On the evening of August 30, Tonghua Dongbao (600867.SH) released its 2024 semi-annual report, during the report period, the company achieved operating income of about 740 million yuan, a year-on-year decrease of 45.84%; net profit attributable to shareholders of listed companies of about -230 million yuan; net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses of about -0.13 billion yuan.

Industry analysts believe that the reason why Tonghua Dongbao fell into a loss, stemming from the biggest cyclical factors - insulin special centralized procurement. Similar to the first centralized procurement, the results of this year's renewal have not been reflected in the performance for the time being. The main reason for the company's first-half performance fluctuations is a one-time dealer to make up the difference, which was also the case in the last centralized procurement, fell to a low point in the second quarter, the second half of the year with the release of centralized procurement products, the company's performance will be expected to reverse.

The basic plate is stable, insulin analogues ready to go

At the end of 2021, the state organized for the first time to carry out special centralized procurement of insulin, and the average price reduction of the product reached 48%, which brought a greater impact to the relevant insulin enterprises. However, by 2023, Tonghua Dongbao had come out of the pain, and the increase in product sales offset the impact of price cuts, and drove operating income to achieve year-on-year growth. In addition, the company's insulin sales of various series of products to achieve comprehensive growth, human insulin market share in 2022 to reach more than 40%, more than Novo Nordisk jumped to the first in the country. Driven by sales growth, the company's performance has basically recovered to the pre-centralized procurement level in 2023.

At present, Tonghua Dongbao's basic disk is human insulin. Human insulin is obtained through genetic engineering and other technologies, the human insulin gene is expressed in tools such as Escherichia coli or yeast powder, and this technology was commercialized in the 1980s. Since the structure is identical to the amino acid structure of natural human insulin (no rejection), the safety and efficacy of human insulin is greatly improved compared to the first generation of animal insulin.

Despite facing competition from an increasing number of new glucose-lowering drugs such as insulin analogs in recent years, the balanced advantages of human insulin in terms of price and performance have led to a sustained growth in its domestic demand. According to the new health insurance catalog, the reimbursement ratio of animal insulin and human insulin is 100%, and the reimbursement ratio of insulin analogs is 70%, and the annualized cost of using insulin analogs is more than two times of human insulin. Therefore, in the townships and other sinking markets, diabetic patients have a higher acceptance of the lower-priced human insulin, which has become an important basis for the continuous growth of sales of Tonghua Dongbao's human insulin products, and has greatly benefited the stability of the company's performance.

In addition to human insulin, Tonghua Dongbao insulin analogs are expected to usher in rapid volume release. In April this year, insulin successive centralized procurement. It is reported that Tonghua Dongbao this time to take a relatively low offer strategy, on the one hand, the company hopes to price for volume, the whole series of insulin products successfully selected in the A class, will get the centralized procurement B class, C class, not selected enterprises to share out the volume, to promote the company's insulin series of products of domestic substitution, especially insulin analogues, the future of the rapid release of the volume in the national scope and enhance market share. On the other hand, as a leading domestic insulin enterprise, it actively fulfills its corporate social responsibility, helps reduce medical insurance premiums by lowering drug prices, reduces the economic burden of patients, and improves the accessibility and affordability of medicines.

Relevant experts pointed out that centralized procurement obviously makes domestic substitution speed up, and also more favorable to the head enterprise. After the first centralized procurement of 2 years, domestic manufacturers to accelerate the expansion of market share. The new round of centralized procurement is the same, foreign capital more than B, C class won the bid, or even did not win the bid, the domestic manufacturers more than A class won the bid, will once again get the foreign enterprises to share out the volume. If there is no centralized procurement, the normal promotion speed of manufacturers is much slower. As a leading insulin, Tonghua Dongbao obviously benefit from the acceleration of domestic substitution.

China has 140 million diabetic patients, insulin as the main medication for diabetes treatment, centralized procurement product price reduction, not only reduces the cost of medication for diabetic patients, but also helps Tonghua Dongbao and other domestic insulin leading market share steadily increased.

Although the data from the half-yearly report, is currently the worst stage of the company's performance, but from the other side of the interpretation, “centralized procurement bottom” is also the value of the depression. Elimination of the return is a one-time, is not expected to have an impact on the subsequent performance, for the listed company is out of the shortcomings, light load, lose the burden. The domestic insulin market has a broad prospect, with the gradual landing of centralized procurement policy and further enhancement of market share, Tonghua Dongbao will achieve steady growth in performance in the future.

