On June 12th, in the earnings conference, Zhu Huaxing, the chairman and general manager of Nearshore Protein (688137.SH), revealed that by the first quarter of 2024, Nearshore Protein would no longer have unconventional business income related to epidemic prevention and control.

However, despite the gradual clearance of the impact caused by the COVID-19 epidemic, the overall performance of Nearshore Protein did not improve. In 2023, Nearshore Protein achieved 153 million yuan in revenue and 12.84 million yuan in net profit attributable to the parent company, a year-on-year decrease of 42.09% and 85.84% respectively. In the first quarter of 2024, Nearshore Protein's revenue decreased by 39.34% year-on-year to 26.0871 million yuan, and net profit attributable to parent company decreased by 123.61% year-on-year to a loss of 2.6305 million yuan.

Explaining the slowdown in the growth of conventional business, Zhu stated that on one hand, the biopharmaceutical industry is facing significant changes due to stage adjustments and industry fluctuations in the domestic biopharmaceutical market. On the other hand, mRNA technology has further expanded its applications in fields such as infectious disease vaccines, tumor vaccines, and antibody/protein substitutes, with more and more pipelines entering clinical trials and yet to be industrialized, resulting in an insufficient demand for raw materials.

Having been engaged in the recombined protein industry for more than ten years, Nearshore Protein's current main business focuses on such fields as in vitro diagnosis, mRNA vaccine drugs, basic research in life sciences, and biopharmaceuticals. Its core products include target and factor proteins, recombinant antibodies, and enzymes and reagents. Among them, enzymes and reagents include mRNA raw material enzymes and reagents, molecular diagnostic enzymes and reagents, life science research enzymes and reagents, and other drug enzymes and reagents, which can be applied to the above main fields.

According to Frost & Sullivan data, the total market size of China's recombined protein research reagents in 2021 was about 1.29 billion yuan, and the target and factor protein product of Nearshore Protein, with a sales revenue of 53 million yuan, accounted for 4.1% of the domestic market share, making it one of the leading manufacturers in the domestic recombined protein field.

Meanwhile, Nearshore Protein holds a leading position in China's mRNA raw material enzyme industry, with a market share of 39.80% in 2021, ranking first among domestic manufacturers and surpassing the second-ranked domestic manufacturer by a large margin of 5%.

It is worth mentioning that, after the epidemic, Nearshore Protein's new COVID-19 business income, such as mRNA raw material enzymes and reagents, declined. However, the mRNA vaccine drug industry has also expanded from the initial urgent demand for COVID-19 vaccines to the development phase of multiple orientations, including other infectious disease vaccines, tumors, cell therapy, and protein drug substitutes.

However, because the industrialization cycle of mRNA vaccine drugs is relatively long, the vaccine research and development cycle generally takes 8-10 years, and the average research and development cycle of protein drugs is 10 years. Although the mRNA vaccine drug research pipeline is abundant domestically and internationally, except for the new COVID-19 mRNA vaccine, few products have been successfully developed. Obviously, the demand for mRNA raw materials cannot bring rapid income contributions to Nearshore Protein in a short period of time.

Regarding the current situation, Zhu stated at the earnings conference that Nearshore Protein would continue to optimize its talent team and system construction, reduce costs and increase efficiency. It is reported that as of the end of 2023, the total number of personnel of Nearshore Protein was 579, a year-on-year decrease of 15.97%, of which 163 people had a master's degree or above, accounting for 28.15% of the total number of employees, an increase of 4.93 percentage points year-on-year.

Zhu also stated that Nearshore Protein would seek opportunities for investment and mergers and acquisitions, and continuously improve the company's industrial layout. Data shows that as of the first quarter of 2024, Nearshore Protein had a cash and cash equivalent balance of 1.393 billion yuan.