2022 will be the first year for the realization of the two-wheel drive strategy of Mimi + Biopharmaceuticals. The performance of Sihuan Pharmaceuticals in 2021 was lower than expected, due to lower-than-expected sales of medical and beauty products and generics, as well as intangible asset impairment and stock buyback costs. In 2021, the company achieved revenue of 3.291 billion yuan, an increase of 33.6% over the same period last year, and shareholder profit of 417 million yuan, down 12.0% from the same period last year. Gross profit margin fell 3.3 percentage points year-on-year to 74.4%, as volume purchases eroded the profit margin of generics. Due to the impairment of intangible assets and corporate restructuring, the net interest rate fell 6.6 percentage points year-on-year to 12.7%. The company will declare a total of 0.108 yuan per share in final dividend and special dividend, equivalent to 241.9% of the dividend ratio.
In 2022, we believe that botulinum toxin (Letibao) and Tongyan water coagulation, Hugel hyaluronic acid filler, fat collection system Lipivage
And more than 20 independently developed II products are expected to support the strong growth of the medical and beauty business. In 2021, the sales revenue of medical and beauty products soared 1383.3% year on year to 399 million yuan, accounting for 12.1% of the total revenue. Most of the sales revenue is contributed by Letibao. Looking forward to 2022 and the future, we expect: 1) with the acceleration of channel coverage (the number of medical and beauty institutions has increased from 2500 at the end of 2021 to more than 3000) and the supply of more specifications, the sales revenue of Letibao will grow by about 30% in 2022; 2) Hugel's hyaluronic acid filler, fat collection system Lipivage and more than 20 independently developed II products are expected to be approved for production. The above products and the catgut embedding products and gold microneedles exclusively represented by the company are expected to support the rapid growth of the medical and beauty business; in addition, the company is developing more than 10 III medical products, including child needles, young girl needles, collagen and lipolysis products, which are expected to be approved and put on the market in 2023-2025. 3) the company will continue to introduce cutting-edge overseas medical technology and products and grow into an international medical platform with a full product matrix covering the life cycle of people who love beauty: in the first half of 2022, the company set up a joint venture with Beijing Blue Crystal Microbiology. Jointly develop PHA microspheres and bio-based regenerative medicine materials, acquire an 80% interest in Shenzhen Yimei to expand in the field of optoelectronic devices, and acquire the exclusive agency of Suisselle's product Cellbooster.
Although the outbreak of the COVID-19 epidemic and the weak financing environment have slightly delayed the R & D and financing progress of the entire pharmaceutical industry, the R & D and financing of Xuanzhu and Huisheng organisms are basically going smoothly. In 2021, sales of innovative drugs and other products rose 23.0% year-on-year to 294 million yuan, accounting for 8.9% of total revenue, most of which was contributed by CDMO business. The company currently has more than 40 well-known domestic and overseas pharmaceutical companies about 180 CDMO projects. We expect innovative drugs to enter the harvest period from 2022. We expect that Annalprazole (proton pump inhibitor), asparagus insulin injection, asparagus insulin 30 injection and asparagus insulin 50 injection are expected to be approved for production in 2022-2023, and Pirosini (CDK4/6i), SGLT-2i and Degu insulin injection are expected to be approved for production in 2023-2024. XZP-3621 (ALK/ROS1i), Degu Insulin and Aspartate Insulin injection are expected to be approved for production in 2024-2025, and XZB-0004 (AXLi) and KM-257 (HER2xHER2 double Antibody) will be approved for production by the end of 2025. As for financing, as of December 2021, Xuanzhu Bio has completed round B financing, with a post-investment valuation of close to 7 billion yuan and plans to list on Science and Technology Innovation Board by the end of 2022. The company currently directly holds about 62.4% of the total issued share capital of Xuanzhu Bio, and the company expects to continue to be its holding company after the listing of Xuanzhu Bio. As of June 2022, Huisheng Biological has completed round A financing, with a post-investment valuation of close to 5 billion yuan. The company currently holds about 68.4% of the total issued share capital of Hui Sheng Biology.
The generics business is expected to grow steadily and provide ample cash. In 2021, sales of generics rose 18.2 per cent year-on-year to 2.598 billion yuan, accounting for 78.9 per cent of total revenue. The company is developing more than 100 generic pharmaceuticals, more than 30 of which are high-end generics, which have high-tech barriers and are expected to be on the market within three years, thus ensuring a stable annual compound growth rate of revenue in the generics business and providing sufficient cash for the research and development of other products.
Sihuan Pharmaceutical has an investment rating of "buy" and a target price of HK $3.30. We still believe that the company's short-to long-term growth logic (from generics + medical beauty to innovative drugs + medical beauty + other new businesses) is achievable and valuable.
Risks include: 1) weak economic environment; 2) government policy risks, especially those that erode profit margins of major products; and 3) delays in the company's pipeline research and development.