On April 22, Chengda Biology (688739. SH) released its 2023 annual report, which showed that the company's revenue was 1.750 billion yuan, down 3.58% year-on-year, net profit attributable to the parent company was 466 million yuan, down 34.75% year-on-year, and non-net profit was 413 million yuan, down 37.99% year-on-year.
Compared with 2022, the company's revenue decline in 2023 has slowed down, but the decline in net profit has accelerated and has regressed to the level of 2016.
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However, another reason for the accelerated decline of net profit is that the company made an asset impairment of 123 million yuan during the reporting period, including a bad debt loss of 13.089 million yuan for receivables, a loss of 56.4081 million yuan for inventory decline, and an impairment of 53.3971 million yuan for long-term equity investment.
At the end of 2023, among the top ten circulating shareholders of Chengda Biologics, the new Bosera SSE Science and Technology Innovation Board 100 Exchange-traded Open-ended Index Securities Investment Fund and Penghua SSE Science and Technology Innovation Board 100 Exchange-traded Open-ended Index Securities Investment Fund replaced Hao Jianjun and Shanghai Orient Securities Innovation Investment Co., Ltd. at the end of the third quarter. In addition, GF Securities Co., Ltd.'s shareholding increased, and Hong Kong Securities Clearing Co., Ltd.'s shareholding decreased.
The next day after the results, Chengda Bio opened low and went high, closing up slightly by 0.77%, with the latest total market value of 11.519 billion yuan.
Caught in a growth bottleneck, net profit continued to "reverse"
Chengda Biopharma is a biopharmaceutical company focusing on the R&D, production and sales of human vaccines, which was spun off from Liaoning Chengda (600739. SH) settled on the Shanghai Stock Exchange, is the first stock of rabies vaccine in China, and its growth almost relies on rabies vaccine as a variety.
In 2023, the revenue of Chengda Biologics' human rabies vaccine (Vero cell) will be 1.643 billion yuan, a year-on-year decrease of 6.93%, accounting for 93.86% of the operating income. During the period, the sales volume of rabies vaccine decreased by 9.71% year-on-year, and the inventory increased by 14.42%.
The decline in products accounting for more than 9% of revenue is the main reason for the negative growth of the company's overall revenue. Regarding the decline in the company's overall revenue, Chengda Bio also pointed out in the annual report that it was mainly due to the intensification of competition in the human rabies vaccine market.
However, the revenue of Chengda Bio's rabies vaccine for human use has been declining for two consecutive years, and the revenue in 2022 will decrease by 15.43% year-on-year to 1.765 billion yuan.
Going back, since 2018, Changchun Changsheng was punished and forced to delist for freeze-dried human rabies vaccine fraud, the domestic supply of rabies vaccine has been insufficient, at that time, there were three main suppliers of domestic rabies vaccine, among which Ningbo Rong'an and Guangzhou Noelson had their own conditions, and Chengda Biology became the market winner.
But the situation has gone to the other end in recent years. In 2023, 11 domestic vaccine companies will receive batch issuance of rabies vaccine for human use, and the market will enter a stage of oversupply. According to the relevant batch issuance data of China Inspection, the batch issuance of rabies vaccine for human use in 2021 will be 88 million, and the batch issuance of 912 batches in 2022 will still be at a high level, and 703 batches will be issued in 2023, and the batch issuance of the industry will decline.
In 2023, 256 batches of Chengda Bio's rabies vaccine will be issued in batches, with 5.96 million batches issued, corresponding to 227 batches and 5.15 million copies in 2022. While last year's batch issuance volume increased, it did not bring in more revenue.
In the face of intensified competition, in order to maintain the No. 1 position in market share, the operating cost of Chengda Bio's rabies vaccine for human use will increase by 20.91% in 2023, and the gross profit margin will decrease by 3.88 percentage points to 83.15%, which is also one of the factors for the company's overall poor profitability.
Another reason for the accelerated decline in the net profit of Chengda Bio in 2023 is the large provision for asset impairment of 123 million yuan - the asset impairment caused by the joint venture hitting the pig cycle head-on, the increase in the provision for the decline in the inventory of another vaccine product, and the loss of bad debts of receivables of 13.089 million yuan.
According to the annual report, Chengda Bio conducted an impairment test on the long-term equity investment of its associate Chengdu Shiji Biopharmaceutical, and made an impairment provision of 53.3971 million yuan for long-term equity investment. The annual report pointed out that the main products of Chengdu Shiji are animal vaccines related to pig breeding, due to the obvious elongation of the current round of pig cycle, the industry has lasted for nearly three years at the bottom, as the upstream enterprise of the pig industry, Chengdu Shiji has also incurred losses.
