On the evening of April 17, Haixiang Pharmaceutical (002099. SZ) announced that its wholly-owned subsidiary, Chuannan Pharmaceutical, received the GMP certificates for clindamycin hydrochloride API and clindamycin phosphate API issued by the Ministry of Health and Consumer Protection (BJV) in Hamburg, Germany. This marks that the company's related products meet the access qualifications of the EU market, which will help the company to explore the high-end market in Europe and the United States and expand its business scale.
Although the subsidiary has passed the EU GMP certification, Haixiang Pharmaceutical's performance in 2023 will turn from profit to loss, which is really unacceptable to investors. According to the performance express data, Haixiang Pharmaceutical expects a net loss of 350 million yuan to 430 million yuan in 2023, compared with a profit of 88.0137 million yuan in the same period last year.
Lanfu Finance and Economics noticed that the prices of Haixiang Pharmaceutical's core products have been declining, the development of the pharmaceutical sector has encountered difficulties, and the revenue of other products is also "shrinking", and the company's sustainable development ability has been widely questioned.
The price of core products has declined, and the development of the main business has been hindered
Looking through the data of the annual reports of previous years, it can be found that this is the second loss of Haixiang Pharmaceutical since its listing in 2003, and the last loss occurred in 2013.
According to public information, Haixiang Pharmaceutical, located in Taizhou, Zhejiang, is a listed company holding in Donggang Group that produces characteristic APIs, preparations and fine chemicals, dyes and dye intermediates, and is also one of the top 100 innovative enterprises in the national pharmaceutical industry.
Regarding this loss, Haixiang Pharmaceutical said that the amount of asset impairment provisions to be made in 2023 is expected to be 180 million yuan to 235 million yuan, which will have a greater impact on the company's net profit attributable to the parent company.
Clindamycin series and penem series are the flagship products of Haixiang Pharmaceutical's API and pharmaceutical intermediates business. In the 2023 performance forecast, Haixiang Pharmaceutical made it clear that in 2023, affected by factors such as changes in the international situation and intensified competition in the API industry, the sales volume of Penem series products will be the same as in 2022, but the sales price will drop sharply, and the dye industry will continue to be sluggish, and the profitability of the company's core products will be under pressure.
It is understood that penem is an atypical β-lactam antibiotic, which is effective in the treatment of complicated urinary tract infections, bronchopulmonary infections, complex intra-abdominal infections, lower respiratory tract infections, gynecological infections and other infections. They are often used as a "last line of defense" or "antibiotic of last resort" when infected patients are seriously ill or suspected of carrying drug-resistant bacteria.
According to the API quotation data in September 2023 compiled by Southwest Securities, the latest price of Penem drug 4-AA was 1,100 yuan/kg, a year-on-year decrease of 35.3%, and its historical highest price reached 2,600 yuan/kg. The price trend of this type of drug has also affected the profitability of Haixiang Pharmaceutical's Penem series products.
Regarding the price trend of penem drugs, Haixiang Pharmaceutical believes that since penem drugs are cyclical products, their prices may fluctuate greatly, which will have a greater impact on the company's performance. In the third quarter of last year, the price of penem drugs may have bottomed out, and there is a trend of rebound in the future. At the same time, the company is also working hard to connect with the original research manufacturers, hoping to further improve the profit structure of the company's penem drugs.
In fact, the pharmaceutical sector is the core business of Haixiang Pharmaceutical (revenue accounts for 73.01%), but the revenue and gross profit margin of this segment have declined.
According to the 2023 semi-annual report, Haixiang Pharmaceutical's pharmaceutical segment achieved revenue of about 874 million yuan, a year-on-year decrease of 15.51%, and a gross profit margin of 22.77%, a decrease of 8.24 percentage points compared with the same period last year. By product, the company's API and pharmaceutical intermediates products achieved revenue of about 771 million yuan, a year-on-year decrease of 16.9%, and a gross profit margin of 18.5%, a decrease of 9.74 percentage points compared with the same period last year.
Other business revenues also declined, and preparations have not yet achieved profitability
In addition to APIs and pharmaceutical intermediates, dyes and pigment intermediates, contract customization business, preparations and other products also contributed to Haixiang Pharmaceutical's revenue. However, the revenue of these three products accounted for a relatively small proportion, 26.99%, 8.59%, and 0% respectively.
In the first half of 2023, the revenue of Haixiang Pharmaceutical's dyes and dye intermediates, contract customization business, preparations and other products all declined, with year-on-year declines of 25.59%, 1.98%, and 99.21% respectively.
Among them, the most shocking is the formulation products. According to the disclosure, Haixiang Pharmaceutical's preparation products achieved revenue of 11,946.90 yuan, a year-on-year decrease of 99.21%, and the gross profit margin was -141.35%, a decrease of 153.82 percentage points compared with the same period last year.
Haixiang Pharmaceutical said that the company is striving to promote the integration of API intermediate preparations, optimize the layout of the industrial chain, and enrich the product sequence through consistency evaluation. In the first half of last year, the company's voglibose tablets (0.2mg specification) obtained the "Drug Registration Certificate" issued by the State Drug Administration, which is deemed to have passed the consistency evaluation. Digestive pantoprazole sodium enteric-coated tablets and hypoglycemic repaglinide tablets have been submitted to the CDE for review, and the sterile powder injection project is advancing as planned and is in the verification stage before registration and approval.
It can be seen that Haixiang Pharmaceutical's preparation business is still in the early stage of registration and verification, and Haixiang Pharmaceutical still has a long way to go if it wants to expand its revenue on preparation products.
The only thing that is slightly gratifying is that Haixiang Pharmaceutical's CMO/CDMO business has maintained a relatively good momentum. In the 2023 performance forecast, the company pointed out that the new projects of strategic customers continued to perform well, the sales volume of the company's products for the transmission of new indications for drugs increased by nearly 200%, and at the same time, other cooperation projects were smoothly promoted, making up for the impact of the patent cliff of existing projects.
Lanfu Finance has learned that due to the greater impact of the patent cliff of the previous stock projects on the company, the growth of new projects of strategic customers may offset it. However, the exact growth is still unknown and will not be known until the company's official annual report is released. According to the disclosure, Haixiang Pharmaceutical will release its 2023 annual report and 2024 first quarter report on April 29.
How can the stock price trend be reversed in the future?
In the secondary market, since October 2023, Haixiang Pharmaceutical's share price has been in a volatile downward trend.
As mentioned above, Haixiang Pharmaceutical released its 2023 performance forecast at the end of January this year, and its net profit suffered a large loss. Just a few trading days before the release of the performance forecast, Haixiang Pharmaceutical's share price fell sharply.
From February to March this year, Haixiang Pharmaceutical's share price finally ushered in a rebound. However, the good times were short-lived, and its share price fell again in early April. The cumulative decline in the stage is more than 41%.
As of press release on April 18, Haixiang Pharmaceutical fell 0.71% to 5.60 yuan per share.
At the same time as the performance forecast, Haixiang Pharmaceutical also disclosed the announcement of the company's chairman proposing to buy back. Wang Yangchao, chairman of Haixiang Pharmaceutical, proposed that the company repurchase the company's shares through centralized bidding transactions, with a total repurchase fund of not less than 50 million yuan and no more than 100 million yuan.
Obviously, Haixiang Pharmaceutical hopes to boost investors' confidence and show the company's optimism about future development prospects by repurchasing shares. However, the total amount of funds for this buyback is relatively small, and the company's operation is indeed facing considerable difficulties, and the performance has turned from profit to loss, which makes investors complain.
Next, how to reverse the decline as soon as possible and restore investor confidence needs to think carefully.