Market NewsAn interpretation of the minutes of the semiannual report of Dongyao Pharmaceutical (1875.HK)Summary:
1. In the first half of the year, the company's operating income reached 182 million yuan, an increase of 687% over the same period last year, and the net loss was significantly reduced to 15.72 million, a reduction of 86%, which represents a positive trend for the company. The management said it would strictly control the company's financial affairs. Today, the company is facing financing challenges. With its own marketing and CDMO business, the company is actively moving towards a balanced operation and balance of payments, and aims to achieve a balanced operating expenditure and positive cash flow by the end of this year and at most next year. two。 In the second half of the year, the company aims to continue to invest in CDMO business, with operating revenue of 22.66 million in the first half, an increase of 94% over the same period last year, a total of 23 projects, and a project delivery rate of 100%. Due to the impact of the entire epidemic, many orders have been delayed, and there are some problems in project revenue recognition. We look forward to completing the project in the second half of the year, with more than 85 million orders on hand and a target contract of nearly 100 million yuan, which is expected to exceed hundreds of millions of yuan by the end of this year. Generally speaking, the company's business is mainly McAb business and ADC business, each accounting for half.
3. AboutTAA013At present, the recruitment of 438 patients has been completed and nearly 290 patients have been released from the group. the whole progress requires the cooperation of various hospitals in this regard. It is hoped that 215 clinical data can be accumulated for analysis. Due to the prevention and control of the epidemic situation in the hospital in the first half of the year, resulting in delays in uploading and submitting the overall data, so the project has been delayed to a certain extent. According to the current process, the company expects to submit BLA in the second half of next year and be approved for listing in the second half of 2024.
Highlights and milestones in the first half of the year
Compared with previous years, operating income entered the harvest period of 182 million yuan, an increase of 687% compared with the same period last year (sales of listed products + fast-growing CDMO business + authorization fee). The net loss decreased significantly by 86% to 15.72 million yuan. Product income 104 million yuan
Park Shinting ®has covered all provinces and autonomous regions except Tibet.
Thirteen provincial alliances were successfully selected for Zhi'an ®, including Henan, Shanxi, Jiangsu and Hebei provinces.
Messia ®cooperated with Frontier Biology to carry out marketing 2.CDMO in the field of AIDS to achieve 22.66 million yuan in revenue, an increase of 94% over the same period last year. A total of 23 cooperation projects were completed, and 10 projects completed the delivery of 14 survival projects and 9 new projects on schedule.
Sign CDMO Strategic Cooperation Agreement with strategic partner Jimin Trust 3. The income of the authorization fee is 49.43 million yuan.
Reach the overseas market license of Park Shinting ®with Sinopec Pharmaceuticals.
Signed with Mega Ophthalmology TAB014 China Commercial Cooperation license in the field of AMD 4. The clinical project was carried out as scheduled.
At present, the company's main clinical project is the TDM1 ADC project-TAA013 phase III clinical trial patients completed.
TAB014 cooperated with Zhaoke to complete the phase III clinical trial. The first subject was enrolled in the group. The company will continue to be responsible for the supply of products in the clinical phase and commercial production in the future.
Use the company's strategic layout to deepen capacity expansion and intensive cultivation in the field of ADC-- promote the expansion of ADC pilot raw liquid production workshop (planned to start production in the second half of 2022) + promote the expansion of ADC commercial preparation workshop (planned to be put into production in the first half of 2023)
Investment aspect
On May 30th, 2022, the first round of equity financing after the completion of IPO, with the strong support of major shareholders Weiwu Capital and Shengde Pharmaceutical Co., Ltd., completed the subscription on July 29th, with a net income of about HK $470 million (subscription price HK $3.15HK / share). The company will continue to optimize its capital structure and vigorously carry out strategic transformation and rapid development of CDMO business through diversified financing and strategic cooperation.
(1) 13 provinces (autonomous regions, municipalities and corps), including Henan, Shanxi, Inner Mongolia, Hubei, Hunan, Guangxi, Hainan, Chongqing, Guizhou, Qinghai, Ningxia, Xinjiang and Xinjiang production and Construction Corps)
Product pipeline
The main products are Park Xin Tian ®+ TAA013 (anti-HER2) completed trial group + TAC020 (innovative target drugs) developed jointly with Platinum Pharmaceuticals. In general, R & D costs are well optimized and controlled within the affordable range.
TAA013 III, completed 438 patients enrolled in the group, 289 patients completed the entire clinical treatment, exceeded the previous target mid-term performance analysis of 215cases, is still waiting for third-party professional confirmation, is expected to complete the mid-term analysis by the end of this year, and is expected to be introduced to the market in the second half of 2024.
