The company wants to cross the mountains and rivers.

"Investors Net" Cai Jun

Since November, Gan & Lee Pharmaceuticals (603087.SH, hereinafter referred to as the company) has issued several announcements at the shareholder level.

In the first three quarters of this year, the company's performance has shown a growth trend. After more than four years of being listed, the company has experienced many challenges. It once shone brightly with a market capitalization of hundreds of billions, but later restructured its strategy under the influence of policies. In 2023, the company's actual controller Gan Zhongru "swept" the private placement and deployed work in overseas expansion, research and development, and investment. Whether the previous glory can be reproduced remains to be seen, waiting for time to provide an answer.

The actual controller in his seventies repays debts.

Gan Zhongru, who is over seventy, still faces significant pressure.

According to the announcement, the company's shareholder Xute Hongda plans to reduce its holdings by up to 6.01 million shares through centralized bidding within three months. The reason for the reduction is the capital requirement for the exit of former employees of Xute Hongda. Xute Hongda is an employee shareholding platform controlled by Gan Zhongru, but the reduction entity does not involve Gan Zhongru himself.

As of the end of the third quarter this year, Gan Zhongru and Xute Hongda respectively hold 0.206 billion shares and 47.494 million shares in the company, with shareholding ratios of 34.21% and 7.9% respectively. A few days before the announcement of the reduction, the company disclosed that Gan Zhongru had pledged 28.45 million shares to Yunnan International Trust, accounting for 13.83% of his shareholding in the company, for debt repayment. A few days later, the company disclosed that some of Gan Zhongru's shares had been released from the pledge, but the remaining pledged shares still accounted for 26.72% of his ownership percentage.

The reason for pledging equity can be traced back to the last private placement. In 2023, Gan Zhongru subscribed to all the private placement shares of the company for 0.773 billion yuan, with a lock-up period of 3 years. This massive "self-funded" behavior also attracted inquiries from regulators. At that time, the company disclosed that its funds came from its own funds and self-raised funds.

Among them, Gan Zhongru's own funds include salary bonuses and cash dividends accumulated from the company since 2019, totaling approximately 0.2 billion yuan. The remaining over 0.6 billion yuan of self-raised funds came from his share pledge financing and loans from relatives and friends.

The funds involved in the "self-funded" effort are quite substantial, with the uncertain risk of stock price fluctuations. Gan Zhongru can be said to be taking a bold move.

In 1995, Gan Zhongru, who was nearing the pinnacle of his career, returned to his homeland. This return was sparked by a "olive branch" from his Peking University classmate Li Yikui. Both decided to join forces to break the monopoly of imported insulin in the domestic market, with Gan Zhongru providing the technology and Li Yikui providing the funding to jointly develop a domestically produced similar product.

Three years later, the first domestic recombined human insulin was born, and Gan & Lee Pharmaceuticals was established almost at the same time, named after the two founders. In 2005, the company launched the first domestically produced third-generation insulin, catching up with multinational companies in terms of technology. Afterwards, "Gan" and "Lee" went their separate ways, with Li Yikui transferring his shares in the company, Gan Zhongru introducing Qiming Venture Partners, and the destinies of former classmates diverged.

In 2020, Gan & Lee Pharmaceuticals successfully went public. Due to its leading technology and products, the company's peak market cap exceeded 110 billion yuan, and Gan Zhongru also reached the peak of his life. However, soon a storm engulfed the industry.

The Pain of Liquidation and Transformation

All good things must come to an end. In 2021, insulin was officially included in special centralized procurement. With heavy price cuts, the sword finally fell on biopharmaceuticals. The following year, both Gan & Lee Pharmaceuticals and their peers won bids with substantial price reductions, some exceeding 60%, but the pain of transformation followed suit.