In addition, Chengda Biologics' inactivated Japanese encephalitis vaccine (Vero cell) was 3.1456 million pieces, amounting to 52.3468 million yuan, and 4.0613 million yuan was provided for the inventory decline of human rabies vaccine.
Since Chengda Biotech was listed in 2021, its profit has been "reversed", and it has been negative profit growth for three consecutive years, and at the same time, the company's share price has also plummeted, with an issue price of as high as 110 yuan, and the closing price on April 23 was only 27.66 yuan, and it also probed to 24.61 yuan on February 5 this year, setting a new low for listing.
Where is the path back to growth?
Among the two existing products on sale focusing on Chengda Biologics, the inactivated human JE vaccine is growing rapidly but accounts for a small proportion of revenue, and is still in the market development period.
JE is a zoonotic natural epidemic disease caused by neurotropic virus, and the existing vaccines include live attenuated vaccines and inactivated vaccines, of which the market size of live attenuated JE vaccine is about 20 million doses per year, which is mainly produced and supplied by Chengdu Institute and Wuhan Institute under Sinobio Group. Chengda Biotech's inactivated Japanese encephalitis vaccine is an inactivated Japanese encephalitis vaccine injected intramuscularly, with two dosage forms: lyophilized and prefilled, and is the only inactivated Japanese encephalitis vaccine in production and on sale in the domestic market.
In 2023, the company's revenue from inactivated Japanese encephalitis vaccine for human use will be 107 million yuan, a year-on-year increase of 114.86%. During the same period, Chengda Bio's sales expenses increased by 7.83% year-on-year to 398 million yuan. In this regard, the company alleged that on the one hand, it was due to the fierce market competition and challenges faced by the rabies vaccine for human use, and on the other hand, it was due to the large expenditure on the promotion of the inactivated Japanese encephalitis vaccine.
Looking at the pipeline under development, Chengda Bio's main products under development include human diploid vaccine, quadrivalent/trivalent influenza vaccine, 15-valent HPV vaccine, 13-valent and 20-valent pneumococcal vaccine, recombinant herpes zoster vaccine, group B flow vaccine, multivalent hand, foot and mouth vaccine, rabies monoclonal antibody, etc.
Among them, the three companies in the phase III clinical trial stage of the development of human diploid vaccine, quadrivalent influenza vaccine, hib vaccine, the fastest progress is the human diploid vaccine has completed the phase III clinical trial work, and obtained the clinical trial summary report, is carrying out pre-registration pre-registration communication (Pre-NDA) with the Center for Drug Evaluation of the State Food and Drug Administration, the company said that it will make every effort to promote the product to be listed as soon as possible.
However, the growth volume that this cumulative investment of 227 million yuan can bring about by the diploid seedling pipeline should be questioned.
In 2023, 703 batches of rabies vaccine will be issued as a whole, 597 batches of Vero cell rabid vaccine will be issued, a year-on-year decrease of 22%, of which 256 batches will be issued by Chengda Biologics, and only 78 batches of human diploid rabid vaccine, a year-on-year decrease of 26%, all from Kanghua Biologics.
Vero cell seedling track, there are 8 companies participating, Chengda Biology is the "leader", which is also its main product line that cannot be raised due to fierce competition, human diploid seedling track In 2023, only one company of Kanghua Biology has been approved, and in the third quarter of last year, Kangtai Biology's human diploid seedling was also approved for listing.
On the one hand, judging from Kanghua Biotech's 2023 annual report, its human diploid rabid seedling generated revenue of 1.425 billion yuan, and Chengda Bio's Vero cell rabid seedling, which has been operating for several years, generated 1.643 billion yuan, which is comparable.
On the other hand, if the human diploid wild vaccine of Chengda Biology is approved, compared with the Vero cell wild seed, the competitive environment is relatively mild, but this market will also be in a state of decline in 2023, and the new competitor of Kangtai Biology, which has stronger production capacity and marketing capabilities, cannot be ignored, which casts a shadow on the growth brought by the human diploid wild seedling to Chengda Biology.
Chengda Bio's R&D expenses in 2023 increased by 38.06% to 419 million yuan, and it is obvious that the company hopes that the products under development will run out of the dark horse of growth.
(This article was first published in Titanium Media App Author丨Yang Yaru Editor丨Sun Cheng)