Charlie Munger said: "The goal I set for myself was to pursue common sense that ordinary people don't have. "Only those investors who are good at spotting some unique patterns in the market will not swim naked when the tide goes out. And the "rules" we are looking for can often be found in the financial report data.
In 2023, Sihuan Pharmaceutical (00460) will achieve operating business income of 1.861 billion yuan (unit: RMB, the same below), and operating profit of about 162 million yuan, returning to the profit track. It is worth noting that the company's medical aesthetic business performed eye-catchingly, achieving revenue of 450 million yuan during the period, a year-on-year increase of 200.3%. At the same time, the total R&D expenditure reached 578 million yuan, which began to decline year by year, and the performance entered an inflection point.
Zhitong Financial APP believes that the strong outbreak of the performance of the medical cosmetology sector marks that Sihuan Pharmaceutical has entered a new cycle of high-quality development driven by medical cosmetology + biomedicine. The value of the one-stop medical aesthetic platform is gradually released + R&D realizes the profitability elasticity, the high alpha attribute is fully revealed, and the 2.0 version of Sihuan Pharmaceutical is accelerating its launch.
Follow the trend: 3.0 marketing has emerged, and the platformization of medical cosmetology has been comprehensively advanced
Relying on the advantages of non-surgical medical means to meet the many needs of beauty seekers, light medical aesthetics based on injection beauty, optoelectronic equipment anti-aging beauty, and skin boosters have become a hot spot in China's medical aesthetic industry.
According to ISAPS (The International Society of Aesthetic Plastic Surgery), in 2022, the global volume of plastic surgery accounted for 44.3%, and the number of non-surgical procedures accounted for 55.7%. Among them, non-surgical is basically equal to light medical aesthetics. According to domestic reports, in 2022, China's medical aesthetic surgery revenue accounted for 48%, and non-surgical revenue accounted for 52%. It can be seen from the data of international societies, domestic reports, and medical aesthetic institutions that light medical aesthetics has become the dominant market in the medical aesthetic market, and there is still great potential for development.
Sihuan Pharmaceutical conforms to the general trend of the development of the medical cosmetology industry, carefully incubates a "one-stop" new medical cosmetology platform - Miyan Space, and creates a complete product matrix across the medical cosmetology value chain driven by the dual engine of "self-research + BD". At present, Miyan Space has more than 40 self-developed and exclusive agent products, including more than 10 self-developed products of class III and more than 20 self-developed products of class II.
In the view of Zhitong Financial APP, the development path of Sihuan Pharmaceutical and Medical Aesthetics is clear: firstly, it will open up the market with botulinum toxin, and secondly, it will comprehensively advance to the medical aesthetic platform with the 3.0 marketing version + full product matrix, and finally form a new accelerator for enterprise value. At present, the company's growth logic in this sector is gradually being realized.
First of all, the continuous increase in large single products has driven a substantial increase in performance. In 2023, the sales of the company's key product botulinum toxin Letibao are expected to bring more than 50% performance growth.
Secondly, 3.0 marketing has emerged, and its scale and operation have been effective. The business upgrade of the 3.0 marketing version of Sihuan Pharmaceutical is mainly through the optimization of the marketing strategy of "direct sales + agency", and through multi-dimensional and multi-session national and regional market and medical activities, to strengthen the accurate coverage and refined services of medical aesthetic institutions. On the production side, Sihuan Pharmaceutical's products cover the basic category of light medical aesthetics, and two production bases and 7 production lines have been completed to ensure that some products can be quickly industrialized after approval. On the sales side, the company's sales channels have covered more than 350 cities and more than 4,700 medical aesthetic institutions across the country, and the coverage rate of the top 500 medical aesthetic institutions has reached 100%. Thanks to the business upgrading and development, the revenue of the company's medical aesthetic division was about 92 million yuan, an increase of 2450% year-on-year, and the revenue of the medical aesthetic segment accounted for 24.2% of the total revenue, a significant increase of 17.3 percentage points year-on-year, which initially achieved the strategic goal of Sihuan Pharmaceutical's transformation and development into medical aesthetics.
Finally, the product matrix is in full bloom, and the platform potential energy is upward. In addition to improving marketing, Sihuan Pharmaceutical's product matrix is also constantly enriched, and at present, Miyan Space is the exclusive agent of overseas high-quality medical aesthetic products, such as Swiss Skin Booster, which is in the clinical process, and the exclusive agent of South Korea's Vio's dual-wave RF microneedling system has just been approved for marketing on March 19. In addition, Jingyan Biotech, a joint venture between the company and Beijing Lanjing Microbiology, a domestic synthetic biology unicorn, has also developed several next-generation light medical aesthetic products based on PHA microspheres and other regenerative medicine biomaterials during the year, and will also enter the clinical stage this year. With the abundant product reserves, the Sihuan pharmaceutical and medical aesthetic sector is expected to continue to increase the high prosperity track, and the performance growth is expected to continue.
Looking back at the development history of the international giant Allergan, it can be found that the growth path of Sihuan Pharmaceutical and Medical Aesthetics is the same as its different paths, and the strategic expansion and matrix building are the core competitive points of the enterprise, and in the future, with the enrichment of product layout and diversified marketing channel capabilities to enhance the potential energy of the platform, it is expected to consolidate the company's long-term development momentum.