Business development
1. Park Shin Ting ®
The products have achieved excellent sales performance, covering all provinces except Tibet, with an income of nearly 100 million.
The monthly performance is growing steadily, and it has the ability to deal with the commercial production after collection on a large scale. according to the current sales trend, the sales momentum in the second half of the year will be significantly better than that in the first half of the year.
Actively seek promotion in overseas markets: we have reached initial cooperation intentions with more than a dozen countries, and have completed the collection of registration documents in several countries. We hope to be able to complete the overseas sales of Park Shin Ting ®through strategic cooperation with Sinorama.
two。 Tiezhian ®
The first half of the year did not catch up with the gathering, and the overall sales volume did not meet the expectations, but successfully selected 13 provincial alliances, Jiangsu and Hebei set to renew the contract, looking forward to substantial growth in the second half of the year. At present, according to the 15 provincial and municipal alliances, the signed orders have exceeded 10 million.
3. Meishiya ®progesterone methylacetate oral suspension
Sign strategic cooperation with Frontier Biology to more accurately locate patient groups, promote sales through market segmentation, and look forward to better sales performance in the second half and first half of the year.
4.CDMO service
Business income 22.66 million, an increase of 94% over the same period last year, a total of 23 projects, project delivery rate 100% due to the entire epidemic, many orders have been delayed, there are some problems in project revenue recognition, and we look forward to completing the project in the second half of the year. The number of orders on hand exceeds 85 million, with a target contract of nearly 100 million yuan, and is expected to exceed hundreds of millions of yuan by the end of this year.
Generally speaking, the company's business is mainly McAb business and ADC business, each accounting for half.
Industry leading ADC
Mainly focus on the ADC service platform, through the overall expansion and promotion of the company, with complete supply development of ADC, commercial production positioning of all-round services, this advantage is scarce in China, no more than three competitors, and with the help of located in Suzhou biomedical gathering area, hope to give better play to the advantages of the company.
Through last year's integration and adjustment, ADC service has been greatly improved, and the time from early completion to case declaration has been quickly completed, and one of the projects has been highly recognized by customers six months ahead of schedule. The company has reached the stage of leading the industry in ADC, with pre-R & D team, R & D capability, strong ability to build ADC Chinese style and commercialization ability, the company conforms to the market demand and expands the ADC commercial production workshop in the second quarter of next year to basically meet the needs and standards of any commercial production, and the production capacity is greatly guaranteed.Have a competitive advantage in commercial production
Promote the production of Park Shinting ®, comply with GMP quality system, and be able to deal with compliance.
The company has a large-scale biological drug production base in line with GMP, including antibody and ADC production capacity of more than 10,000 liters, the establishment of a localized end-to-end GMP production platform, the design of macromolecules, small molecules, coupling and other aspects, has more than 120quality team to meet the compliance of the whole quality management system and GMP from R & D to commercial stage, and the service success rate is 100%.
Monoclonal antibody biological drug solution and preparation workshop + ADC drug solution and preparation workshop
Generally speaking, the company is involved in the fields of large-scale McAb and ADC, from research and development, industrial development, to commercial production. The goal is to continue to promote the sales of Park Shinting ®in the second half of the year, and to achieve a substantial improvement in the performance of Zhi'an ®to complete the large-scale production of antibody ADC by the end of this year. With the help of the advantages of corporate differentiation, quickly enhance the development of CDMO business.
Financial situation
1. Income
Revenue in the first half of 2022 reached 182 million yuan, based on more than 23 million last year, a year-on-year growth rate of 687%. Product sales revenue reached 104 million yuan, mainly for the commercial sales of the core product Park Shin Ting ®.
In 2022, we will actively expand CDMO/CMO business, with related revenue reaching 22.66 million yuan, a year-on-year growth rate of 94%.
The income from the royalty has reached 49.43 million yuan.
Product sales accounted for 57% of revenue in the first half of 2022, a significant increase over last year.
two。 Cost
The operating cost increased by 157% compared with the same period last year, mainly because part of the CDMO project cost was measured according to the implementation schedule input method, and the cost increased with the increase in the sales volume of self-developed products.
R & D expenses: in the first half of 2022, R & D expenses totaled RMB 70268,000, a decrease of 20.82% compared with the same period last year, mainly due to clinical expenses (due to product pipeline optimization, cooperation and sharing to effectively control the cost of related clinical trials), R & D materials (due to the completion of TAA013 project III clinical group, related R & D materials decreased significantly).
