On December 20th, Lu Kang Pharmaceutical announced that the company plans to issue stocks to no more than 35 eligible investors, including the controlling shareholder Hualu Group, with a total fundraising amount of no more than 1.2 billion yuan. After deducting the issuance expenses, the funds will be used for the construction of high-end intelligent manufacturing workshops (total investment 442 million yuan), biopesticide base construction (total investment 432 million yuan), new drug research and development projects (total investment 210 million yuan), and supplementary working capital (200 million yuan).

According to the official website, Lu Kang Pharmaceutical is a state-owned comprehensive pharmaceutical enterprise established in 1966. It was listed on the main board of the Shanghai Stock Exchange in 1997 and became a subsidiary of Hualu Holdings Group Co., Ltd. (hereinafter referred to as "Hualu Group") in 2006.

For the 1.2 billion yuan private placement fundraising, Lu Kang Pharmaceutical stated that it will further deepen the company's main business and provide production capacity support to meet the sustained growth market demand for human use pharmaceutical products; Seize the development opportunities of the biopesticide industry to gain more initiative in future market competition; Continuously investing in the field of new drug research and development to further enhance the company's core competitiveness.

440 million yuan investment in building intelligent manufacturing workshops, improving the quality of generic drugs, and setting high standards for going global
Announcement content display. The largest investment in the construction project of a high-end intelligent manufacturing workshop for formulations is mainly based on the need to optimize product structure, investing in the high-end generic drug business, pointing to opportunities for structural changes in the pharmaceutical industry and opportunities for going global.

On the one hand, the market for generic drugs is considerable. According to data from Zhuoshi Consulting, the size of China's generic drug market is expected to reach approximately 705.6 billion yuan in 2023 and 771.4 billion yuan in 2025.

Secondly, the structural adjustment of the domestic pharmaceutical industry has led to a continuous increase in demand for drug quality. As of the end of 2023, the company has invested 190 million yuan in the automation transformation of production workshops. Through automation and digital transformation, the existing workshop production efficiency has been improved, driving the company's per capita labor productivity to increase by 59.86%.

Thirdly, Lu Kang has rich customer resources and accumulated experience in related fields. The construction of high standard formulation production workshops is also to meet the certification needs of the international high-end market and help expand international business.

It is worth mentioning that with the call of the country to promote the high-end, intelligent, and green development of manufacturing industry and the demand for business going global, there are many enterprises that improve product quality and production efficiency by optimizing production lines. Recently, Chenxin Pharmaceutical invested 2.15 billion yuan to build a high-end formulation research and development and intelligent intensive workshop, realizing digital and refined control of the entire product life cycle from production to warehousing, and creating a first-class "benchmark workshop" in China; In April of this year, the Inner Mongolia Changsheng Pharmaceutical International High end Formulation Intelligent Manufacturing Lighthouse Factory project located in the Tokto Economic Development Zone has also started construction, with a total investment of about 1.5 billion yuan; In April, the Hainan Qilu Pharmaceutical High end Intelligent Processing and Manufacturing Center project with a total investment of 690 million yuan has been completed. For equipment suppliers, they can explore business opportunities in the wave of capacity optimization and quality improvement.

430 million yuan investment in building a biopesticide base, researching new products and expanding production capacity
Lu Kang Pharmaceutical stated that the company has accumulated certain experience and resource reserves in the research and development, production, and sales of biopesticides; At present, the company is producing and selling more than 60 biopesticide products, and is registering 3 innovative biopesticide products. Due to the technical similarities between the fermentation technology of biopesticides and antibiotic fermentation technology, the company can utilize its accumulated fermentation technology and production experience in the field of antibiotics to provide strong support for the research and production of biopesticide products.
According to Zhuoshi Consulting, the Chinese biopesticide market is expected to show a rapid growth trend. The market size is expected to reach 15.03 billion yuan in 2022, and is projected to grow to 33.09 billion yuan by 2027, with an average annual compound growth rate of 17.1%, indicating great development prospects.

The construction project of the biopesticide base proposed by LuKang Pharmaceutical this time has a total investment of about 432 million yuan. The planned production varieties include multiple innovative biopesticides developed by LuKang Pharmaceutical using biosynthetic technology, such as polymyxin, trans aconitic acid, and emodin methyl ether. Among them, polymyxin obtained the original drug approval number in June 2024, trans aconitine acid has started the relevant experimental work for new pesticide registration, and emodin methyl ether has submitted registration materials. It is urgent to start project construction to meet production needs. Due to the demand for green development, the trend of replacing biopesticides with antibiotics is unstoppable. The research and development of new products and the expansion of production in LuKang will provide more options for the market.

On that day, the stock price of LuKang Pharmaceutical quickly rose and hit the limit up, closing at 9.41 yuan per share, an increase of 10.06%, with a total market value of 8.456 billion yuan.
Public information shows that Lukang's pharmaceutical products involve antibiotics, amino acids, cardio cerebrovascular drugs, semi synthetic antibiotic APIs, biological drugs and related preparations, infusion, traditional Chinese patent medicines and simple preparations, pharmaceutical intermediates, antibiotics for animal health, starch, glucose, etc. As of the end of the third quarter of this year, the controlling shareholder Hualu Group holds 23.82% of the shares, with the actual controller being the State owned Assets Supervision and Administration Commission of Shandong Province.

According to data from Tonghuashun, the performance of Lukang Pharmaceutical has achieved a growth rate of over 50% for two consecutive years. In the first three quarters of this year, the company achieved a revenue of 4.667 billion yuan, although it decreased by 1.37% year-on-year, it achieved a net profit attributable to the parent company of 347 million yuan, a significant increase of 80.24% year-on-year, far exceeding last year's net profit level of 246 million yuan.

Source: https://pharm.jgvogel.cn/c1478074.shtml