Momentum rises: the two wings of the pharmaceutical industry fly together and transform steadily, and the dual growth logic continues to be deduced
The two wings of Sihuan Pharmaceutical's pharmaceutical sector are steadily transforming, among which the background of generic drugs cash cows has not changed, and the progress of innovative drugs has promoted future growth.
During the year, a total of 13 generic drugs were approved for marketing, and 8 products were included in the National Medical Insurance Catalogue. These products will bring new increments to the Group's pharmaceutical business revenue, and the background of cash bulls will not change. In addition, in 2023, Sihuan Pharmaceutical will lose weight and focus on the growth potential of innovative drugs. Driven by R&D, we will accelerate the upgrading and development of the company's pharmaceutical business to innovative drugs.
Specifically, Xuanzhu Biotech's aneprazole sodium enteric-coated tablets, as the first self-developed proton pump inhibitor class 1 innovative drug with independent intellectual property rights in China, were approved for marketing by the State Food and Drug Administration in June 2023, and were successfully included in the national medical insurance list in the same year. In addition, Xuanzhu Biotech has advanced three world-leading innovative drugs to the clinical stage, and actively explored the "overseas strategy" of products.
Huisheng Biotech has also made a number of positive progress in product research and development and new drug application applications. During the year, a total of 7 drugs including Aspart, Aspart 30 and Aspart 50 Insulin Injection were successfully approved, and a total of 5 drugs, including Insulin Degludec Aspart injection, were successfully approved. At the beginning of 2024, the Class 1 innovative drug SGLT-2 inhibitor proline plus agliflozin tablets developed by Huisheng Biotech for the treatment of type 2 diabetes mellitus has also been successfully approved for marketing. At present, the clinical phase III of semaglutide for the hypoglycemic indication of Huisheng Biotech has completed the enrollment of patients, and the indication for weight loss is currently in the preclinical research stage, and it is expected to apply for IND in the second half of this year, and the progress is ideal.
Relying on the cash and income generated by the generic drug business, Sihuan Pharma has built a pipeline of more than 60 innovative biologics, and has also built a strong three core competencies of registration, production and sales. With the continuous optimization of the structure of the pharmaceutical sector and the acceleration of the transformation and implementation of R&D achievements, the company is expected to open up new growth space.
Zhitong Financial APP believes that the dual growth logic of Sihuan Pharmaceutical continues to be deduced, and the certainty of performance growth is enhanced. First, the pharmaceutical sector is the first growth logic, with generic drugs as the cornerstone of value, which continues to generate cash flow, provide financial support for the research and development of innovative drugs, promote the transformation of Sihuan Pharmaceutical into a leading biological innovative drug research and development platform, and help the healthy development of long-term business. Second, the dual-engine acceleration of the medical aesthetic and pharmaceutical business constitutes the company's second growth logic, and the synergy of the two businesses will contribute to a stable and continuous source of income, and the profit structure will be gradually improved and upgraded.
Riding the Momentum: Strong Beta + High Alpha Attributes Fully Displayed Accelerate the Rise Configuration at the Right Time
Sihuan Pharmaceutical's strong beta + high alpha resonance, the configuration value is significant.
From the perspective of industry beta, Sihuan Pharmaceutical will enjoy the growth dividend of medical cosmetology + pharmaceutical industry. By 2022, light medical aesthetics will contribute more than half of the market size of the overall medical aesthetic market, and has surpassed the heavy medical aesthetic market and become the mainstream beauty method in medical aesthetics. Among them, optoelectronics and injection are the main project components, and it is expected that the next five years will still show a high growth rate of 20%-30%. With the release of the value of medical cosmetology platform, Sihuan Pharmaceutical will continue to seize the scale dividend of the light medical cosmetology market.
As far as the pharmaceutical sector is concerned, the rich pipeline has accumulated steadily, the breast cancer and diabetes market has broad prospects, and the company's growth prospects are relatively bright. For example, as a biopharmaceutical company with full coverage of diabetes products, Huisheng Biotech has a prominent scarcity value, a broad diabetes market in the future, and its growth momentum is abundant. According to the data disclosed by the International Diabetes Federation, in 2021, the number of adult diabetes patients in mainland China has reached 140 million, ranking first in the world, and it is expected to rise to 160 million in 2030 and 170 million in 2045.
As the pressure factors gradually disappear and the innovation results are accelerated, Sihuan Pharmaceutical will enter a new round of innovation and growth.
In addition, Sihuan Pharmaceutical has always maintained a solid financial position. As of the end of 2023, the Company's cash and cash equivalents plus wealth management products, pledged deposits and time deposits totaled approximately RMB4.610 billion. The company's operating cash flow has also always maintained a net cash inflow, reaching 200 million yuan. In addition, the net book value of the company's properties, plant and equipment was approximately RMB2.175 billion, and the total assets were approximately RMB11.535 billion.
As of the close of trading on April 8, the company's total market value was only HK $4.852 billion, far lower than the company's current assets (6.204 billion yuan), which is basically the same as the total deposits of cash and cash equivalents and wealth management products (4.610 billion yuan). It is believed that in the next few years, Sihuan Pharmaceutical will be in the accelerated growth stage of "man-made", and it will usher in sustainable growth by following the trend, building momentum, and taking advantage of the trend.