A Trillion-Dollar "Gray Market" on the Path to Legalization
Update time:
2026-04-17 08:16
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Recently, Robert F. Kennedy Jr., Secretary of the U.S. Department of Health and Human Services (HHS), publicly stated in a podcast that he is a die-hard fan of peptides and revealed that the FDA is discussing reclassifying more than a dozen peptides—previously placed on the Category 2 prohibited compounding list—back into Category 1, allowing pharmacies with valid prescriptions to compound them again. The HHS Secretary even bluntly claimed that the ban under the Biden administration was legally baseless.
The announcement sent shockwaves through the industry. Peptides named with letters and numbers—BPC-157, MOTS-c, Ipamorelin, AOD-9604—which once operated in regulatory gray areas, overnight became the focal point of heated discussions among licensed compounding pharmacies and functional medicine clinics. If the policy is finalized, demand will flow back from overseas gray-market channels to the compliant compounding system.
This is merely a prelude. Behind Kennedy’s podcast remarks, a peptide industry transformation spanning China and the U.S. and affecting a multi-trillion-dollar market is accelerating.
A critical question arises: As the U.S. begins to deregulate emerging peptides, where are Chinese pharmaceutical companies?
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The Expanding "Gray Market"
The logic behind Kennedy’s push for regulatory shift is straightforward: the ban never truly eliminated demand—it only pushed it into regulatory blind spots.
Over the past five years, online advertisements, e-commerce listings, and social media content for unapproved peptide products have exploded. In 2025 alone, search interest for "peptides" on Google Trends officially surpassed that of "Ozempic", catapulting peptides from professional circles into the public mainstream.
Behind these figures lies a massive gray market operating outside FDA oversight.
More than a dozen unapproved peptides—including BPC-157, AOD-9604, MOTS-c, TB-500, Tesamorelin—are openly sold on major e-commerce platforms like Amazon under the guise of "research chemicals," "laboratory reagents," or even "daily chemical products," with social media acting as a powerful catalyst.
Although BPC-157 lacks high-quality published clinical trial data, it is widely used in regenerative medicine clinics and among professional athletes. MOTS-c is regarded by biohackers as an "exercise mimetic." Pep19 achieved a 17% reduction in visceral fat without affecting lean body mass in a 60-day clinical trial.
According to a January 2026 survey by the Financial Times, approximately 1,000 Chinese suppliers are exporting unregulated peptide products directly to Western consumers via instant messaging apps and online platforms for skincare, weight loss, and muscle building.
More disturbingly, patients can even purchase experimental drugs still in Phase III trials online. Eli Lilly’s triple agonist retatrutide (unfinished clinical trials) and Novo Nordisk’s CagriSema (under FDA review) are both readily available on the gray market.
The prosperity of the gray market is essentially a direct reflection of unmet demand through formal channels—demand that did not emerge out of thin air. Long overlooked by mainstream pharma, indications such as sports recovery, metabolic health, cognitive enhancement, and anti-aging are transforming from "latent demand" into a "visible market" catalyzed by peptides.
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Dividends of the Follower Strategy
Turning to China:
Over the past five years, China’s peptide industry has undergone a dramatic shift from a "wasteland" to a "red ocean"—almost entirely centered on one molecule: semaglutide.
In March 2026, Novo Nordisk’s core compound patent for semaglutide officially expired in China, opening a legal window for domestic generics to launch. According to public data from the National Medical Products Administration (NMPA), at least 10 domestic pharmaceutical companies—including Huadong Medicine (Jiuyuan Gene), Livzon Group, and Qilu Pharmaceutical—have submitted semaglutide generic marketing applications, with over 11 more in Phase III clinical trials.
Industry forecasts predict the first batch of domestic generics will be approved in Q3 2026, with the number of domestic generics reaching 20 by 2028. Novo Nordisk, the originator, has already launched defensive price cuts: the antidiabetic semaglutide injection now costs over 70% less on e-commerce platforms than before its inclusion in medical insurance.
Meanwhile, a group of more innovative Chinese pharmaceutical companies are attempting breakthroughs through differentiated positioning:
- Innovent Biologics’ mazdutide—the world’s first approved GCGR/GLP-1 dual agonist—delivered a maximum 14.8% weight loss at 48 weeks.
- Hengrui Medicine’s HRS9531 (GLP-1R/GIPR dual agonist) showed a 19.2% maximum weight loss in Phase III data and was submitted for marketing approval in September 2025.
- Huadong Medicine’s GLP-1R/GIPR agonist HDM1005 directly initiated a head-to-head Phase III study against mazdutide.
- Cytopeptides’ zolveglucotide (ZT002), a monthly GLP-1 injection, has entered Phase III weight-loss trials; its GLP-1/FGF21 dual agonist is in Phase I clinical trials in Australia. In March 2026, Cytopeptides completed a Series C financing of over ¥500 million.
