With the end of 2024, A-shares have also entered the stage of announcing full-year performance. According to statistics from E-Pharmaceutical Manager, as of January 20, in the biopharmaceutical industry, a total of 101 A-share listed companies and 7 Hong Kong-listed companies disclosed performance forecasts.

The drama of the strong getting stronger is still being staged in each sub-sector. The Chinese medicine sector, such as Dong-E-E-Jiao, is not only expected to win a net profit of 1.5 billion to 1.6 billion yuan, but also an increase of 30% to 39%; the net profit of the Science and Technology Innovation Board listed company Sansheng Guojian is expected to be 700 million to 712 million yuan, an increase of 137.73% to 162%. In addition, Sinopharm Modern, a chemical pharmaceutical company, Tebao Bio, a biological product company, Synthetic Biology leader Chuan Ning Bio, and orthopedic consumables leader Dabao Medical have also achieved a "double harvest" of profitability and positive profit growth.
However, the overall performance is not optimistic. The number of companies expected to lose money and decline in net profit accounts for more than 60% (including companies listed on the Science and Technology Innovation Board), and the company with the highest net profit decline even reached 2,500%. If we observe the situation of these companies that are either losing money or declining, the "reshuffle" seems to run through each sub-sector.

The most typical is the traditional Chinese medicine sector. Among the 12 companies that disclosed performance forecasts in A-shares, 9 are expected to decline, and the lowest decline in net profit is 44%. Among them, Zhendong Pharmaceutical, Weican Pharmaceutical and Yibai Pharmaceutical are the three companies with the highest decline. China National Traditional Chinese Medicine, the only company that disclosed a forecast in Hong Kong stocks, is also a member of the declining camp, with a net profit expected to decline by 90%-100%. "Price reduction after product entry into centralized procurement/national negotiations and product sales not meeting expectations" has almost become the common "rhetoric" of these traditional Chinese medicine companies with "failed" performance. For example, Yibai Pharmaceutical stated that "the company's products, Loplatin for injection, Ginkgo Biloba Injection and Compound Blister Capsule, were affected by the price reduction of the centralized procurement, resulting in a decrease of about 190 million yuan in the company's main business income"; after the price of Dali Pharmaceutical's Xingnaojing Injection was significantly reduced, the profit margin was severely squeezed and sales fell short of expectations. Zhendong Pharmaceutical's performance forecast shows that its net profit attributable to the parent company fell by 1.15 billion to 1.35 billion yuan, and its non-net profit fell by 570 million to 790 million yuan. In addition to investment losses, the decline in product sales is the main reason for its losses. However, the reasons behind the impact of their product sales are ultimately trapped by the single product line and insufficient risk resistance. The same is true for the vaccine industry.

In addition to the two leading companies, Wantai Biological and Hualan Biological, Jindik also released a performance forecast, but none of the three companies escaped the fate of decline. Looking back at the whole year of 2024, the vaccine price war and the decline in demand continued to put pressure on the survival space of vaccine companies, and in order to seize more market share, the leading companies even took the lead in price cuts. Under the increasingly competitive trend, no winner will become the final result. Wantai Bio is the vaccine company with the highest expected decline, with a full-year non-net profit loss of 155 million to 220 million yuan, a year-on-year decrease of 114.38% to 120.4%. Of course, unlike the decline in performance caused by product sales in the pharmaceutical and vaccine industries, the pharmaceutical business and CXO sectors have become the hardest hit areas due to long-term accumulated problems, but the most fundamental logic is still the industry reshuffle. In the pharmaceutical business sector, the performance of chain drug stores is the worst.

Yixintang and Jianzhijia can still maintain a slight profit in the sharp decline in profits, and the largest Guoda Pharmacy may even fall into a loss dilemma. According to the performance forecast of Sinopharm Accord, the net profit attributable to the parent company in 2024 is expected to be 561 million to 760 million yuan, a year-on-year decrease of 52.48% to 64.92%. One of the main reasons for the "halved" net profit is the sharp decline in the company's retail sector. In the CXO sector, two companies that disclosed performance forecasts-Medicis and Heyuan Bio-Pharmaceuticals-also failed to turn losses into profits. Among them, Medicilon expects to achieve a non-net profit of -367 million yuan to -245 million yuan, which will be reduced by 187 million yuan to 309 million yuan compared with the same period last year. Heyuan Bio expects a net loss of 282 million yuan to 339 million yuan, compared with a net loss of 128 million yuan in the same period last year.

From the overall performance of the 101 companies, the unprofitable "U" pharmaceutical companies collectively brought good news.

The "U" companies are representatives of domestic innovative pharmaceutical and medical device companies. They tell the story of innovative drugs from difficult research and development to finding a way to commercialization. Every step they take is a risky move, and they are always accompanied by the attention of the market. Their trial and error and adjustment process partially constitutes the experience value of China's innovative drug research and development commercialization.

