CSPC PHARMA recently announced that executive director Pan Weidong was fined 5 million yuan by China's securities regulator for insider trading. Investigations revealed that Pan purchased nearly 100 million yuan worth of shares through subsidiary accounts before the disclosure of CSPC Innovation's restructuring transaction. Although Pan resigned as chairman in September 2024, the incident exposes weaknesses in CSPC's internal controls and compliance management.

As a pharmaceutical giant with a market cap exceeding 100 billion yuan, core executives exploiting information asymmetry not only damages investor confidence but may also invite sustained regulatory scrutiny. While CSPC maintains "normal business operations," unaddressed governance risks could impair its long-term capital market reputation.

**Persistent Earnings Decline Amid Growth Challenges** Beyond governance issues, CSPC's financial performance raises concerns. The group reported a 9.56% year-on-year revenue decline and 25.90% drop in net profit attributable to shareholders in 2024—marking its first annual contraction in a decade. The downtrend continued into H1 2025, with revenue and net profit falling 20.04% and 15.64% respectively.

Subsidiary CSPC Innovation similarly underperformed, with 2024 net profit plunging 87.63% and posting its first quarterly loss since listing in Q1-Q3 2025. Despite emphasizing its robust innovative drug pipeline, the company faces evident short-term pressure from intensifying industry competition and centralized procurement policies, with transformation efforts yet to yield results.

**The Double-Edged Sword of Innovation and Partnerships** CSPC has aggressively expanded into innovative drugs and global collaborations, boasting over 200 R&D projects and a $5.33 billion AI drug development partnership with AstraZeneca. However, heavy investments bring funding strains and uncertain payoff timelines. Notably, the much-anticipated CSPC Innovation restructuring deal was terminated in April 2025, reflecting strategic execution uncertainties.

While the company projects over 50 new drug applications by 2028, its ability to sustain high R&D and licensing expenditures remains questionable amid current earnings slumps and tightening regulations.

**Conclusion** From governance lapses to operational struggles, CSPC confronts multifaceted challenges. Successfully strengthening corporate governance while balancing innovation investments with short-term profitability will determine its ability to regain growth momentum. The capital markets will closely monitor subsequent strategic adjustments and compliance overhauls.