On March 9, 2022, Apeloa Pharmaceutical Co.Ltd(000739) ( Apeloa Pharmaceutical Co.Ltd(000739) . SZ) released the annual report for 2021: the company achieved an annual operating revenue of 8.943 billion yuan, a year-on-year increase of 13.49%; The net profit attributable to the parent company was 956 million yuan, a year-on-year increase of 17.00%; The net profit attributable to the parent company after deduction was 833 million yuan, with a year-on-year increase of 20.53%.
The better performance also boosted Apeloa Pharmaceutical Co.Ltd(000739) share price. On the day after the release of the annual report, the company’s stock closed at the limit price of 32.15 yuan / share, and the market value also reached 37.8 billion yuan. On March 11, Apeloa Pharmaceutical Co.Ltd(000739) rose 3.51% again to close at 33.28 yuan / share, with a total market value of 39.2 billion yuan.
Shift focus from “intermediate” to “API”
In terms of revenue structure, Apeloa Pharmaceutical Co.Ltd(000739) business is mainly divided into API, cdmo and FDF, accounting for 73.20%, 15.59% and 9.70% of total revenue respectively.
Apeloa Pharmaceutical Co.Ltd(000739) takes “refining API, strengthening cdmo and making excellent preparation” as the long-term development strategy, and the positioning of these three business segments is also clarified in this strategic plan.
Among them, as the basic sector of Apeloa Pharmaceutical Co.Ltd(000739) revenue, API intermediates are the main business segment with the strongest comparative advantage of the company, and its product line widely covers the fields of anti infection, cardio cerebrovascular, anti-tumor, mental nerve and so on. In 2021, Apeloa Pharmaceutical Co.Ltd(000739) API intermediate business achieved an operating revenue of 6.546 billion yuan, with a year-on-year increase of 10.37%; The gross profit margin was 19.15%, down 2.83 percentage points from the same period last year.
Based on this analysis, the gross profit margin of API intermediate business is under pressure, which has dragged down the growth of the company’s overall gross profit Apeloa Pharmaceutical Co.Ltd(000739) the explanation in the announcement is that the rising prices of some raw materials, energy and power have increased costs, and the overseas epidemic has led to a decline in the export demand of antibiotic raw materials.
In fact, although the revenue scale ranks in the forefront among Chinese api enterprises, the low profit margin is a problem that has plagued Apeloa Pharmaceutical Co.Ltd(000739) for a long time. According to wind data, Apeloa Pharmaceutical Co.Ltd(000739) the gross profit margin of sales in the last four years was 31.43%, 31.95%, 27.60% and 26.27% respectively. As a reference, the median values of the pharmaceutical industry were 50.48%, 47.06%, 53.65% and 56.12% respectively.
Apeloa Pharmaceutical Co.Ltd(000739) said that the company’s products are also gradually shifting the focus from “intermediate” to “API”. In recent years, the company’s main product level has gradually changed from the initial “starting materials + registered intermediates” to “registered intermediates + APIs”. The product focus extends to the back end. Originally, most products can only achieve the intermediate link, and now the proportion of API close to the back end of the industrial chain is increasing.
In the preparation business, the company achieved an operating revenue of 867 million yuan, a year-on-year increase of 14.11%, a gross profit of 498 million yuan, a year-on-year increase of 13.71%, a gross profit margin of 57.42%, a year-on-year decrease of 0.21 percentage points. The reporter found through vertical comparison that the Apeloa Pharmaceutical Co.Ltd(000739) preparation business in 2020 was affected by the covid-19 epidemic and the withdrawal of ubenimex from the medical insurance catalogue in the short term, and the income and gross profit of the whole sector decreased to a certain extentP align = “center” Image Source: screenshot of financial report
On the one hand, the overall sales of cefixime series increased significantly compared with the same period last year, reaching a record high; On the other hand, levofloxacin tablets and ceftazidime for injection participated in the two rounds of national centralized collection during the year and were selected to start supply. Subsequently, cefixime tablets, cefixime granules and metoprolol succinate sustained-release tablets will also participate in the national centralized purchase, which may bring new growth points to the preparation business.
