On March 30, Asymchem Laboratories (Tianjin) Co.Ltd(002821) ( Asymchem Laboratories (Tianjin) Co.Ltd(002821) , SZ; previous closing price of 360.00 yuan) released the annual report of 2021. The annual report shows that during the reporting period, the company’s annual operating revenue was 4.639 billion yuan, a year-on-year increase of 47.28%; The net profit attributable to the parent company was 1.069 billion yuan, a year-on-year increase of 48.08%.
This is the fastest year for Asymchem Laboratories (Tianjin) Co.Ltd(002821) since its listing in 2016. It is also a year for Asymchem Laboratories (Tianjin) Co.Ltd(002821) to vigorously build production capacity and double its liabilities. Like most companies in the industry, Asymchem Laboratories (Tianjin) Co.Ltd(002821) develops macromolecular drug business outside the advantageous fields. However, from the perspective of the income contribution of emerging businesses, the company is still a long way from the goal of “two wheel drive” of cdmo (pharmaceutical production outsourcing) business and emerging services.
In addition, affected by the tightening of new regulations on innovative drug research and development, the reduction of holdings of head institutions and rumors of sanctions, the IPO of Asymchem Laboratories (Tianjin) Co.Ltd(002821) going to Hong Kong in December 2021 was cold, the opening price fell below the issue price of HK $388 / share, and the closing price of the day was HK $370 / share, down 4.64%; Since then, the market value of Asymchem Laboratories (Tianjin) Co.Ltd(002821) A-Shares has shrunk by about 40% in two months and has only rebounded recently.
When the industry valuation turbulence coexists with the company’s performance growth, Asymchem Laboratories (Tianjin) Co.Ltd(002821) how to deal with opportunities and challenges?
three orders contribute half of the revenue
As China’s leading cdmo one-stop comprehensive service provider, small molecule cdmo service is the core business of Asymchem Laboratories (Tianjin) Co.Ltd(002821) and mainly refers to the outsourcing services of process development, amplification and commercial production in the R & D process of small molecule innovative drugs.
In recent years, with the increasing favor of macromolecular drugs in the global market, Asymchem Laboratories (Tianjin) Co.Ltd(002821) began to layout macromolecular drug services, continuously expand emerging businesses, and put forward the goal of “two wheel drive”. In December 2021, Asymchem Laboratories (Tianjin) Co.Ltd(002821) went to Hong Kong for listing, raising HK $6.85 billion net, which is mainly used to improve the production capacity and capacity of small molecule cdmo solutions, strengthen emerging services and expand service content.
According to the annual report data, Asymchem Laboratories (Tianjin) Co.Ltd(002821) 2021 the revenue of small molecule cdmo solutions in clinical stage and commercialization stage was 1.723 billion yuan and 2.515 billion yuan respectively, accounting for 37.15% and 54.22% of the operating revenue respectively; Their revenue totaled 4.238 billion yuan, a year-on-year increase of 45.63%, exceeding 90% of the total revenue.
Although the growth rate of emerging services is fast, it is still a long way from the “two wheel drive” that Asymchem Laboratories (Tianjin) Co.Ltd(002821) expected. In 2021, Asymchem Laboratories (Tianjin) Co.Ltd(002821) emerging service revenue was 398 million yuan, a year-on-year increase of 67.43%, accounting for only 8.57% of the total revenue.
Among them, clinical research services grew rapidly, with a year-on-year increase of 83.71%. In October 2021, Kainuo pharmaceutical, a subsidiary of Asymchem Laboratories (Tianjin) Co.Ltd(002821) company, wholly acquired Beijing yipukono Technology Co., Ltd. with its own capital of 136 million yuan, in order to enhance the ability of clinical research sector in data management and biostatistics. In terms of macromolecular drugs, the revenue of chemical macromolecular cdmo increased by 42.48% year-on-year, and small nucleic acid drugs made technological breakthroughs, which is a key business segment; Biological macromolecular cdmo has reached the capacity of R & D and pilot production. As of the disclosure date of the annual report, the company has placed orders of about 130 million yuan.
In terms of revenue by region, Asymchem Laboratories (Tianjin) Co.Ltd(002821) ‘s order structure is still dominated by overseas, and its core customers include multinational pharmaceutical giants such as Pfizer, MSD and Eli Lilly, with China’s revenue accounting for only 13.82%. However, the revenue of Asymchem Laboratories (Tianjin) Co.Ltd(002821) in the Chinese market grew fastest. In 2021, the revenue of the company from large pharmaceutical companies, overseas small and medium-sized pharmaceutical companies and Chinese pharmaceutical companies increased by 41.46%, 50.99% and 72.95% respectively year-on-year. Insiders of the company told the reporter of the daily economic news that the company has entered the harvest period in China’s small molecule cdmo market and its revenue growth has accelerated. In the future, the company will adhere to the market strategy of paying equal attention to both Chinese and foreign markets.
