Investor Network Cai Jun
Zhejiang Dongyang to Taizhou, gathered numerous API and CRO enterprises, gave birth to a lot of listed companies, and many are sprinting IPO.
In February this year, Zhejiang Haisen Pharmaceutical Co., Ltd. (hereinafter referred to as "Heisen Pharmaceutical" and "Company") from Dongyang updated its prospectus. The company intends to list the main board of the Shenzhen Stock Exchange and is expected to raise more than 600 million yuan for production lines, R & D centers and office buildings, supplementary liquidity and so on.
Prior to this, the CSRC has given feedback on environmental protection, sales fees and other issues, and Hessen Pharmaceutical has responded in its updated prospectus. In the business model, the company mainly produces orders from major customers, but it is also looking for an overseas way out because of its own or downstream collection.
It is worth noting that in January this year, the CSRC terminated the IPO application of an API company. The fate of Hessen Pharmaceutical remains to be seen.
See Ann Naijin again
Analgin, one of the core products of Heisen Pharmaceutical, may determine the success or failure of the company's listing.
In January this year, the CSRC announced the termination of the Shenzhen Stock Exchange main board application of Jiheng Pharmaceutical Co., Ltd. The company also deals in APIs, and its core products are acetaminophen and analgin. By comparison, Hessen's core products are analgin, sucralfate and Atto vastatin calcium, which accounted for 22.5%, 26.04% and 21.9% of revenue in the first half of 2022, respectively.
Although regulators have not disclosed the reasons for terminating Jiheng Pharmaceutical, the environmental protection and sustainable profitability of API companies have always been the focus.
In 2020, the State Drug Administration announced to stop the production and sale of analgin injection in China. After the release of the first prospectus, regulators asked Hessen Pharmaceutical to explain Anajin's policy prospects, production and management, environmental protection and other issues in their feedback. In response, the company said that its downstream customers are mainly oral tablet factories, which are less restricted and have not been severely punished since 2019.
However, Heisen Pharmaceutical was punished by the Dongyang Environmental Protection Bureau in September 2017 for excessive discharge of waste water, according to a celestial eye survey. Coincidentally, the Shenzhen branch of Ji Heng Pharmaceutical Co., Ltd. was closed for rectification in 2015 because of pollution.
If environmental protection is the sword of the ceiling, then sustainable profitability is a long-term pain point for API companies.
From 2019 to the first half of 2022, Hessen Pharmaceutical's Analgin gross profit margin was 16.74%, 14.17%, 16.22% and 13.71%, respectively, showing a downward trend. From 2019 to 20221, Jiheng Pharmaceutical's Analgin gross profit margin was 25.68%, 29.22% and 32.94% respectively, showing an upward trend.
Similar products have different destinies. Hessen Pharmaceutical explained that the cost of sales increased due to the increase in unit consumption of major raw materials during the reporting period, but Ji Heng Pharmaceutical said in its prospectus that the purchase prices of Analgin's main raw materials, such as diketene and aniline, were declining during the reporting period.
Sales unit price, during the reporting period, Hessen Pharmaceutical, Jiheng Pharmaceutical near the range of 63-80 yuan / kg, 58-65 yuan / kg. The price of the former is higher, and customer resources are very important.
In November 2022, Hessen Pharmaceutical signed an agreement with Huazhong Pharmaceutical Co., Ltd., which purchased nearly 5.28 million yuan of Analys. the contract was the only transaction of its kind exceeding 5 million yuan in that year. Back in 2019, Kunming Pharmaceutical Group purchased nearly 6.0689 million yuan from the company, but the company did not disclose its sales customers in 2020 and 2021 in its prospectus.
"get close to" Qilu Pharmaceutical
Atto vastatin calcium, a drug that regulates blood lipids, has gradually become one of the core products of Hessen Pharmaceutical.
Atto vastatin calcium accounted for 4.42% of Heisen's revenue in 2019, rising to 21.9% in the first half of 2022. This IPO, the company plans to use 320 million yuan to raise funds to build an annual production line project of Atto vastatin calcium.
From a small scale to a huge investment, Atto vastatin calcium of Hessen Pharmaceutical Co., Ltd. has gained momentum, mainly "alongside" Qilu Pharmaceutical.