It has differentiated advantages in the cdmo field of veterinary drugs
Apeloa Pharmaceutical Co.Ltd(000739) put forward the new development concept of “strong scientific and technological research and development, high standard compliance and low-cost manufacturing” in 2021. In 2021, the company’s total R & D investment reached 479 million yuan, a year-on-year increase of 34.88%, accounting for 5.36% of the company’s operating revenue. The R & D investment reached a new high.
In order to better meet the needs of the company’s business development, the company’s investment in R & D and manufacturing is further increased, especially in cdmo. According to the annual report, in 2021, the cdmo business segment of the company achieved a revenue of 1.394 billion yuan, a year-on-year increase of 32.09%, a gross profit of 601 million yuan, a year-on-year increase of 36.85%, and a gross profit margin of 43.12%, a year-on-year increase of 1.50 percentage points.
Apeloa Pharmaceutical Co.Ltd(000739) introduced that its cdmo business sector strategy has been strengthened, its R & D capability has been strengthened, and the number of API cooperation projects has increased significantly, with a year-on-year increase of 50%. Among them, 8 projects have achieved industrialized supply, 9 projects are in the verification stage, and 28 projects are in the R & D stage. By the end of the reporting period, there were 812 cdmo quotation projects, with a year-on-year increase of 50%, and 323 projects in progress. Among the ongoing projects, there were 143 projects in the R & D stage and 180 projects in the commercialization stage (including 120 human medicine projects, 37 veterinary medicine projects and 23 other electronic materials projects), with a year-on-year increase of 61%.
According to the Research Report of Minsheng securities, compared with the head cdmo companies such as Wuxi Apptec Co.Ltd(603259) , Asymchem Laboratories (Tianjin) Co.Ltd(002821) , Apeloa Pharmaceutical Co.Ltd(000739) , the cdmo business of Apeloa Pharmaceutical Co.Ltd(000739) focuses on different directions. In addition to the human drug business, the cdmo business of the company is also vigorously developing the veterinary drug market to obtain differentiated advantages. At present, more than 40% of the revenue of Apeloa Pharmaceutical Co.Ltd(000739) cdmo sector is the revenue of veterinary drug projects. In terms of the number of projects, more than 20% of commercial projects are veterinary drug projects, and the average income volume of a single veterinary drug project is higher than that of human drugs.
Regarding this characteristic of Apeloa Pharmaceutical Co.Ltd(000739) cdmo business, Minsheng securities once explained in the research report that, on the one hand, the company has stronger comparative advantages and customer relations in the field of veterinary drugs, and the project stage undertaken is later. At present, most of them can achieve API (most of human drugs are still registered intermediates); On the other hand, it is also related to the fact that there are more expired patented drugs and more scattered projects in the previous human drug projects.
Capital expenditure and talent introduction are accelerated, and production capacity will be further released in the future
In essence, cdmo is a capital + labor-intensive industry. On the one hand, cdmo companies need to continuously invest a lot of capital in capacity construction in order to achieve the stable growth of orders and revenue; On the other hand, the reason why the global pharmaceutical outsourcing industry chain is transferred to China is that it is also interested in China’s engineer bonus.
In this context, the development path of Apeloa Pharmaceutical Co.Ltd(000739) in cdmo business is also clear. The annual report shows that in 2021, the company’s capital expenditure (cash paid for the purchase and construction of fixed assets, intangible assets and other long-term assets) was 700 million yuan, the highest since its listing; By the end of 2021, 710 million yuan of projects under construction and 1.93 billion yuan of fixed assets were under construction. According to the details of projects under construction, the completion rate of projects such as plokangyu, PLO biology, Hanxing medicine and plod Pradesh was 70% +.
In terms of talent introduction, in 2021, Apeloa Pharmaceutical Co.Ltd(000739) introduced 14 key talents, including 8 doctors of chemistry, 1 high-end R & D talent, 3 professionals in biology and 2 professionals in automation. A total of 410 fresh college students majoring in chemistry, pharmacy, biology, automation and other related majors were recruited Apeloa Pharmaceutical Co.Ltd(000739) said that the company aims to expand its R & D personnel to about 2000 by 2024, of which cdmo R & D personnel will account for about 60%.