Yet problems have emerged.
Nearly all Chinese peptide R&D pipelines are highly concentrated in the metabolic disease sector, especially GLP-1 and its derivatives. While U.S. functional medicine clinics boldly use BPC-157 for sports recovery, MOTS-c for metabolic optimization, and Semax for cognitive enhancement, Chinese pharmaceutical companies have almost no presence in these "non-mainstream" peptides.
Our follower strategy excels in "semaglutide generics," but we still lack forward-looking answers to the question: What will be the next GLP-1?
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The Underestimated Core Capabilities
Nevertheless, labeling China’s peptide industry solely as "followers" is unfair. Chinese companies have built global competitiveness in upstream supply chains and midstream CDMO sectors.
According to Frost & Sullivan, the global peptide drug market grew from $60.7 billion in 2018 to $89.5 billion in 2023, and is projected to reach $261.2 billion by 2032. The domestic peptide CDMO market is expected to hit ¥18.5 billion by 2030, with GLP-1 drugs as a major driver.
- WuXi AppTec’s TIDES business generated ¥11.37 billion in revenue in 2025, surging 96% year-on-year; its total solid-phase peptide synthesis reactor volume exceeds 100,000 liters.
- Asymchem’s chemical macromolecule CDMO business grew ~124% last year, expanding solid-phase peptide synthesis capacity from 45,000 liters to 69,000 liters by the end of 2026.
- Tedapharm was the world’s third-largest peptide-focused CRDMO in 2023, with nearly 80% of revenue from overseas; its pipeline includes 9 GLP-1 novel molecules and over 330 CDMO projects.
- Nantai Biotech achieves industry-leading single-batch output of over 10 kg in long-chain peptides.
- Saintano Biotech strategically positions itself in the GLP-1 sector via an "API + formulation" integrated model.
Chinese top-tier CXOs possess know-how, cost control, human resources, capacity infrastructure, delivery efficiency, and reliability—any one of which grants global competitiveness. With ~65% of global peptide API production outsourced, China’s capacity advantage is poised to dominate the global GLP-1 capacity race.
Beyond this, Chinese peptide companies are accelerating overseas expansion:
- Hanyu Pharmaceutical’s GLP-1 liraglutide injection received the first FDA generic approval in 2024; its glatiramer acetate injection for multiple sclerosis gained FDA approval in February 2026.
- Frontier Biotech’s FB4001 (teriparatide generic) passed FDA pre-approval inspection with zero deficiencies in March 2026 and entered the corrective phase.
- Sunsure Peptide struck partnerships with Novartis and Eli Lilly in early 2026, including a global exclusive license for an in-house peptide asset with Novartis, securing a $50 million upfront payment—a new record for Hunan innovative drug outbound licensing.
Notably, overseas peptide products are expanding from traditional generics to more complex areas, with macrocyclic peptides emerging as a highlight in 2026.
On March 18, Johnson & Johnson’s oral macrocyclic peptide Icotrokinra was approved by the FDA, marking a critical leap from platform validation to commercialization for the oral macrocyclic peptide sector. China’s macrocyclic peptide leader YuanSi Peptide quickly followed with a $150 million Series B financing, having previously secured a $3.4 billion macrocyclic peptide platform collaboration with AstraZeneca.
From GLP-1 to oral macrocyclic peptides, Chinese peptide companies are shifting from "generic exports" to "technology exports." However, challenges in overseas expansion are escalating:
- Tariff pressures
- Tightening biotech export controls
- Fundamental differences between U.S. and Chinese regulatory systems
These require companies to shift from a "product export" mindset to "global capability building." Tedapharm has explicitly earmarked part of its IPO funds to expand U.S. local production capacity to mitigate policy risks. Localized capacity is becoming a new standard for overseas strategies.
— Conclusion —
As the West begins deregulating "non-mainstream" peptides at the policy level, Chinese pharmaceutical companies are not responding quickly enough.
Admittedly, China’s rapid follow-up on GLP-1, CDMO capacity expansion, and accelerated overseas breakthroughs are commendable. Yet these achievements almost entirely revolve around already validated molecules and sectors. True industry foresight lies in seeing "the fringe" beyond the mainstream and discovering "the future" within the fringe.
BPC-157, MOTS-c, Semax, macrocyclic peptides—these peptides remain in U.S. regulatory gray areas or technical validation today, but their target indications—sports recovery, metabolic optimization, cognitive enhancement, oral delivery—are global.
When the FDA opens the door to legal compounding pharmacies for these peptides, demand will shift to regulatorily approved formal channels. At that point, those who can provide safe, compliant, cost-controlled products will seize the first-mover advantage.
Kennedy noted in his podcast: "These peptides should return to compliant suppliers." Among those "compliant suppliers"—how many will come from China?
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