1. Express delivery of new shares: cdmo + L-carnitine leader – Chengda pharmaceutical
On Monday, January 10, 2022, Chengda pharmaceutical, one of the major suppliers of pharmaceutical intermediate cdmo + L-carnitine in the world, will start the subscription. Chengda pharmaceutical was founded in 1999. The terminal drugs involved include many fields, such as anti tumor, AIDS, hepatitis B, hepatitis C, myelofibrosis, epilepsy, Parkinson’s disease and so on. 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. Its products are exported to more than 30 countries around the world and have strong market competitiveness.
The company’s revenue from 2021q1-q3 is 290 million yuan, yoy is 8 million yuan 58%, the net profit attributable to the parent company is 70.5 million yuan, yoy6.5% 65%, net interest rate 24%. Among them, the revenue of L-carnitine is 164 million, accounting for 56.52%, which is the top five suppliers of L-carnitine exported by China; The revenue of pharmaceutical intermediates was 106 million, accounting for 36.74%, and the revenue of CAGR from 2017 to 2020 was 15%.
The advantages of the company’s business are mainly reflected in: ① accumulated many years of synthetic technology and R & D advantages; ② It has established stable cooperative relations with many pharmaceutical enterprises for more than 10 years; ③ Cdmo has formed a more reasonable product echelon with strong profitability. The company is one of the world’s major suppliers of L-carnitine. ④ Flexible production capacity, equipment transformation capacity and intelligent production control system. ⑤ Comprehensive management advantage: GMP and EHS management ability.
Raised investment direction: the main investment direction of this raised investment is the expansion of pharmaceutical intermediate project, API project and R & D center. The products of pharmaceutical intermediate project mainly involve alamolin intermediate, rocotinib / barretinib intermediate, lufeimide intermediate, isotretinoin intermediate and other products, and the API project mainly involves buwasitan, oxagol and other products.
Development direction: improve the cdmo production capacity of pharmaceutical intermediates and APIs in the short term, reserve more high-end generic products, and improve the large-scale and commercial production capacity. In the long term, we will continue to deeply cultivate the cdmo market of pharmaceutical intermediates and APIs, and comprehensively improve the multi link and comprehensive integrated R & D customized service capacity in the subdivided fields of new drug pre clinical research, clinical research and commercial production. Seize the golden development opportunity of China’s generic pharmaceutical industry and accelerate the R & D and commercialization of key generic pharmaceutical products.
2. China’s biweekly resumption
China: Valuation switching at the beginning of the year, falling in volume. From December 27, 2021 to January 7, 2022, the pharmaceutical sector fell by 1.59%, underperforming the CSI 300 index by 5.03pct; The pharmaceutical outsourcing sector fell 7.04%, underperforming the pharmaceutical sector by 5.44pct. Since the beginning of 2022, the pharmaceutical sector has fallen by 4.55%, underperforming the CSI 300 index by 2.17pct, and the pharmaceutical outsourcing sector has fallen by 10.80%, outperforming the CSI 300 index by 8.41pct. From the perspective of individual stocks, the valuation switching has been obvious in recent two weeks due to the impact of style switching such as fund position adjustment at the end of the year and the beginning of the year. In the past two weeks, only the cumulative gains of Shanghai Medicilon Inc(688202) (+ 3.12%), Zhejiang Tianyu Pharmaceutical Co.Ltd(300702) (+ 2.30%) and Hitgen Inc(688222) (+ 1.06%) were positive, and the rest decreased significantly. Affected by mode switching and covid-19 large orders, Asymchem Laboratories (Tianjin) Co.Ltd(002821) (- 17.21%), Pharmablock Sciences (Nanjing) Inc(300725) (- 16.28%) and Porton Pharma Solutions Ltd(300363) (13.67%) decreased significantly.
Overseas: affected by the possible tightening of funds, overseas also fell significantly. From December 27, 2021 to January 7, 2022, overseas leading outsourcing companies fell by 9.87%, underperforming the MSCI health index of 5.17pct. From the perspective of individual stocks, the overall decline in the past two weeks, led by Codexis and medface, with a cumulative decline of 19.72% and 15.23%. We speculate that it is mainly caused by the position adjustment of covid-19 concept stocks by the US stock market after the beginning of the year. We believe that the short-term overseas may be affected by the tightening of capital liquidity, and the overall market sentiment is poor. With the gradual clarification of the policy, the valuation is expected to callback.
Industry dynamics follow-up: Merck acquires mrnacmoexelead.
3. Industry boom tracking
The prosperity of domestic innovative drug ind application continues, and the number of domestic biological drug ind applications significantly exceeds that of imports. As of January 7, 2022, China has 26 ind of class 1 chemical drugs and 4 ind of biological drugs; There are 2 ind of class 5.1 chemical drugs, 10 ind of class 1 chemical drugs and 11 ind of biological drugs imported. In terms of the annual application volume in 2021, there were 872 domestic chemical drugs (yoy60%), 617 biological drugs (yoy33%), 617 imported chemical drugs (yoy80%) and 204 biological drugs (yoy-12%).
Investment and financing were active, and the industry maintained a high boom. In December, global healthcare financing reached US $10.505 billion, up about 8% month on month. China’s total financing in the field of health care was about US $4.05 billion, an increase of about 41% month on month. In December, the representative is the Medical Federation, a leading provider of chronic disease management platform in China, which became the top 1 financing enterprise this month with us $514 million in round e financing.
4. Investment suggestions
It is emphasized that the improvement of supply side capacity will lead to the simultaneous increase of volume and price of front-end cro and the enhancement of back-end cdmo’s global participation. We recommend focusing on: Hangzhou Tigermed Consulting Co.Ltd(300347) , Wuxi Apptec Co.Ltd(603259) , Joinn Laboratories (China) Co.Ltd(603127) , Asymchem Laboratories (Tianjin) Co.Ltd(002821) , Pharmaron Beijing Co.Ltd(300759) , Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) , Porton Pharma Solutions Ltd(300363) , Fangda holdings, Pharmablock Sciences (Nanjing) Inc(300725) , Shanghai Medicilon Inc(688202) .
