“Science and Technology Innovation Board Daily”, March 26 (Reporter Zheng Bingxun) Nanxin Pharmaceutical (688189.SH), which has been losing a lot of net profit for two consecutive years due to the impact of the COVID-19 pandemic, finally came out of the shadow of the pandemic in 2023 and turned a loss into a profit.

In 2023, the main external factor that created performance growth for Nanxin Pharmaceutical was several large-scale outbreaks of respiratory diseases, especially influenza, that year, which led to an increase in sales of antiviral drugs related to Nanxin Pharmaceutical.

According to financial reports, Nanxin Pharmaceutical achieved revenue of 745 million yuan in 2023, a slight increase of 6.55% year on year. Compared with a 6 percentage point year-on-year decrease in the same period in 2022, this is a significant improvement; net profit to mother was 3.7515 million yuan, a significant loss compared to last year and the same period of the previous year, making a profit again.

▌Develop external markets and lay out chain channels

Nanxin Pharmaceutical is a pharmaceutical company engaged in drug research, development, production and sales. Currently, its main products include anti-viral and infectious disease prevention drugs such as influenza, as well as drugs to treat other major diseases such as malignant tumors, cardiovascular diseases, and diabetes. Among them, anti-influenza virus drugs have always been the main source of revenue for Nanxin Pharmaceutical.

Taking 2023 as an example, anti-influenza drugs achieved revenue of 667 million yuan, an increase of 44.59% over the previous year, accounting for 89.63% of the company's revenue, which is nearly 24 percentage points higher than the same period in 2022. Furthermore, the gross margin of anti-influenza virus drugs reached 90.29%, which is the highest of all products.

By contrast, other segments performed far less well in 2023. Specifically, cardiovascular drugs achieved revenue of 36.252,800 yuan, a sharp decrease of 74.29% year on year, antibiotics achieved revenue of 34.271 million yuan, a year-on-year decrease of 60.24%, and antipyretic and analgesic drugs achieved revenue of 6.702 million yuan, a year-on-year decrease of 33.19%.

The data on anti-influenza virus drugs is also significantly better than other products, as reflected in specific production and sales volume.

In 2023, the production volume and sales volume of anti-influenza virus drugs were 10.6667 million yuan/box, respectively, and the sales volume was 11.237 million bottles/box, with year-on-year increases of 99.88% and 155.97% respectively. However, sales of other products declined markedly. Cardiovascular drugs were the most affected. Sales volume was 2.043,600 bottles/box, a year-on-year decrease of -60.03%.

As an investor, the “Science and Technology Innovation Board Daily” reporter learned from Nanxin Pharmaceutical company personnel that some of Nanxin Pharmaceutical's cardiovascular products were not included in collection in 2023, which led to a decline in sales. However, the other party also said, “Harvesting is only one factor. The overall environment last year was quite average, which also had an impact on sales of other products. However, due to the influenza outbreak, the company relied on anti-influenza products to outperform the average level of the chemical industry as a whole.”

It is worth mentioning that the control measures taken against popular clinics during the COVID-19 pandemic led to a sharp drop in traffic, impacting the sales volume of Nanxin Pharmaceutical's anti-influenza products in terminal medical institutions, and prompted Nanxin Pharmaceutical to choose to develop an out-of-hospital market in terms of marketing channel construction in 2023, expand the OTC market, and develop the top 100 chains and small to medium pharmacies. These measures are new actions that were not disclosed in previous years' financial reports.

The company personnel mentioned above told the reporter, “The company is working hard to do this. We have already begun to cooperate with pharmacy chains such as Sinopharm Group. The current cooperation area mainly revolves around Hunan and the surrounding area where the company is located.”

▌The market share of the core product peramivir has been divided

Also, it is important to focus on the fact that many competitors for Nanxin Pharmaceutical's core anti-influenza product “peramivir” have appeared on the market, forcing Nanxin Pharmaceutical to carry out research and development of many new products that are critical to survival.

According to data, Paramivir injection under Nanxin Pharmaceutical is the first Class 1.1 innovative anti-influenza drug marketed in China. The 5-year monitoring period for the innovative drug enjoyed by this product expired in April 2018. What is embarrassing is that since Nanxin Pharmaceutical only obtained a patent for a method for synthesizing paramivir trihydrate, and has not obtained a patent for a pharmaceutical compound, other pharmaceutical companies can synthesize paramivir by other methods, so there is a risk that this product will be copied domestically.

Nanxin Pharmaceutical Company personnel revealed that there are currently less than 10 competing products of paramivir on the market in China. The reporter's inquiry revealed that as of July 2023, generic paramivir drugs from at least 6 domestic manufacturers, including Guilin Southern Pharmaceutical, Yangzijiang Pharmaceutical, and Qilu Pharmaceutical, have been approved for marketing.

Company personnel also further revealed that the increase in competition for listed products has increased competitive pressure on the company. “It is not ruled out that peramivir will be included in the next batch of collection, which will reduce the price of the product.”

According to information, volume procurement has now been carried out in 9 batches and 10 rounds. Of these, the first five batches involved a total of 234 varieties, with an average drop of 52-59%, focusing on chemicals. The remaining 4 batches involved both biopharmaceuticals and centralized pharmaceuticals, with an average drop of between 48% and 58%.

It can be found that in order to maintain its competitive advantage in the field of anti-influenza drugs, Nanxin Pharmaceutical is promoting research and development of projects such as paramivir inhalation solution and paramivir powder. Nanxin Pharmaceutical said that peramivir inhalation solution can be directly applied to the respiratory tract, has better compliance, is suitable for the prevention and treatment of influenza in infants and adults, and is expected to become the first atomized inhaled anti-influenza drug to be marketed in the world.

In addition to this, Nanxin Pharmaceutical's other anti-influenza generic drug, oseltamivir phosphate suspension (oral suspension), obtained the “Drug Registration Certificate” issued by the State Drug Administration in June 2023. Business personnel revealed, “Oseltamivir phosphate has already been marketed in 2023. The exact sales volume still needs to be further verified, but initial feedback is that the sales volume is quite good.”