On one hand, the company's performance has changed from profit to loss, with a net income attributable to the parent company of -0.44 billion yuan in 2022, a year-on-year decrease of 130.25%. On the other hand, the company's stock price fell from a high level, with a market cap of hundreds of billions dropping to around 20 billion yuan. During this period of clearance, it gave Gan Zhongru the opportunity to re-examine the market, and the company's strategy also gradually became more aggressive.

One obvious change is that the company's financial investments have expanded from simple banking products to higher-risk securities markets. In 2022, the company used its own funds of 0.133 billion yuan to purchase 6 securities products, including 5 stocks. As of the first half of this year, the company sold some investments, with a total of 0.141 billion yuan from fair value changes and disposal of investments, still at a book value of 0.261 billion yuan for securities investments.

The pains of clearance lasted nearly a year. In 2023, the company returned to profitability. In the first three quarters of this year, the company participated in a special procurement of insulin, renewing all 6 products, with an average price increase of 31%. They obtained a total of 46.86 million units through agreement procurement, including 43.55 million units of the third-generation insulin analogs; during the same period, the company's revenue and net income attributable to the parent company were 2.245 billion yuan and 0.507 billion yuan respectively, with year-on-year growth of 17.81% and 90.36% each.

With the performance improving and the push of the domestic market recovery, there is still a gap from the peak revenue of over 3.6 billion yuan in 2021. Gan Zhongru is eager to make a leap, which is also an important reason for participating in the additional offering in 2023 to bolster the company's net worth.

The company's future business blueprint covers R&D pipeline, industrialization, and global expansion plans. In a previous response to the regulatory body, the company stated that it would add approximately 2.5 billion yuan in R&D investment over the next three years (2024-2026). In the first three quarters of this year, the company's R&D expenses were 0.403 billion yuan, an 8.9% year-on-year increase.

Speeding up global expansion.

From being a god on the mountaintop to descending, Gan & Lee Pharmaceuticals is still adapting and exploring.

In fact, shortly after successfully going public in 2020, the company made significant changes to its top management. Gan Zhongru stepped down as the general manager but retained the position of chairman. Du Kai became the new general manager, and the company internally promoted Lawrence Allan Hill, Wang Bin, Yuan Zifei, and Xing Cheng to deputy general managers.

At that time, the new management team included many post-80s and post-90s individuals. It is reported that Gan Zhongru launched the Phoenix Plan for talent cultivation targeting young people before the company went public. From the layout to the forefront, the company is experiencing boundless prospects. After the listing, the market environment changed significantly, prompting the company to further accelerate its international expansion plan.

Even before going public, Gan & Lee Pharmaceuticals planned to establish an insulin production facility in Brazil. This year, the company's insulin factory in the country has been officially completed.

In the first three quarters of this year, the company's international sales revenue was 0.242 billion yuan, a year-on-year increase of 37.63%. Part of the increase came from the progress made by the company in emerging market regions. During the reporting period, the company received local registration approvals for multiple products produced in Algeria and delivered them in the third quarter, marking its successful entry into the African market for the first time. Earlier, the company's products were approved and awarded contracts in countries such as Bolivia and Kazakhstan.

Another part of the increase in revenue during the reporting period, amounting to 0.135 billion yuan, came from the company's franchise service revenue, resulting from the increase in milestone revenue confirmed by agreement. Previously, the company signed a Production and Supply Agreement with Sandoz, stipulating the latter's exclusive rights to sell the company's insulin products in specific regions such as the USA, Canada, and Europe. Sandoz pays upfront franchise service fees, milestone costs, and sales profit sharing annually based on the progress of the project.

Of course, future revenue growth will come from the company's new product launches and capacity expansion. As of now, its research pipeline covers areas such as weight loss drugs, fourth-generation insulin, and monoclonal antibody drugs. The construction of the Yunnan Linyi production base started in 2020 and as of the first half of this year, the progress is at 71.79%, with a total budget of 3.018 billion yuan. It is expected to produce 10 billion tablets and 0.7 billion injection pens annually in the future. (Produced by WeShareFinance) ■