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Microchip Biologics released its second social responsibility report: single source of revenue, sustainable development challenges

author:National Business Daily

Per reporter: Huang Bowen Per editor: Liang Qi

Microchip Biotech (SH688321, stock price 22.61 yuan, market value 9.295 billion yuan), the "first innovative drug on the science and technology innovation board", released its 2022 social responsibility report in April this year, which is also the company's second social responsibility report since its listing.

Overall, Microchip's 2022 report is relatively complete, with 88 pages covering all levels from environmental, social to corporate governance. However, every time the Brand Value Institute found that the report did not summarize the matrix of relevant important issues, lacked data comparison in previous years, and lacked continuity in some important contents. In addition, Microchip Biotech's revenue source has been too single for many years, and the increase in R&D investment has not yet shown results, which has brought challenges to the sustainable development of the company.

In response to questions related to the social responsibility report, the reporter of "Daily Economic News" sent an interview letter to Microchip Biotechnology, but as of press time, the company has not replied.

Microchip Biologics released its second social responsibility report: single source of revenue, sustainable development challenges

Cover of Microchip's 2022 Social Responsibility Report

Image source: Screenshot of the announcement

Lack of data comparison in previous years, safety production input has decreased significantly

This is the second time that Microchip Biotech has released a social responsibility report since its listing. The report is divided into 8 parts, in addition to introduction and overview, it also includes corporate governance, R&D innovation, safety management, environmental responsibility, quality management, employee rights, social welfare, etc., covering all aspects of ESG.

However, compared with other ESG reports or social responsibility reports, Microchip's report does not show a matrix of relevant important issues at the beginning.

In terms of report scale, Microchip's 2022 social responsibility report is almost twice as large as in 2021, reaching 88 pages. From the perspective of expanded content, it mainly focuses on the introduction of the company's product quality, industry communication and R&D innovation, and at the same time, there is also more detailed data disclosure in terms of environmental information.

In terms of quality management, the company has established a quality management system for the whole life cycle of drugs, and carries out quality management in the whole process of drug development, production, operation and use, including group quality system, R&D quality system, clinical quality system, production GMP system and pharmacovigilance system.

In terms of environmental responsibility, the company has established and improved the organizational structure of environmental management, including environmental organization and hazardous waste organizational structure, waste gas organizational structure, formed an environmental management system with management responsibility and multi-department coordination, and successively promulgated "Waste Management Regulations", "SOP for the Use of Production Wastewater Treatment Facilities", "Standard Operating Regulations for the Use of Waste Gas Treatment Facilities in Quality Control Center" and other systems and standardized processes, while detailed classification of online monitoring, monthly monitoring, quarterly monitoring, semi-annual monitoring and annual monitoring data.

Unfortunately, Microchip's 2022 social responsibility report lacks data comparison in previous years, which makes it difficult for investors to intuitively grasp the relevant situation. For example, in 2022, Microchip's consumption of electricity, diesel, water and other resources, industrial wastewater discharge and hazardous waste disposal have all decreased, but they are not directly reflected in the social responsibility report.

In some indicators, Microchip Bio's performance in 2022 is not as good as in 2021. For example, in terms of safety production, the investment in 2022 is less than 40% of 2021, only about 270,000 yuan; In terms of social welfare, the amount of external donations dropped significantly in 2022, with only 50,300 yuan in funds and material discounts, and 1,697,800 yuan in 2021.

In 2022, the participation in volunteer activities is also not high, with a total of 150 hours of volunteer activities and 11 related activities, with 11 participants.

Microchip Biologics released its second social responsibility report: single source of revenue, sustainable development challenges

Volunteer activities of Microchip Bio in 2022

Image source: Screenshot of Microchip's 2022 social responsibility report

At the same time, some important contents disclosed in 2021 were missing in the 2022 report, such as the organizational chart of hazardous waste management and supplier management.

The source of revenue for many years is too single, and the benefits of R&D investment have not yet been reflected

Of course, as a listed company mainly engaged in innovative drugs, Microchip Bio's core competitiveness lies in the research and development and sales of innovative drugs.

Microchip introduced the company's research and development in the social responsibility report. According to the report, the company's R&D investment in 2022 will be 286.84 million yuan, a year-on-year increase of 22.4%. In terms of the number of patents authorized, Microchip disclosed in its social responsibility report that the company applied for and obtained a total of 24 patents authorized at home and abroad in 2022, compared with 32 in 2021.

Microchip Biologics released its second social responsibility report: single source of revenue, sustainable development challenges

R&D investment and achievements of Microchip Bio in 2022

Image source: Screenshot of Microchip's 2022 social responsibility report

R&D investment continues to increase, but the results are not obvious. Microchip's innovative drug products include two varieties: cidarbenamide and siglitasodium. In terms of revenue sources, Microchip Biotech relies too much on a single product of cedarbenamide, and its sales revenue in 2022 accounts for 88.67% of the company's main business revenue. In addition, the sales of the top five customers of Microchip Biotech in 2022 will be 424.6488 million yuan, accounting for 80.13% of the total annual revenue.

Microchip Biologics released its second social responsibility report: single source of revenue, sustainable development challenges

In 2019~2022, the sales revenue of cedarbenamide accounted for the proportion of Microchip's main business revenue

Data source: Microchip Biotech Annual Report

Whether it is highly dependent on a single drug or highly dependent on large customers, it may bring business risks to Microchip Biologics, and it is difficult to achieve the "sustainable development of the company" as stated in the social responsibility report.

In fact, Microchip's net profit attributable to the parent in the past three years is in a downward trend, from 31.05 million yuan in 2020 to 17.48 million yuan in 2022. In the first quarter of 2023, the company's net profit attributable to the parent was -32.4768 million yuan (a loss of 3.732 million yuan in the same period last year). The poor performance is also reflected in the share price. Since its listing on August 12, 2019, the share price of Microchip Biotech has continued to decline, from the opening price of 125 yuan / share on the listing day to the closing price of 23.16 yuan / share on June 2, 2023, a drop of more than 80%.

In the global pharmaceutical industry, the research and development of original innovative drugs is a high-investment, high-risk, long-term but high-return industry. Microchip Biotech is in this track, and the company's revenue source has been too single for many years, which is not conducive to the sustainable development of the company.

Cover image source: Visual China - VCG21400233878

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