Xuantai pharmaceutical products are relatively limited, with the increasing number of market competitors, the company faces fierce competition. The company's main revenue comes from the US market, and the domestic market development is uncertain. In addition, the company's procurement ratio of APIs is higher and more restricted.
On January 11, 2022, Shanghai Sherwin-Tech Co., Ltd. (hereinafter referred to as Sherwin-Tech) will be approved on the Sci-Tech Innovation Board of the Shanghai Stock Exchange. On January 21, the company has submitted for registration.
According to the prospectus, Xuantai Pharmaceutical intends to issue 45.34 million shares this time, accounting for 10% of the total share capital after the issuance. It is expected to raise 600 million yuan, of which 320 million yuan will be used for the preparation production complex building and related supporting facilities project, 196 million yuan will be used for high-end generic drug and improved new drug research and development projects, and 84 million yuan of supplementary working capital.
Flipping through the prospectus found that the variety of Xuantai pharmaceutical products is relatively limited, and with the increasing number of market competitors, the company faces fierce competition. The company's main revenue comes from the US market, and the domestic market development is uncertain. In addition, the company's procurement ratio of APIs is higher and more restricted. In view of the above situation, it was found that the network sent an interview letter to Xuantai Pharmaceutical's public mailbox to request clarification, and as of press time, Xuantai Pharmaceutical did not give a reasonable explanation.
The variety of products is relatively limited The domestic market development is uncertain
According to public information, Xuantai Pharmaceutical is a high-tech enterprise driven by R&D and innovation, mainly engaged in the research and development, production and sales of generic drugs and CRO services.
High-end generic drugs refer to generic drugs with "large clinical demand and high price of patent expired drugs", as well as generic drugs that can "expand the international high-end market", which have strong technical barriers. Xuantai Pharmaceutical's Posaconazole enteric-coated tablets meet the definition of "high-end generic drugs", which is also the company's most important product.
In 2019, 2020 and the first half of 2021, Xuantai Pharmaceutical's Posaconazole enteric-coated tablets achieved revenue of 53 million yuan, 250 million yuan and 120 million yuan respectively, accounting for 38.69%, 79.23% and 77.16% of the main business income, respectively.
Sherwin-Tech Pharmaceutical said in the prospectus that the company's leading product, Posaconazole enteric-coated tablets, is mainly for the US market, and with the approval of AET's Posaconazole enteric-coated tablets products in 2021, the market share of Shentai Pharmaceutical and Merck's Posaconazole enteric-coated tablets products has declined. If the number of competitors in the US market of Posaconazole enteric-coated tablets further increases, the terminal price and market share of Shentai pharmaceutical products will continue to decrease. In addition, Xuantai Pharmaceutical's other two self-developed products, bupropion hydrochloride sustained-release tablets and propafenone hydrochloride sustained-release capsules, account for a relatively small proportion and decrease year by year, mainly due to the increase in the number of competitors in the market, and the unit price of products showed a downward trend.
Source: Prospectus (Xuantai Pharmaceutical)
In fact, The sales of Xuantai Pharmaceutical are mainly concentrated in overseas markets, and the main product of Posaconazole enteric-coated tablets is sold through the overseas distributor LANNETT. In 2019, 2020 and the first half of 2021, Xuantai Pharma's sales revenue to LANNETT was 0.53 billion yuan, 250 million yuan and 112 million yuan respectively, accounting for 38.50%, 78.44% and 72.02% of the main business income, respectively.
At the same time, Xuantai Pharmaceutical has less sales experience in China, and there is uncertainty in the future development of the domestic market. There are four main reasons: first, the promotion of the domestic market of posaconazole enteric-coated tablets is affected by the domestic "resistance restriction order"; second, the enteric-coated tablets of posaconazole have not yet entered the medical insurance directory in China; third, the enteric-coated tablets of posaconazole are not currently included in the national centralized procurement directory; finally, the promotion of the domestic market of enteric-coated tablets of posaconazole is affected by dealers.
Industry insiders said that Xuantai pharmaceutical products are relatively limited and face fierce market competition. More importantly, The domestic market development is uncertain, Xuantai Pharmaceutical, the main income comes from the US market, if the Sino-US trade friction is further intensified, it will lead to a decline in export revenue, which in turn will adversely affect the company's profitability.
The proportion of APIs purchased is high
The main raw materials purchased by Xuantai Pharmaceutical include APIs, excipients, consumables, reagents, packaging materials, etc., mainly APIs.
From 2018 to 2020 and the first half of 2021, the APIs purchased by Xuantai Pharmaceutical were 5.1814 million yuan, 18.4356 million yuan, 56.7718 million yuan and 28.2091 million yuan, accounting for 23.73%, 45.51%, 73.85% and 67.39% of the total raw material procurement in each period, respectively.
In this regard, Xuantai Pharmaceutical explained in the prospectus, "In the first three years of the reporting period, the company's API prices continued to increase, mainly with the company's Posaconazole enteric-coated tablets products put into production, the number of posaconazole raw materials purchased during the reporting period continued to rise, and the price of posaconazole APIs was relatively high, which raised the overall price of APIs. The decline from January to June 2021 is mainly caused by the change in the proportion of different varieties of APIs. ”
In 2019, 2020 and January-June 2021, Xuantai Pharmaceutical purchased 12.0695 million yuan, 43.7765 million yuan and 14.2105 million yuan from Zhejiang Aoxiang Pharmaceutical Co., Ltd., accounting for 29.80%, 56.95% and 33.95% of the total procurement in the current period, accounting for a relatively large proportion and increasing year by year. Because Zhejiang Aoxiang Pharmaceutical Co., Ltd. is the supplier of Xuantai Pharmaceutical Posaconazole API, during the above period, the sales revenue of the company's Posaconazole enteric-coated tablets products continued to increase, so the procurement of APIs increased year by year, resulting in a relatively large proportion of the purchase amount to Zhejiang Aoxiang Pharmaceutical Co., Ltd.
Correspondingly, the purchase amount of Xuantai Pharmaceutical to Hangzhou Minsheng Binjiang Pharmaceutical Co., Ltd. decreased. From 2018 to 2020, Xuantai Pharmaceutical purchased 10.0086 million yuan, 8.6425 million yuan and 5.0343 million yuan respectively, accounting for 45.84%, 21.34% and 6.55% of the total procurement in the current period, respectively. Xuantai Pharmaceutical's product bupropion hydrochloride sustained release tablets are produced by Minsheng Binjiang OEM, and the company purchases bupropion hydrochloride sustained release tablets from Minsheng Binjiang and sells them to customers. From January to June 2021, Minsheng Binjiang did not enter the list of the top five customers of Xuantai Pharmaceutical, mainly due to the relatively small sales of bupropion hydrochloride sustained-release tablets in the current period.
Xuantai Pharmaceutical admitted in the prospectus that the price of APIs may be affected by market prices, downstream process levels, and supplier capacity constraints. If the price of APIs fluctuates, it may have an impact on the company's future performance.
(Discovery network reporter Luo Xuefeng intern reporter Chen Kangli)