At present, there are 15 A-share pharmaceutical companies that have not yet taken off the "U", and most of them have entered the product commercialization stage. At present, there are 12 companies that have disclosed performance forecasts, and many companies have achieved loss reduction, such as Junshi Biosciences, Digene, Innovent Biologics, Yifang Biopharma, and Zejing Pharmaceuticals. The pharmaceutical companies with "U" convey three stories. First of all, the "gold content" of domestic FIC and BIC innovative drugs going overseas is being verified in different ways. Although the two "hundred-character" wealth makers, BeiGene and Baili Tianheng, have not yet disclosed their performance, they have released positive signals. BeiGene, the "innovative drug leader", has accumulated losses of more than 50 billion in the past seven years based on huge R&D investment. This time it has finally come to a critical watershed and clearly stated that it will start to "make money".

On January 14, BeiGene issued an announcement stating that according to US generally accepted accounting principles, the company expects to achieve positive operating profits for the full year of 2025, that is, operating income is greater than the sum of operating costs, sales expenses, administrative expenses and R&D expenses. Baili Tianheng is a representative of another path - using BD to vigorously promote revenue growth. In the first three quarters of this year, the company achieved revenue of 5.663 billion yuan, an increase of 1399.22% over the same period last year. The main reason for the significant increase in revenue was the irrevocable and non-deductible down payment of 800 million US dollars received from its partner BMS based on the product BL-B01D1 cooperation agreement. Since the signing of the licensing cooperation, Baili Tianheng's stock price has climbed and its market value has gradually increased. The market value has nearly doubled 9 times in about 1 year. In a sense, BeiGene and Baili Tianheng have better demonstrated the value of China's FIC or BIC innovative drugs going overseas in two ways. The former created the first billion-dollar molecule in China, and the latter created a big drug with a BD value of about 60 billion.

BeiGene is "born international" and chose to "face the world" when it was established in 2010; although Baili Tianheng Gene is a generic drug company, it has repeatedly investigated the US biomedical innovation ecosystem in 2013, and created a new drug research and development center in the United States from 0 to 1 the following year-SystImmune. "It takes at least 10 years to lay the foundation", which is the international success experience recognized by many interviewees today. "We must be patient about this." There is another company that can "win" overseas, Junshi Biosciences. Since entering commercialization, Junshi's road has been full of twists and turns. Teplizumab is the first domestic PD-1 to be listed, but unfortunately it failed to quickly conquer the market with the first-mover advantage; Ongoricizumab started early in the domestic PCSK9 track, but also caught up late. When it "lately arrived" last year, the market was already in fierce competition among pharmaceutical companies such as Innovent. But in the Age of Discovery, it must be mentioned that Junshi Biosciences has done a good job in the internationalization of its core products.

In addition to the Chinese market, Teplizumab has been approved in many places such as the United States, Europe, the United Kingdom, India, and Australia. Just today, Junshi announced that it has reached a cooperation with Leo Pharma on the commercialization of the product in Europe. As a century-old European pharmaceutical company, the latter has a mature drug distribution network in the European market, which undoubtedly adds color to Junshi's commercialization. Second, the commercial value of domestic innovative "big drugs" is also being demonstrated in the form of "real money" in the domestic market. Sinocell is expected to achieve profitability for the first time throughout the year and is about to get the "U" certificate. The key influencing factor is a core explosive product - the "first domestic" recombinant human coagulation factor VIII Anjiayin. In 2023, the third year of Anjiayin's listing, sales will reach about 1.78 billion yuan. With the increase in product volume, Sinocell expects revenue to be 2.48 billion to 2.54 billion yuan in 2024, a year-on-year increase of more than 30%; net profit is expected to be 90 million to 130 million yuan, compared with -396 million yuan in the same period last year, turning losses into profits.

Previously, four pharmaceutical companies, including CanSino, Bio-Thera, Shanghai Yizhong and Eli Lilly, have achieved profitability and won the "U". Among them, Eli Lilly has run an upward curve with the continuous "surge" of vometinib. The company expects its net profit to reach 1.43 billion yuan in 2024, a year-on-year increase of 122%. Third, the collective reduction of losses by companies with "U" also confirms another truth: after experiencing cyclical shocks and twists and turns, innovative pharmaceutical companies have gradually learned new survival rules: focus, increase efficiency, and make the long board longer. Taking Junshi as an example, the company expects its revenue to reach 1.949 billion yuan in 2024, a year-on-year increase of 29.71%; its net profit is -1.292 billion yuan, a year-on-year narrowing of more than 40%. In addition to the increase in sales revenue of the four major commercialized new drugs compared with the previous year, its "quality improvement, efficiency increase and return" strategy and cost control effect also played a key role. However, before taking off the "U", the corresponding companies still have risks and difficulties to face. Companies such as Zejing Pharmaceuticals and Mengke Pharmaceuticals are still working hard to take off the "U"; Maiwei Bio, an ADC company that "burns money" fiercely, is impacting the Hong Kong stock market. But then again, the resilience of China's Biotech is actually beyond expectations. At present, all its internal and external adjustments are to better release the value of new drugs.

https://mp.weixin.qq.com/