comparables suggest 6-9%.
The strategic context is clear. Novo’s own CagriSema, a semaglutide plus cagrilintide combination, failed to meet the primary non-inferiority endpoint against tirzepatide in Phase III. UBT251 is Novo’s answer to Lilly’s retatrutide.
Global Competitive Landscape
UBT251 is not competing only against retatrutide. Already approved therapies include semaglutide, with about -15% weight loss; tirzepatide, at -22.5%; and oral orforglipron, at -12.4%. Phase III competitors include retatrutide at -28.7%, CagriSema at -23%, and survodutide at -18.7%. At the Phase II stage alongside UBT251 are amycretin, Novo’s own GLP-1/amylin co-agonist; VK2735 from Viking Therapeutics, an oral dual agonist; and MariTide from Amgen, a monthly injection with about -20% weight loss.
The China market will be even more crowded. By the time UBT251 launches, likely around 2028-2029, semaglutide, tirzepatide, mazdutide, ecnoglutide, and multiple semaglutide biosimilars will already be on the market.
Scenario Valuation
Based on BIO industry statistics, the historical success rate from Phase II to approval for metabolic-class drugs is about 25%. I adjust UBT251’s probability upward to 40-50% because it has two positive Phase II readouts, retatrutide validates the mechanism, and Novo Nordisk is backing the program. I do not push the probability higher because long-term safety is still unknown, competition is intense, and Novo’s internal priorities could change.
The probability-weighted pipeline expected value is about RMB 13 billion. UBT251 accounts for roughly RMB 11.2 billion of that, made up of Greater China rights of around RMB 5-6 billion, ex-China milestones of around RMB 3 billion, and ex-China royalties of around RMB 3 billion. Other pipeline assets contribute approximately RMB 800 million.
The bottom of the range still matters. There is a 15-20% probability of a complete write-off. If Phase III fails or Novo abandons the project, the pipeline value goes to zero. Pipeline valuation is an option, not a certainty.
Management Governance: Valuable Business, But Minority Shareholder Protection Needs a Discount
United Laboratories is not a fraudulent shell company, but management’s behavior pattern is not especially friendly to minority shareholders. The evidence chain is not hard to follow.
First, the buyback signal did not match the placement reality. In April 2025, the company announced plans to repurchase up to HKD 200 million of shares for cancellation. No cancellation-type buybacks were executed during the year. In July 2025, United placed 156 million new shares at HKD 14.16, a 7.9% discount, to no fewer than six unnamed placees, raising net proceeds of HKD 2.17 billion. The signal was a HKD 200 million buyback. The action was HKD 2.2 billion of dilution. In June 2026, the company issued another buyback announcement with almost the same language.
Second, management chose a directed placement instead of a rights issue. The 156 million shares were sold to six people. Existing minority shareholders were diluted by 7.9% with no chance to participate on equal terms. Controlling shareholder Heren Far East was diluted from 45.91% to 42.28%, so this was not the controlling family directly enriching itself. Still, choosing a placement over a rights issue suggests management prioritized funding convenience over shareholder fairness.
Third, the company raised equity despite having ample cash. At the time of the placement, net cash stood at RMB 4 billion, and borrowing costs were minimal. A cash-rich management team voluntarily selling shares at a discount at HKD 14 implies it considered that price at least fair value. Compared with my pipeline-inclusive fair value of HKD 16.3, that suggests management’s internal pipeline valuation is materially lower than external analysts’ numbers.
Fourth, there is the Evergrande receivable. The annual report discloses litigation related to an investment cooperation with Chengdu Evergrande, with a final court ruling of approximately RMB 167 million that remains uncollected. The amount is small, but it shows management was willing to expose company assets to real-estate-linked counterparties outside the core pharmaceutical business.
The key question is not only whether UBT251 can succeed. It is whether the value from that success will stay in per-share equity, or be redistributed through placements, stock-based compensation, and other capital allocation decisions.
Stock Price Narrative: From HKD 2 to HKD 15 to HKD 8.7
In 2022-2023, the stock traded at HKD 2-3. That was not really about United’s fundamentals. 2023 net profit was about RMB 2.7 billion, implying a PE of only 1.5-2x. The Hong Kong market was in systemic collapse, hit by COVID lockdowns, China panic, and global rate hikes. Everything was priced at absurd levels. For United to trade there, two things had to happen at the same time: its own earnings cycle had to trough, and Hong Kong-wide valuations had to crash. That combination happens perhaps two or three times in twenty years.
From 2023 to 2025, the stock moved from HKD 2 to HKD 15. Hong Kong valuations normalized from extreme lows, with PE expanding from 1.5x to 6-8x. 6-APA entered a high-cycle phase, with prices rising from RMB 200 to RMB 300+. The March 2025 Novo deal added a powerful catalyst. Most of the rally was Hong Kong beta reversion, not United-specific alpha.
From 2025 to 2026, the stock fell from HKD 15 to HKD 8.7 because the narrative broke. The March 2026 profit warning showed that 2025 net profit of RMB 2.09 billion included RMB 1.44 billion of one-time Novo license fee income. Strip that out, and core operating profit was only RMB 700 million. Intermediate segment profit fell 79.4%, and API segment profit fell 53.4%. The market abruptly realized that United’s profit engine is 6-APA, a commodity chemical, not insulin and not innovative drugs. The innovation premium disappeared, and the stock repriced to operating asset fair value.
Total Valuation
The sum of the parts is straightforward: upstream plus intermediates at RMB 5.5 billion, finished drugs at RMB 6.5 billion, the equity bridge at RMB 2.8 billion, and the pipeline at RMB 13 billion. That gives a total of RMB 27.8 billion, or about HKD 16.3 per share.
The current share price of HKD 8.72 is basically operating asset fair value plus zero pipeline value.
If you believe the UBT251 pipeline is worth RMB 13 billion on a probability-weighted basis, the current price implies 87% upside. If the pipeline is ultimately worth zero, you are buying at operating asset fair value with limited downside: HKD 7-9 in normal conditions, HKD 7 in a mild downturn, and HKD 5-6 in an extreme single-event scenario.
The core bet is not on the operating assets. Those are already fairly priced. The bet is whether the 2027 Novo global Phase 1b/2a data and United’s China Phase III will deliver. Until then, a sustainable 3-4% dividend yield is a holding subsidy, not a reason to buy.
Disclaimer: This article does not constitute investment advice. The author may or may not hold positions in the securities mentioned. All valuations are based on public information and subjective judgment. Actual outcomes may differ materially from expectations.