In addition, according to the company’s annual report, “during the reporting period, the company’s first commercial production line of fluid chemistry, the first cdmo modular flexible production workshop and a high standard automatic API workshop were successively completed and put into operation”; In terms of R & D capacity, “Shanghai’s new cdmo R & D building has been put into use by the end of February 2022, Hengdian’s new cdmo R & D building is also under construction and is expected to be put into use within the year”, “the company’s biological R & D experimental center will be put into use in early 2021” and “the company’s analysis and testing center will also be officially put into use by the end of 2021”; In terms of preparation production capacity, “the phase II expansion project of preparation workshop 7 plans to increase the production capacity from the original 1 billion tablets / year to 3 billion tablets / year, and the new sterile powder injection workshop project with a production capacity of 100 million tubes / year is also under construction, which is planned to be put into use within the year”.
The above data shows that the capacity of Apeloa Pharmaceutical Co.Ltd(000739) various businesses may be accelerated in the next two years Zheshang Securities Co.Ltd(601878) also commented on this, saying that it is optimistic about the upgrading of the company’s supply capacity with accelerated capital expenditure and continuous production capacity, supporting medium – and long-term sustainable growth.
Environmental protection risks are highlighted, and the governance cost may increase
The reporter noted that in the prospect of future development, Apeloa Pharmaceutical Co.Ltd(000739) in the annual report, it also added the expression of environmental protection related risks: with the improvement of people’s living standards and the enhancement of social awareness of environmental protection, as well as the promotion of the construction of ecological civilization of the Party Central Committee and the strategic goal of “carbon peaking and carbon neutralization”, energy conservation and emission reduction The policy requirements of safety and environmental protection are further improved and the supervision is further strengthened, which requires pharmaceutical enterprises to continue to increase investment in environmental protection and ensure green production.
This may be related to the administrative punishment of Shandong puluohanxing Pharmaceutical Co., Ltd. (hereinafter referred to as “puluohanxing”), a wholly-owned subsidiary of Apeloa Pharmaceutical Co.Ltd(000739) in the first half of 2021, for exceeding the standard of exhaust gas. On April 21, 2021, Changyi City, Shandong Province issued a notice that an obvious odor was found at the north boundary of Shandong puluohanxing sewage station. After preliminary monitoring, the maximum concentration of hydrogen sulfide is 298 μ g / m3, which is 8.9 times higher than the factory boundary standard. After finding the problem, the relevant local departments traced the source of the whole plant to the company on the same day. It was found that the cover sector of the tank body of the sewage treatment station on the north side was not tightly sealed, there were two leakage points in the anaerobic section, and the hydrogen sulfide gas escaped and discharged. For the two leakage points, the company immediately carried out sealing treatment, and reinforced and sealed all sealing points of the sewage treatment plant. At that time, the company said that the ecological environment department was filing a case for investigation and punishment for the problem of excessive hydrogen sulfide concentration at the plant boundary, and would impose administrative punishment.
In the record of investor relations activities of Apeloa Pharmaceutical Co.Ltd(000739) 2021 on May 28, institutional investors also asked: has the environmental protection rectification work of an enterprise in Shandong in the past two weeks affected the operation of the company Apeloa Pharmaceutical Co.Ltd(000739) on the other hand, it responded at that time: “after the construction of ecological civilization, it will also become normalization. In the future, it must be companies with more scale, economic ability and technical ability that can do better. This improvement is a very good support and guarantee for the normal production of enterprises in the future and in the future.”
In addition, in the record of investor relations activities on July 6 last year, Apeloa Pharmaceutical Co.Ltd(000739) also mentioned: “multinational corporations have much higher requirements for EHS (integrated management of health, safety and environment) than the government. In the past, we focused on the treatment of solid and hazardous wastes, and now we are required to meet the VOC (volatile organic compounds) treatment standard. Originally, each plant area had a set of RTO (regenerative thermal incinerator) The equipment is specially designed to deal with VOC. Now all plants are required to be equipped with 2 sets. The cost of a set of RTO equipment is about 15 million, plus the annual operation cost of 10 million. These costs should be amortized into the products. If the enterprise is too small, it is difficult to absorb these costs. Therefore, the enterprise will be relatively competitive. Compliance is the basic requirement, but also how to reduce costs. The quality requirements are the same. Multinational companies have higher requirements than cGMP, which requires more equipment investment. “