Sales expenses increased by 526% compared with the same period last year, mainly due to the increase in sales of self-developed products and the increase in marketing consultant fees.
The overall operating profit (loss) shrank sharply to 6.95 million, compared with-115 million in the same period last year, narrowing by 94%. Finally, the net loss was 15.72 million yuan. In addition, the company successfully completed the issuance of new shares to two major shareholders under special authority on 29 July, with a capital of about HK $470 million. The cash flow of business activities reached a positive direction of 24.24 million yuan in the first half of 2022.
Qroomamppac A:
Q:With regard to CDMO business, what is the current technical reserve on the ADC project, and how many kinds of PELO coupling can be provided to customers, including various coupling methods, antibodies, and how to cooperate in toxins?
The field of ADC is the advantage of the company's differentiation, whether from the early research and development of ADC, commercialization has a very systematic layout and overall capacity improvement, for ADC coupling is a core technology, more is the challenge of choice and energy consumption. At present, the coupling technology is constantly iterated in the research and development field, and many successful ADC drugs use traditional coupling, such as cysteine coupling and so on. On the one hand, the whole coupling technology of the company can implement all kinds of coupling technology and show the control in the process. On the other hand, wages continue to invest resources in the development of new coupling technologies, such as coupling in some fixed locations. At present, the overall development is carried out step by step, hoping to launch technology to customers in a certain period of time. The company's technology is still in a leading position in the world, so after internal verification, it will provide services in this respect to a number of ADC innovative drug companies.
As for PELO, due to its high toxicity, the company is looking for more experienced partners to reach a strategic cooperation with Borey Pharmaceutical, a listed company that has been engaged in intensive cultivation for more than ten years. They are very interested in ADC research and development, have rich experience in small molecules and strong commercial production capacity, and believe that the company can achieve win-win cooperation with them. At the same time, the company is also actively looking for companies with different PELO commercial production capabilities, especially domestic GMP that meet the standards, as well as European and American GMP partners, to jointly promote the research and development of ADC drugs and future commercial production.
Q:With the company's current manpower and production capacity, how many projects can the company undertake at the same time, including future business expansion and CDMO's expectations for this year?
From the point of view of the hardware invested by the company at present, we do not see any bottleneck in production capacity, so if a project is completed in the future, it can meet the needs of customers in terms of overall hardware and system construction. At present, there are not many CDMO companies in the market that can undertake clinical phase III and commercially produced CDMO projects. The company's monoclonal antibody production capacity exceeds 20,000 liters, based on the company's capacity usage, half of the extraction can basically meet the needs of current products, especially the production of Park Xin Ting ®, and then there will be at least 10,000 liters of production capacity to meet the clinical needs of customers, and ADC is a very leading producer in this area. After it is completed in the second quarter of next year, it can meet the needs of commercial production of any variety. The company's ADC production team has more than 30 people, and the antibody production team has more than 100 people. it can complete large-scale 3-4 project III clinic and more than 10 phase I and II clinic at the same time. The company will actively implement the ability of such service in the second half of the year.
Q:CDMO will make better progress in the second half of the year. Can the annual revenue reach 100 million?
The goal is like this, and the company's original goal is 150 million based on outstanding contract orders, management believes that this goal is achievable.
Q:What are the differentiated advantages of the company over other CDMO companies such as Yao Ming Biology and Yao Ming Union in the competition??
Yao Ming biology is well known as the leader of the industry, as a whole, there is still a large gap, no matter from the production scale, the overall system, Yao Ming has been highly recognized in China. But the market is very large, CDMO revenue, whether antibody class, ADC class, the whole market is constantly expanding; the company has its own characteristics, first, in the ADC layout in a leading position, which is relatively scarce in China. In terms of ADC, it is not only as good as Pharmaceutical Union, but also expected to have bright results in the second quarter in the future. Second, on the one hand, although Yao Ming biology has a good development, the industry will have a trend of diversified services, looking forward to the emergence of alternative companies, so Yao Ming company does not occupy the overall market of CDMO. On the other hand, the company has a very good system, steady, practical, high success rate, can provide customized services for customers, although it is a small company, but according to the needs of customers, the use of customized services to win their own space in the market. And the large organization Pharmaceutical Company, more use of platform services, not detailed enough, customers out of demand will also encounter challenges and do not adapt. In the first half of this year, many customers are also transferred from Yao Ming Bio, which further proves the differentiation advantage of the company. Generally speaking, each has its own advantages, and the company recognizes the strength of Yao Ming in the industry, which is also an example for the company to learn from.
