On April 20, Changchun High-Tech (000661.SZ) simultaneously released its 2024 annual report and 2025 first quarter report. In 2024, the company achieved operating income of 13.466 billion yuan, a year-on-year decrease of 7.55%; and achieved a net profit attributable to the parent of 2.583 billion yuan, a year-on-year decrease of 43.01%.

In terms of a single quarter, in the fourth quarter of last year, Changchun High-Tech suffered a loss, with operating income of 3.08 billion yuan, a year-on-year decrease of 20.8%; net profit attributable to the parent company was a loss of 206 million yuan, a year-on-year decrease of 122.4%; in the first quarter of this year, although it remained profitable, it continued the "double decline" of last year, with a single-quarter income of 2.997 billion yuan, a year-on-year decrease of 5.66%; net profit attributable to the parent company was 473 million yuan, a year-on-year decrease of 44.95%.

Changchun High-Tech has four subsidiaries, namely Jinsai Pharmaceutical, Beike Bio, Huakang Pharmaceutical and Gaoxin Real Estate. Among them, the performance of three business segments: Jinsai Pharmaceutical corresponding to the growth hormone business and Beike Bio corresponding to the influenza vaccine, varicella vaccine and shingles vaccine, as well as Gaoxin Real Estate, all declined, and only Huakang Pharmaceutical's performance maintained growth.

Jinsai Pharmaceutical's profit fell by 40%, and long-term products will face fierce competition in the future

In terms of revenue share, Jinsai Pharmaceutical is the most important business segment of Changchun High-Tech.

In 2024, Jinsai Pharmaceuticals achieved revenue of 10.671 billion yuan, accounting for about 80% of Changchun High-Tech's overall revenue, a decrease of 3.73% from the same period last year; and achieved a net profit attributable to the parent company's owners of 2.678 billion yuan, a decrease of 40.67% from the same period last year.

In the global market, the competition landscape of growth hormone is relatively stable, mainly dominated by several companies such as Novo Nordisk, Pfizer, Roche, Eli Lilly, and Merck, which occupy 90% of the global market share. However, in the Chinese market, the field of growth hormone is mainly dominated by local companies, and overseas companies have a weak influence. Local companies such as Jinsai Pharmaceuticals, Anko Bio, and United Cell occupy the main market share. Among them, Jinsai Pharmaceuticals is the leader of the domestic growth hormone industry, and its water injection and long-acting formulations occupy a large market share.

Jinsai Pharmaceutical is one of the few companies in the world that has three generations of growth hormone products, including powder injection, water injection, and long-acting water injection. The corresponding annual average treatment costs range from low to high, about 20,000 yuan, 50,000 yuan, and 150,000 yuan, respectively, for different groups of people. Among them, its long-acting growth hormone is the world's first long-acting growth hormone product launched in 2014.

Previously, water injection was its main product line. According to the investor relations activity record sheet disclosed by Changchun High-Tech on March 17, 2022, at that time, powder injection accounted for about 10% of Jinsai Pharmaceutical's revenue, water injection accounted for more than 70%, and long-acting water injection accounted for more than 18%.

However, in recent years, some provinces in China have included growth hormone powder injection and water injection in centralized procurement, which has greatly compressed the profit margins of enterprises.

In August 2022, the local alliance centralized procurement led by Guangdong Province involved growth hormone for the first time. Judging from the results of the selected/alternative selection, both the selected and alternative dosage forms are powder injections. The products of Jinsai Pharmaceutical and United Cell were selected, and the reductions relative to the highest effective bid price were 52.46% and 28.98% respectively; it is worth mentioning that in the centralized procurement at that time, Changchun High-Tech and Anke Bio both abandoned the bid for water injection dosage forms.

In the growth hormone market reshuffled by price reduction formed by centralized procurement, Jinsai Pharmaceutical is also adjusting the business structure of powder injection, water injection, and long-acting water injection. Recently, Changchun High-Tech revealed in an institutional survey that in 2024, the proportion of growth hormone long-acting dosage form revenue in growth hormone products will increase to about 32%; in the first quarter of 2025, the proportion will further increase to about 35%.

An industry insider told Blue Whale Finance that centralized procurement of both powder injections and water injections is the general trend, and long-acting products will become the focus of future market competition.

However, in the field of long-acting products, although Changchun High-Tech's Jinsai Zeng is still the only approved long-acting growth hormone product in China, in January, March, September and December 2024, Tebao Bio, Weisheng Pharmaceuticals, Novo Nordisk and Tianjin Biopharma respectively announced that their long-acting growth hormones were accepted by the National Medical Products Administration.

In terms of price, as early as March 17, 2022, the Qinghai Provincial Drug Procurement Center issued a notice on adjusting the prices of some drugs. Among them, the online price of Jinsai Pharmaceutical's long-acting product polyethylene glycol recombinant human growth hormone injection (specification: 54IU/9.0mg/1.0ml) was changed from the original 5,600 yuan to 3,500 yuan, a decrease of 37.5%.