In 2019, the bid for Atto vastatin calcium preparation was opened, and Qilu Pharmaceutical, Dongrui Pharmaceutical and Lepu Pharmaceutical won the bid. Among them, Hessen Pharmaceutical has become the first two raw material suppliers. From 2019 to 2021, the company's income from such products is 12 million yuan, 59 million yuan and 85 million yuan respectively. In 2022, Qilu Pharmaceutical purchased 154 million yuan of these products from the company.
If there is a big single happiness, there will be corresponding troubles. Due to the decline in the price of postharvest products from customers, from 2019 to the first half of 2022, the average unit price of Atto vastatin calcium of Hessen Pharmaceutical dropped from 1662.56 yuan / kg to 1220.55 yuan / kg, and the gross profit margin decreased from 28.66% to 23.92%.
In the face of happiness and annoyance, the next step for Hessen Pharmaceutical is to expand production capacity to reduce unit costs. According to the prospectus, the company has built a production capacity of 100 tons, and Zhejiang Lepu Pharmaceutical, a related party of Lepu Pharmaceutical, is building a production line of the same scale. In response, the company decided to use IPO to raise funds to increase production capacity to 300t.
Among them, Lepu Pharmaceutical and Zhejiang Lepu Pharmaceutical are subsidiaries of Lepu Medical (300003.SZ), which is mainly engaged in the business of raw materials. Hessen Pharmaceutical Co., Ltd. is regarded as a comparable enterprise, and has plans and practices to enter the international market.
In 2021, Hessen Pharmaceutical sold 20 million yuan of Atto vastatin calcium to CHEMAKE LIMITED. The latter produces and operates amorphous similar preparations and is eventually sold to Brazil and Costa Rica. In 2022, the two sides signed an agreement for the company to supply similar preparations with US $1.188 million (about 8.28 million yuan).
It is worth noting that Zhejiang Lepu Pharmaceutical Co., Ltd. is the forerunner of overseas markets. Lepu Medical disclosed in its 2021 report that its revenue fell 7.77% from a year earlier, mainly because its API business was affected by overseas outbreaks, and its revenue continued to decline 13.9% in the first half of 2022 compared with the same period last year.
In response, Hessen Pharmaceutical said in the prospectus that with Atto vastatin calcium entering the international market, "it is bound to face greater competition."
The rate of sales expenses was questioned.
In addition to APIs, Hessen Pharmaceuticals has also operated the business of escitalopram oxalate tablets. The business is co-operated by the company and Conbey, the former is responsible for the supply of raw materials, marketing, etc., and the two sides share according to the cooperation.
From 2019 to 2021, the business income was 21.9694 million yuan, 5.029 million yuan and 3.1713 million yuan respectively, accounting for 8.25%, 1.77% and 0.82% of the operating income. The reason for the obvious decline is still related to mining. In September 2019, Heisen Pharmaceutical Co., Ltd. failed to win the bid with volume procurement, resulting in a rapid decline in the business.
After the business shrank, the related expenses also shrank. From 2019 to the first half of 2022, the sales expenses of Hessen Pharmaceutical were 27 million yuan, 11 million yuan, 9.54 million yuan and 5.18 million yuan respectively. The company said that the market promotion fee was mainly generated by the oxalate citalopram film business, which was 15 million yuan, 3.334 million yuan, 1.893 million yuan and 928400 yuan respectively during the reporting period.
Although the cost has dropped sharply due to collection, the proportion is not low. During the reporting period, the sales expense rates of Hessen Pharmaceutical were 10.28%, 3.69%, 2.45% and 2.45% respectively, which were higher than the average of comparable enterprises of 4.08%, 2.56%, 2.46% and 2.18% in most reporting periods.
In this regard, the CSRC asked Hessen Pharmaceutical to explain the reasons and rationality in its feedback. The company responded that the selected four comparable enterprises do not have preparation business or account for a relatively small proportion, so the cost is also lower.
In contrast, Hessen Pharmaceutical's R & D investment is not high. From 2019 to the first half of 2022, the company's R & D expenses were 9.4202 million yuan, 11 million yuan, 12 million yuan and 5.801 million yuan respectively, and the cost rates were 3.53%, 3.8%, 3.1% and 2.74% respectively, which were lower than the average of comparable enterprises.
Therefore, Hessen Pharmaceutical is still a production-driven API company. As of the first half of 2022, the company has a total of 584 employees, including 442 in production, 72 in R & D and 15 in marketing, of which the number of production staff is significantly higher than that of 415 in the first half of 2021. (produced by thinking Finance) ■