How is 40 billion market capitalization formed?

“Investor Network” Cai Jun

Recently, New Novus (300765.SZ, hereinafter referred to as the “Company”) disclosed a 7.6 billion yuan acquisition plan.

As a subsidiary of CSPC Group split into GEM, the company has been planning this round of acquisitions for a long time. In fact, in recent years, the Group's actual controller family has greatly raised the company's valuation through the expansion, integration, and injection of internal assets. In a situation where the general medical environment has snubbed the frost, it is a long-sleeved dance that shows capital skills.

However, the smooth running of capital operations did not significantly improve performance growth. Whether New Novus's valuation can continue to be strengthened will be tested over time.

Sugar blowers watch the weather

Sugar blowing is a traditional craft that originated in Beijing-Tianjin-Hebei and has a history of 100 years. Shiyao Group, headquartered in Hebei, is also boosting its sugar company, Xinnovi, in the capital market by injecting innovative pharmaceutical assets.

According to the plan, the company plans to acquire 100% of the shares of Shiyao Baig by issuing shares and paying cash. The counterparties are the three subsidiaries of the Shiyao Group at a price of 7.6 billion yuan. Among them, shares and cash were worth 6.84 billion yuan and 0.76 billion yuan, respectively.

As of June of this year, Shiyao Baig's net worth was 4.276 billion yuan. Based on this calculation, the company's value-added rate is approximately 80%. The company specializes in long-term protein drugs. The core product is “Jin Youli”. The revenue from 2022 to the first half of this year was 2.235 billion yuan, 2.316 billion yuan, and 0.922 billion yuan respectively, and net profit was 0.621 billion yuan, 0.785 billion yuan, and 0.39 billion yuan, respectively.

As a traditional craft, sugar blowers need to heat maltose to an appropriate temperature. Fire is undoubtedly the key to determining the ultimate integrity of sugar people. The innovative drug market has been cold for some time. On the surface, it seems that Shiyao Group arranged this round of transactions as a “sharp attack,” but after careful research, we know where it is.

In today's pharmaceutical sector, long-lasting protein products are a hot topic chased by institutions. Tebao Biotech, which is mainly a similar business, had revenue and net profit of 1.19 billion yuan and 0.304 billion yuan respectively in the first half of this year, and the market value exceeded 30 billion yuan. The scale of performance of Shiyao Baike is comparable to that. Judging from this, the company's overall purchase price of 7.6 billion yuan is not only quite “economical,” but it has also hit the hot spot.

Moreover, Novus is also experienced in designing transaction structures. At the same time as announcing the acquisition plan, the company announced that it plans to issue shares to no more than 35 specific investors, raising a maximum capital of 1.78 billion yuan to pay cash consideration for this transaction, new drug development and industrialization projects, and supplementary working capital.

This plan ensures that the company does not consume its own capital excessively. As of the first half of this year, the company's monetary fund balance was 1.482 billion yuan, a year-on-year decrease of 25.28%. It was mainly affected by Jushi Biotech's R&D payments, purchase of large deposit certificates, annual equity distribution, and share repurchases.

Stereotyped innovative pharmaceutical companies

Craftsmen are sugar blowers. In the early stages, they focus on the techniques of pinching, spinning, and blowing, and finally put in a mold to shape. This time, the CSPC Group injected 100 grams of Shiyao into Sinovay, essentially to set the stage for its transformation and innovative pharmaceutical company.

In 2019, CSPC Group split the company and went public on the GEM. Until now, the company is still mainly engaged in functional ingredients and health foods, and is one of the largest synthetic caffeine manufacturers in the world. Since 2022, the company has successively been injected into Shiyao Shengxue and Jushi Biotech, and each of the two assets has played a different role. Shiyao Shengxue, which specializes in raw materials, is an important source of performance; Jushi Biotech specializes in innovative drug research and development, and although it has not been profitable so far, it has boosted the company's valuation.

In the first half of this year, the company's operating income and net profit attributable to shareholders of listed companies were 0.972 billion yuan and 0.137 billion yuan respectively, down 27.71% and 48.27% year-on-year respectively. Performance fluctuations are mainly related to falling caffeine prices. However, looking at the performance of the capital market, the company's market value soared, breaking through 40 billion yuan, and the price-earnings ratio also increased from 20 times to 50 times.

Standing at this level, Shiyao Group injected 100 grams of Petrochemical into Sinovay, not only to establish the image of an innovative drug, but also to consolidate its core.

In the acquisition plan, the company clarified its performance commitment for the first time. From 2024 to 2026, the net profit of Shiyao Baig was not less than 0.44 billion yuan, 0.39 billion yuan, and 440 million yuan, respectively, for a total of 1.26 billion yuan; if the delivery date is postponed to 2024, the amounts from 2025 to 2027 will be at least 0.39 billion yuan, 0.44 billion yuan, and 500 million yuan, respectively, for a total of 1.33 billion yuan.

Earlier, when Shiyao Shengxue was acquired by the company, it also made performance promises, that is, the deducted non-net profit for 2022, 2023, and 2024 will not be less than 0.081 billion yuan, 0.091 billion yuan, and 102 million yuan, respectively. In 2022 and 2023, the company's net profit was 0.091 billion yuan and 95 million yuan.

How big can a sugar man blow

Continuously injecting assets into Sinovay, the CSPC Group not only reshaped the core of innovative drugs, but also boosted the company's valuation. Cai Dongchen, the actual controller of the group, made plans and handed over the almost finished sugar man to his son.

In May, CSPC revealed the latest board member list. Cai Xin, son of Cai Dongchen, first appeared on the board list. Cai Xin graduated from Purdue University in Pharmacy, worked as an analyst at Dinghui Investment, and joined the group as Executive President and President of the Marketing Decision Center in 2022. Another son, Cai Lei, became the group's vice president in 2019 and later became a director of New Novartis.

As the second generation took over, the interior of the new Novus was also being adjusted one after another. In April, Han Feng, the company's former general manager, and Wang Huaiyu, the director, left their jobs. Most of these retired executives will end in 2026. Their previous experience was mainly in the production and logistics sectors of the CSPC Group. In September, the company announced the resignation of chairman Pan Weidong and director Yang Dong from all positions, and elected general manager Yao Bing as the new chairman.

The biggest beneficiaries of intensive asset injections and executive adjustments are still the actual controller's family. As of October 18, the market values of CSPC Group and New Novus were 76.84 billion yuan and 44.72 billion yuan respectively, for a total of 121.56 billion yuan. Among them, the majority shareholder of the company is a subsidiary of Shiyao Group, with a shareholding ratio of 73.6%.

The extent to which Sugar Man can blow depends on the company's R&D progress and prospects. Its two assets for innovative drugs, Jushi Biotech simultaneously developed biosimilar drugs, ADC, mRNA and other pipelines. In the first half of this year, the R&D cost was 0.25 billion yuan, and a PD-1 drug was approved for marketing. An important development of Shiyao Baike is a weight loss drug, a TG103 injection that has entered phase III clinical trials. The indications are type 2 diabetes and overweight/obesity.

In other words, Novus has two major pipelines for fighting cancer and weight loss at the same time. This is also the core that institutions are looking for. In the anti-cancer pipeline, many companies with a market capitalization of 10 billion dollars have also appeared in the capital market, such as Rongchang Biotech, Junshi Biotech, Alice, etc.; in the weight loss pipeline, Borui Pharmaceutical, which is smaller, also supports a market value of 10 billion dollars by relying on clinical pharmaceuticals. However, it remains to be seen whether the company can move from clinical to commercialization. (Produced by Thinking Finance) ■