The gross profit margin of products continued to increase, and the performance of Luoxin Pharmaceutical bottomed out

Economic Herald reporter Duan Haitao

Luoxin Pharmaceutical Co., Ltd. (002793. SZ), which is gradually coming out of the labor pains. According to the recently released 2023 annual report and the first quarter report of 2024, Luoxin Pharmaceutical will achieve operating income of 2.364 billion yuan in 2023, of which the revenue of the pharmaceutical industry sector will be 2.074 billion yuan, a year-on-year increase of more than 43%, and the net profit attributable to the parent company will increase by 46.03% year-on-year, significantly reducing the loss, and in the first quarter of 2024, while the operating income will increase by 3.97% year-on-year, the net profit attributable to the parent company will increase by 59.37% year-on-year, and the loss will continue to shrink.

The reporter of the Economic Herald noticed that the gross profit margin of Luoxin Pharmaceutical's digestive system and respiratory system products will increase significantly in 2023, the management expenses will decrease significantly, and the cash flow will also successfully turn positive, especially in terms of innovative research and development, the new "duodenal ulcer" indication of Tigola raw tablets has been approved for marketing, the marketing application for the third indication combined with the eradication of Helicobacter pylori infection has been accepted, and the phase III clinical trial of the guanylate cyclase inhibitor pucanatide tablets has been completed, bringing more space for the company's future performance growth.

The gross profit margin of the main products increased significantly

According to the annual report data, Luoxin Pharmaceutical will achieve operating income of 2.364 billion yuan in 2023, a decrease of 34.11% over the same period of the previous year, and a net profit attributable to the parent company of -661 million yuan, a decrease of 46.03% over the same period last year.

The Economic Herald reporter learned that the decline in Luoxin Pharmaceutical's revenue is related to the company's divestment of Shangyao Luoxin (formerly Modern Logistics), a subsidiary of the pharmaceutical business sector at the end of 2022, which directly led to a year-on-year decrease of 87% in the company's pharmaceutical business revenue in 2023. However, after focusing on the main business, Luoxin Pharmaceutical's pharmaceutical industry segment will have a revenue of 2.074 billion yuan in 2023, a year-on-year increase of more than 43%, and a revenue of 689 million yuan in the first quarter of 2024, an increase of 28.17% from the previous quarter, indicating that the company's pharmaceutical industry fundamentals are rising steadily.

Luoxin Pharmaceutical said that the company's profit is still in a state of loss, mainly because the company's innovative drug business has not been able to cover its costs, and corresponding impairment provisions have been made for inventory and long-term assets in accordance with accounting policies. However, signs of improvement for the company are also emerging.

In the first quarter of 2024, the company's net profit attributable to the parent company will be -36.6616 million yuan, a loss reduction of more than 53 million yuan compared with the same period last year, and the loss reduction ratio is nearly 6 percent, so that investors are full of expectations for the company's performance to turn positive.

At the same time, a number of financial indicators such as the gross profit margin of Luoxin Pharmaceutical's products are also eye-catching. According to the disclosure, the gross profit margin of Luoxin Pharmaceutical's digestive system products in 2023 will be 64.84%, an increase of 18.41% over the previous year, the gross profit margin of respiratory system products will be 47.50%, an increase of 159.38% over the previous year, and the gross profit margin of antibiotic products will also reach 32.67%.

In 2023, the net cash flow generated by Luoxin Pharmaceutical's operating activities will be 467 million yuan, a year-on-year increase of 149.72%, and the cash flow will successfully turn positive. In addition, Luoxin Pharmaceutical's management expenses in 2023 decreased by 25.08% compared with the same period of the previous year, and the financing scale decreased from 3.5 billion at the end of 2022 to less than 1.5 billion in 2023, and financial expenses decreased by 46.74% year-on-year. The company's asset-liability ratio also decreased from 59.26% at the beginning of 2023 to 49.73% at the end of the year, and the proportion of short-term borrowings to interest-bearing liabilities decreased significantly by 67.60%.

Breakthroughs continue to be made in the research and development of innovative drugs

The reporter of the Economic Herald learned that as an enterprise that has been ranked as one of the "Top 100 Chinese Chemical Pharmaceutical Enterprises" for 17 consecutive years and one of the "Top 20 Innovative Pharmaceutical Enterprises in China" for five consecutive years, Luoxin Pharmaceutical has continued to deepen the field of digestion in recent years and continuously improve product competitiveness through R&D and innovation.

According to reports, Luoxin Pharmaceutical's innovative drug Tegola Shengpian (trade name: Taixinzan ®) for the treatment of reflux esophagitis was approved in 2022, which is China's first self-developed potassium ion competitive acid blocker (P-CAB), realizing self-research and self-production from raw materials to preparations, The product is the first chemical class 1 innovative drug in Shandong Province, which belongs to the national "major new drug creation" science and technology major special achievements, and won the "first prize of Shandong Province Technological Invention Award".

In November 2023, the new indication of "duodenal ulcer" was approved for the marketing of Tigola raw tablets, and the marketing application for the indication of "eradication of Helicobacter pylori in combination with appropriate antimicrobial therapy" was accepted. In addition, a phase III clinical trial of the guanylate cyclase inhibitor pukanatide tablets for functional constipation has been completed and the primary efficacy endpoint has been met. The LX22001 of the new drug under development for injection has made phased progress, and the new drug research application (IND) has been accepted, and phase I./II./III. clinical studies for multiple indications are planned.

In 2023, Luoxin Pharmaceutical has also made significant progress in a number of generic drug R&D projects, including loxoprofen sodium dispersible tablets passing the consistency evaluation, new generic drugs rivaroxaban tablets, urapidil hydrochloride injection and valacyclovir hydrochloride tablets were approved, of which urapidil hydrochloride injection won the bid in November 2023, and sulbactam sodium raw materials and pantoprazole sodium raw materials were approved, realizing the continuous improvement of the quality of marketed APIs and the cost-effective improvement of the self-production and supply of existing preparation varieties of APIs.

The Economic Herald reporter learned that up to now, Luoxin Pharmaceutical has listed more than 150 varieties and more than 300 specifications of products, forming a rich and competitive product portfolio. In addition to increasing the self-development of innovative drugs, Luoxin Pharmaceutical is also actively promoting the cooperative development of innovative products, the authorized introduction of mature products, and the overseas layout of its own products.

In March this year, Luoxin Pharmaceutical reached a strategic cooperation with Shenzhen Unknown, an AI+BT microecological R&D company, to lay out the field of intestinal microbiota transplantation (FMT). Shenzhen UnknownJun has licensed the intestinal microbiota transplantation treatment solution to Luoxin Pharmaceutical, and carried out exclusive commercialization cooperation within the agreed regions and channels between the two parties to jointly accelerate the commercialization process of FMT treatment.

It is reported that the field of microecology is becoming a field for multinational pharmaceutical giants, such as Pfizer, Roche, Johnson & Johnson, etc., and public information on domestic government websites shows that "microbiota transplantation is becoming a new track in the field of biomedicine, with a global market segment of about 50 billion US dollars." Industry analysts said that the cooperation between Luoxin Pharmaceutical and Shenzhen Unknown Jun will help the two sides jointly tap this vast domestic blue ocean market.