In terms of the overall market, not only Changchun High-Tech, but also Anko Bio (300009.SZ), another major growth hormone manufacturer, recently disclosed its 2024 annual report. The financial report shows that the company achieved operating income of approximately 2.536 billion yuan during the reporting period, a year-on-year decrease of 11.51%; the net profit attributable to shareholders of listed companies was approximately 707 million yuan, a year-on-year decrease of 16.56%.

Although the 2024 annual report did not disclose the specific sales data of growth hormone, it attributed the reason for the performance not meeting expectations to "the decline in sales revenue of the company's main product growth hormone, resulting in the company's overall operating income failing to achieve expected growth, which in turn affected the increase in net profit." It can be seen that the "An Su Meng" series of products is still an important source of the company's operating income. In 2023, the company's growth hormone sales revenue is close to 70% of the consolidated revenue, and the parent company achieved a net profit of 763 million yuan, mainly contributed by growth hormone.

Baike's net profit fell by 53.67%, and the revenue of herpes zoster vaccine fell significantly.

In addition to the decline in performance of Jinsai Pharmaceutical, which accounts for the highest proportion of performance, Baike Bio achieved revenue of 1.229 billion yuan in 2024, a decrease of 32.64% from the same period last year; and realized a net profit of 232 million yuan attributable to the parent company's owners, a decrease of 53.67% from the same period last year. Although Huakang Pharmaceutical achieved revenue of 762 million yuan, an increase of 8.48% from the same period last year; and realized a net profit of 52 million yuan attributable to the parent company's owners, an increase of 38.80% from the same period last year, but the revenue accounted for only about 5.6%. Gaoxin Real Estate achieved revenue of 756 million yuan, a decrease of 17.32% from the same period last year; and realized a net profit of 15 million yuan attributable to the parent company's owners, a decrease of 80.09% from the same period last year.

In addition, Beike Bio also released its first quarter report on April 20, showing that the revenue and net profit attributable to the parent company in the first quarter of this year were 162 million yuan and 1.0643 million yuan, respectively, down 39.96% and 98.24%, respectively.

Beike Bio has approved products such as varicella vaccine, herpes zoster vaccine, and nasal spray influenza vaccine. Among them, the herpes zoster vaccine is the first herpes zoster vaccine in China developed by it for people aged 40 and above, and is considered by the industry to be its main growth point.

Beike Bio pointed out in its financial report that during the reporting period, due to factors such as the external environment and the lack of willingness of vaccine recipients to be vaccinated, the company's sales and use of herpes zoster vaccines decreased, the number of vaccinations and shipments decreased, and operating income and net profit declined year-on-year.

According to the 2024 annual report data, the revenue of varicella vaccine was 837 million yuan, a slight increase of 2.16% year-on-year; the gross profit margin was 84.84%, a slight decrease of 0.51% year-on-year. The nasal spray flu vaccine achieved revenue of 141 million yuan, a year-on-year increase of 15.37%; the gross profit margin was 69.82%, a slight decrease of 0.78% year-on-year. The shingles vaccine achieved revenue of 251 million yuan, a sharp decline of 71.54% year-on-year; the gross profit margin was 96.08%, a decrease of 1.42% year-on-year.

In addition, although the revenue of varicella vaccine and nasal spray flu vaccine increased slightly in 2024. However, Beike Bio also mentioned that the national newborn birth rate has been declining year by year, the price adjustment of similar products and the entry of new products into the market have brought challenges and unfavorable factors. Although the varicella vaccine currently occupies a leading position in the market share, the shrinking market capacity caused by the decline in birth rate and the increase in the number of manufacturers of similar products may face the risk of falling product prices and sales in the future.

It is worth noting that while revenue and profits have declined, Changchun High-Tech's overall sales and administrative expenses have increased. In 2024, sales expenses will be 4.439 billion yuan, a year-on-year increase of 11.81%, and the sales expense rate will reach 41.6%. In this regard, Changchun High-Tech stated that the company continued to strengthen the introduction of sales team talents and compliance construction, and further accelerated the promotion of product sales.

In addition, management expenses were 1.202 billion yuan, a year-on-year increase of 25.59%. Changchun High-Tech pointed out that with the adjustment of the new BU management structure of its subsidiary Jinsai Pharmaceutical and the establishment of related lower-level subsidiaries, the accounting treatment of related expenses has changed compared with previous years, resulting in an increase in management expenses.

The number of R&D personnel has declined from 1,329 in 2023 to 1,264 in 2024, a decrease of 4.89%; in addition, the proportion of R&D personnel has dropped from 14.72% in 2023 to 10.95% in 2024.

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