Q:Including such as Zhixiang Pharmaceutical, they all have this relatively differentiated competitive advantage, so what are the advantages in competing with this kind of enterprises??
In terms of field, the ADC field has been booming in the past three years, and the ability of the company is not that of many other CDMO enterprises springing up after a spring rain. It takes a certain amount of time to accumulate.
In terms of the entire quality system, it took several years to build the company overnight, through product listing, building products that meet domestic GMP standards and approved by the State Drug Administration, so that CDMO customers have a higher degree of recognition and trust, which many CDMO enterprises do not have, and this is the direction that the company will continue to optimize and improve. The company does not want to rely on low-price competition to win business development, but to rely more on high-end, high-quality service that can reassure customers to help create high-quality development of the new drug industry, which is the company's strategy to continue to pay attention to and strengthen competition.
Q:Can you explain in more detail that "bio-drug collection" is based on the target, sexual recruitment and acquisition? alternatively, which enterprise products may be included in the group products?
Set acquisition has been mentioned for a long time, but there is no time point for implementation, but the company has continued to pay attention to the collection process since Park Shinting ®went public. On the whole, after collection, the advantages outweigh the disadvantages for the company to expand market sales quickly, but on the other hand, the whole expansion will indeed have an impact on the price, the current market promotion situation, the company's overall sales are concentrated in the second-and third-tier cities, while the whole bevacizumab has a lot of room for improvement in the second-and third-tier cities, so the company will speed up the second-tier cities. Market competition in third-tier cities to prepare for collection. At present, the company already has the ability to collect, which is one of the advantages of the company, at the same time, the company will continue to reduce production costs to deal with collection. In addition, another advantage of collection is that the company's net profit will not be affected, because it will greatly reduce marketing expenses, and the expansion of volume is a very good thing for the company to promote and make a profit. Therefore, the company will actively respond to the landing of collection, and the company is also very confident in this respect.
Q:With regard to the business process, at the beginning, the customer put forward the CDMO demand, and the company docked with them. In the second stage, the customer initiated the sales rules to allow the company to participate in the bid. The third stage confirmed the service with the company, signed an agreement, and would see the number of orders on hand on the report. I would like to ask how long it will take for the customer to bid to sign a contract with them.
This mainly depends on the degree of customer demand, some customers already have a tendency before bidding, so they will ask the bidding units to make preparations in advance, probably after the bidding is over, it will take a month to complete the contract. Some are very fast, about a week after the bidding, usually about a month. Generally speaking, after the bidding is over and the customer is sure, some practical work is already under way, including preparations on a larger scale. The implementation of the real contract does not affect the progress of the project.
Q:If the customer needs to cancel the order, how long will it be in advance? What is the compensation for the company?
The company has not encountered this kind of situation, and the pharmaceutical R & D environment is becoming more and more serious. on the whole, there is a certain contraction in feedback with customers. in many cases, customers give up doing such projects themselves, while the trend of handing them over to CDMO project enterprises is becoming more and more obvious. After signing a contract with customers, the company will make some adjustments to adapt to some changes in the market, such as the previous COVID-19 project, which will be adjusted quickly according to COVID-19 's rapid changes.
The contract generally stipulates that if cancelled due to customer reasons, the company has the right to require customers to pay relevant fees based on the input of manpower, material resources, materials and other costs, and a certain proportion of liquidated damages for the whole contract. In addition, the overall financial situation will be reviewed and customers will be fully adjusted before receiving customer service to minimize the risk in this regard.
Q:How much is the expected listing of TAA013, including the market expectation in the future?
At present, the recruitment of 438 patients has been completed and nearly 290 patients have been released from the group. the whole progress requires the cooperation of various hospitals in this regard. It is hoped that 215 clinical data can be accumulated for analysis. Due to the prevention and control of the epidemic situation in the hospital in the first half of the year, there has been a delay in uploading and submitting the overall data, so there is a certain delay in the project. According to the current process, the company expects to submit BLA in the second half of next year and be approved for listing in the second half of 2024. In addition, this product has been developed for a long time, has a wide patient base, has a large market coverage, and sales continue to rise. But the overall effect of the new HER2 target, ADC Enhertu, is very eye-catching, and it is expected that the competition will be very fierce in the future. However, based on the performance-to-price ratio, the Chinese market seeks patient affordability, and the management believes that after TAA013 is approved, there will still be a lot of market space and profit space, while the company is also controlling production costs, unlike the fierce situation in the biosimilar drug market, this product is still relatively small in the face of similar competition.
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