Diversification and multi-discipline innovation to open up a new growth curve

Although on the whole, the sales volume increase brought by insulin centralized procurement can substantially offset the impact of insulin centralized procurement price reduction, Tonghua Dongbao is still committed to finding new performance growth points with the help of innovative research and development, external cooperation, internationalization and other strategies.

In terms of R&D, Tonghua Dongbao's R&D strategy is oriented to clinical needs. The company believes that only by continuously launching new products to meet market demands can it stay ahead in the fierce competition and ensure the long-term success and sustainable development of the enterprise.

Data show that Tonghua Dongbao through “independent research and development + external cooperation” dual-wheel drive strategy, constantly accelerate the pace of innovation and transformation, and actively build internal and external synergistic R & D system, and continue to promote the development and industrialization of innovative drugs. 2019, the company has been expanding the field of endocrine metabolism, to the transformation of innovative pharmaceutical enterprises. The company's glucagon insulin, Mentholatum insulin series products, GLP-1 liraglutide, and a number of oral hypoglycemic drugs have been continuously approved for listing. Meanwhile, the company has laid out a number of innovative drugs, expanding its therapeutic field from diabetes to gout/hyperuricemia, non-alcoholic steatohepatitis, etc., and extending its product indications from glucose-lowering to overweight and obesity.

Since its establishment, Tonghua Dongbao has always adhered to the development concept of “insisting on independent innovation and creating a world brand”. In the field of independent research and development, Tonghua Dongbao has not only successfully developed China's first recombinant human insulin, but also made important breakthroughs in the field of GLP-1 receptor agonists, etc. The approval of Liraglutide Injection for listing in 2022 marks the company's solid step forward in the field of GLP-1.

In terms of external cooperation, Tonghua Dongbao is open and inclusive, and accelerates the transformation and industrialization of innovative achievements through cooperation with famous enterprises and institutions at home and abroad. on May 7, the company issued two “news” in a row: firstly, it announced that it had signed a cooperation agreement with Beijing Quality Peptide Bio-medical Science and Technology Company Limited for the introduction of the GLP-1 product Si-Meglutide Injection; secondly, it announced that the company has signed a cooperation agreement with Beijing Quality Peptide Biomedical Technology Company Limited for the introduction of GLP-1 products. The first is to announce the signing of a cooperation agreement with Beijing Quality Peptide Biomedical Technology Co., Ltd. for the introduction of GLP-1 product Simeglutide injection; the second is to invest an additional 100 million yuan to Junheimeng Biopharmaceutical (Hangzhou) Co.

In addition to R & D innovation, overseas markets are also seen by Tonghua Dongbao as a new performance growth point.

With the opening of the curtain for domestic biopharmaceutical enterprises to go overseas, Tonghua Dongbao has continued to upgrade and speed up its internationalization strategy. 2019, the company's insulin analogs have been approved and listed in the domestic market, and the company has gradually started the preparation of insulin analogs and GLP-1RA and other products to go overseas and continued to export APIs. At the same time of exporting APIs, the company has been increasing the registration and declaration of insulin preparations overseas.

It is understood that Tonghua Dongbao, based on its own competitive advantages, has formulated a targeted overseas strategy, and tailored a differentiated “overseas” strategy according to the different characteristics of the target countries or regions, such as market size and potential, medical security system, medication demand and habits, etc. Through different modes, targeted and targeted cooperation with the countries or regions that have the highest potential for the development of insulin products, such as the export of APIs, the export of APIs+technology transfer and the export of preparations, etc., Tonghua Dongbao will continue to develop its overseas strategy. Through the different modes of API export, API+technology transfer, formulation export, etc., we have targeted to jointly develop the market with partners with rich local experience, so as to comprehensively accelerate the company's speed of going overseas.

To summarize, over the past 40 years, Tonghua Dongbao has done a lot of work in production and operation, market development, innovation and R&D, and foreign cooperation, and achieved important results. These achievements have laid a solid foundation for the company's sustainable development and continuous improvement of comprehensive competitiveness, and the future development of the company is worth looking forward to.

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