In fact, Asymchem Laboratories (Tianjin) Co.Ltd(002821) has a strong ability to obtain international orders Asymchem Laboratories (Tianjin) Co.Ltd(002821) announced three major daily operation contracts on November 16, November 28, 2021 and February 20, 2022, with the amount of USD 481 million, RMB 2.720 billion and RMB 3.542 billion respectively. It is speculated that Pfizer covid-19 oral drug paxlovid is involved At present, this rumor has not been confirmed. The company refuses to disclose the basic information of the counterparty and product related information on the grounds of “involving the confidentiality of trade secrets”.
The three orders disclosed by Asymchem Laboratories (Tianjin) Co.Ltd(002821) in the annual report show that the two parties are a large pharmaceutical company in the United States and one is a new drug research and development company in China. The amount of the three orders fulfilled accounts for half of the company’s total revenue. As of the disclosure date of the annual report, Asymchem Laboratories (Tianjin) Co.Ltd(002821) on hand orders totaled US $1.898 billion, an increase of 320% over the same period in 2021.
However, despite the continuous large orders, Asymchem Laboratories (Tianjin) Co.Ltd(002821) profitability is declining. In 2021, the company’s gross profit margin was 44.36%, a year-on-year decrease of 2.21 percentage points. In the clinical stage, the gross profit margin of cdmo solutions fell seriously, decreased by 8.46 percentage points. Among the main products, only the gross profit margin of cdmo solutions in the commercial stage increased by 2.31 percentage points.
company and Hillhouse capital join hands again
Both “big orders” and “new orders” need sufficient capacity reserves Asymchem Laboratories (Tianjin) Co.Ltd(002821) said in the annual report: “in view of the tight production capacity of small molecules, the company has started to speed up production capacity construction to meet the growing demand for orders”. By the end of 2021, Asymchem Laboratories (Tianjin) Co.Ltd(002821) small molecule traditional batch reactor has a volume of nearly 4700m3. As of the disclosure date of the annual report, the volume of traditional batch reactor is 5000m3 By the end of 2022, the capacity of small molecule traditional batch reactors is planned to increase by 46% compared with the end of 2021.
In addition, the company’s emerging services are in the stage of rapid expansion and layout, and capacity construction is a top priority. In 2021, Asymchem Laboratories (Tianjin) Co.Ltd(002821) invested 172978 million yuan in the construction of R & D and production platform for Biomacromolecule innovative drugs and preparations, and the project construction progress will be accelerated in 2022.
Asymchem Laboratories (Tianjin) Co.Ltd(002821) another way to release production capacity is to expand the application of continuous reaction technology, including upgrading existing workshops and plants, and greatly increasing continuous reaction equipment in new plants. According to the contents of the annual report, in 2021, Asymchem Laboratories (Tianjin) Co.Ltd(002821) 30% of clinical phase II or later clinical stage projects and commercial stage projects applied emerging technologies such as continuous reaction technology and biological enzyme catalysis technology.
The other side of capacity building is the soaring debt. In 2021, Asymchem Laboratories (Tianjin) Co.Ltd(002821) liabilities totaled 2.546 billion yuan, a year-on-year increase of 118.92%, including current liabilities of 2.205 billion yuan, a year-on-year increase of 138.38% Asymchem Laboratories (Tianjin) Co.Ltd(002821) insiders interpreted it as related to capacity construction during the year. The person said that in the future, the company’s small molecule business and emerging sector business will accelerate production capacity to cope with the growing demand for orders.
Regarding the rumors of sanctions against CXO industry which began to ferment at the end of 2021, Asymchem Laboratories (Tianjin) Co.Ltd(002821) insiders said that up to now, the trade risk or sanctions risk of the industry are rumors, and the company’s operation has not felt the real impact from geopolitics. However, in order to prevent potential risks, the company has carried out business layout overseas by acquiring and setting up overseas R & D centers.
For the new regulation on the research and development of innovative drugs in China, the person believes that it helps to avoid repeated research or pseudo innovation projects, promote the healthy development of China’s innovative drug market and is more in line with the development of the company. “For cdmo company, the foundation of the company’s continuous profitability is the smooth and continuous development of the project. Our company has always been a leader in the field of continuous service innovative drugs.” The source said.
In addition, the person believes that the reduction of capital holdings in CXO industry is a normal investment behavior. The reporter of the daily economic news also noted that recently, the announcement of Asymchem Laboratories (Tianjin) Co.Ltd(002821) showed that Hillhouse capital and Asymchem Laboratories (Tianjin) Co.Ltd(002821) once again “joined hands”, and all parties intend to jointly invest to build Asymchem Laboratories (Tianjin) Co.Ltd(002821) subsidiary into a leading enterprise in the field of R & D and production services of biological drugs and advanced therapy contracts in the world.
