On February 21, Chengda pharmaceutical replied to the attention letter issued by the Shenzhen Stock Exchange, which explained the matters related to the cooperation between the company and Pfizer on covid-19, saying that it had not carried out the cooperation with Pfizer on covid-19
(source: Announcement)
On February 21, Chengda pharmaceutical once fell more than 16% to 98.01 yuan, and its market value once fell below 10 billion yuan. As of the closing, the share price closed at 107.10 yuan / share, down 8.85%.
share price soared against “Pfizer concept stock”?
Recently, as long as the enterprises that rub hot spots with covid-19 medicine have almost opened the way of trading limit. In the final analysis, it seems that they are all related to “Pfizer”. Compared with Jinghua Pharmaceutical Group Co.Ltd(002349) , senxuan medicine and so on, they rub the “concept stock” of “Pfizer” in the investor interaction platform.
On January 25th, a question about an interactive platform for investors laid a “foreshadowing” for the subsequent soaring of Chengda pharmaceutical’s share price. On the same day, an investor asked Chengda pharmaceutical whether it produced intermediates of covid-19 medicine. Later, the company replied on the investor platform that Pfizer, as the end customer of the company’s products, customized and developed pharmaceutical intermediates, including pf-07304814 intermediates.
At this time, the company’s share price still hovered around 80 yuan / share, did not rise, and even began to fall. By February 11, it fell to the lowest point of 62.7 yuan / share since listing.
Then, on the interactive platform, investors often ask whether Chengda pharmaceutical provides intermediates of covid-19 drugs for Pfizer and other large international pharmaceutical companies, and ask about orders. However, the company did not specifically answer the relevant orders. Since then, many of his replies were also related to covid-19 drugs, and there were replies such as “the company provides pharmaceutical intermediates to GlaxoSmithKline, and there is no cooperation with covid-19 drugs at present”.
In the five trading days immediately following February 14, its share price rebounded from 62.7 yuan / share to 118.45 yuan / share, an increase of 47.06%, almost doubling. From February 14 to 17, the stock price closed three “20cm” limits, with a cumulative increase of 85% in just four days, and the market value expanded by about 5.2 billion yuan.
The share price rose by “20cm” for three consecutive trading days, which attracted the attention letter of Shenzhen Stock Exchange, asking it to explain the supplier identity, product information, market competition pattern and the company’s operation on covid-19 specific drug intermediate, and to explain “whether there is a situation of actively catering to the hot spots of the market, hyping the company’s share price and cooperating with the reduction of shareholders”
(source: screenshot of attention letter)
On February 21, in its reply to the letter of concern from Shenzhen Stock Exchange, Chengda pharmaceutical again stressed that it had not carried out cooperation with Pfizer on paxlovid related intermediates at present, and further disclosed the orders of pf-07304814 intermediate np1105 products supplied by the company to Pfizer. The sales revenue of this product was 2.2643 million yuan and 2.258 million yuan from January to June 2020 and 2021, The proportion in operating revenue was 0.61% and 1.16% respectively. After July 2021, Chengda pharmaceutical has not received any new orders from Pfizer for this product.
However, it should be noted that Pfizer has terminated the global clinical development of pf-07304814 in February this year, but this important information has not been replied and disclosed by Chengda pharmaceutical in time.
In this regard, Chengda pharmaceutical explained that in January 2022, the company communicated with Pfizer authorized API through the clinical progress of pf-07304814, but it did not update and feed back relevant information to the company. Until media reports showed that the company inquired about the relevant clinical progress of Pfizer pf-07304814 through public channels, and learned that Pfizer showed that the status of the product was terminated when it updated the clinical progress of the product on its official website on February 8, 2022.
Therefore, since the orders of Chengda pharmaceutical and Pfizer API factory have been delivered, there are no new orders or orders in hand from July 2021 to now, and the order contracts the company cooperates with customers do not meet the disclosure standards of major contracts specified in the listing rules, the company cannot set the information disclosure obligation for Pfizer’s termination of the global clinical development plan pf-07304814.
single revenue
questionable R & D capability
Public information shows that Chengda pharmaceutical is mainly committed to providing cdmo services for key pharmaceutical intermediates for multinational pharmaceutical enterprises and pharmaceutical R & D institutions, and is engaged in the R & D, production and sales of L-carnitine series products. Terminal customization customers served by the company include multinational pharmaceutical enterprises such as Incyte, Helsin, Lilly / Evonik, Gilead and GSK. In terms of L-carnitine series products, the company is one of the main suppliers of L-carnitine series products in the world, and its products are exported to more than 30 countries around the world.
According to the data in the prospectus, in the composition of its main business from 2018 to 2020, the total income of pharmaceutical intermediates and L-carnitine products accounted for 92.65%, 93.03% and 94.97% of the main business income respectively. In other words, pharmaceutical intermediates and L-carnitine products have almost become the main source of Chengda pharmaceutical’s revenue
(source: prospectus data)
Although committed to cdmo services, China’s market share has been almost eroded by leading enterprises such as Wuxi Apptec Co.Ltd(603259) and Asymchem Laboratories (Tianjin) Co.Ltd(002821) . In addition, it also faces strong competitors such as Porton Pharma Solutions Ltd(300363) , Kyushu pharmaceutical and Jiangsu Sinopep-Allsino Biopharmaceutical Co.Ltd(688076) , leaving Chengda pharmaceutical with almost little market share.
According to the prospectus data, at present Wuxi Apptec Co.Ltd(603259) and Asymchem Laboratories (Tianjin) Co.Ltd(002821) almost occupy 34% of the market share of China’s cdmo, while Porton Pharma Solutions Ltd(300363) , Kyushu pharmaceutical and Jiangsu Sinopep-Allsino Biopharmaceutical Co.Ltd(688076) occupy 8.2%, 5.22% and 1.66% respectively. At this time, Chengda pharmaceutical only occupies 0.8% of the market share. Such a huge gap shows that Chengda pharmaceutical is facing great pressure.
In addition, the R & D team of Chengda pharmaceutical is far from its peers in other tracks in the industry. According to the data, its R & D investment from 2018 to 2020 is 9.4867 million yuan, 12.1082 million yuan and 18.9844 million yuan respectively, which is dwarfed by the investment of hundreds of millions in the same industry.
At the same time, as the core competitiveness of an enterprise, Chengda pharmaceutical light also lags behind in the number of R & D personnel. According to the prospectus data, the number of its R & D team is only 66.
In this regard, Chengda pharmaceutical also admitted that there is still a certain gap between the company and the industry-leading cdmo enterprises in terms of enterprise scale, R & D strength and brand awareness. At the same time, the company’s capital strength is relatively weak. The implementation of strategies such as improving equipment level, increasing R & D investment and introducing talents is constrained by large-scale capital investment.
The reporter sent an interview letter to the enterprise on whether there is a hot spot in the company’s share price and related business problems. As of press time, no reply has been received.
