Watson Bio's third-quarter net profit fell by more than 80% year-on-year the process of commercialization of mRNA vaccines

Per reporter: Chen Xing Per editor: Tang Hui

On the evening of October 28, the three quarterly reports released by Watson Bio (300142, SZ) surprised many investors.

The strong reaction of investors stemmed from the fact that Watson Bio achieved operating income of 779 million yuan in the third quarter of this year, down 21.53% year-on-year; net profit attributable to shareholders of listed companies was 45.175 million yuan, a year-on-year decline of 87.92%. After the opening of the market on October 29, Watson Bio fell sharply, and as of the close of the day, Watson Bio reported 55 yuan / share, down 4.96%.

The "Daily Economic News" reporter noted that, or affected by the grass-roots vaccination of the new crown vaccine, in addition to the 13-valent pneumonia conjugate vaccine and a few varieties of batch issuance volume remained rising, the number of batches issued by many varieties declined.

<h2>The overall batch issuance of Yuxi Watson vaccine products decreased by 26.54% year-on-year</h2>

On the evening of October 28, Watson Bio released the third quarter report of 2021.

During the reporting period, Watson Bio achieved operating income of 2.129 billion yuan, an increase of 35.90% year-on-year; net profit attributable to shareholders of listed companies was 364 million yuan, down 16.33% year-on-year. But more noteworthy is the performance of Watson Bio in the third quarter, in the third quarter, Watson Bio achieved operating income of 779 million yuan, down 21.53% year-on-year; achieved a net profit attributable to shareholders of listed companies of 45.175 million yuan, a year-on-year decline of 87.92%.

This performance data has surprised many investors of Watson Biology. After the opening of the market on October 29, Watson Bio fell sharply, and as of the close of the day, Watson Bio reported 55 yuan / share, down 4.96%.

What is the reason for the decline in Watson Bio's performance? The reporter noted that from the perspective of the company's operating expenses, the management and research and development expenses of Watson Biology in the first three quarters have been greatly improved. Among them, R&D expenses increased by 118.19% year-on-year to 335 million yuan; management expenses increased by 700 million yuan due to equity incentive amortization, a total increase of 250 million yuan.

If the growth rate of R&D and management expenses and revenue growth rate are at the same pace, Watson Bio's non-net profit in the first three quarters of this year will be much better than the current data.

From the perspective of specific vaccine products, in the first three quarters, Watson Bio's batch of 13-valent pneumonia conjugate vaccine was issued 4.033 million doses, an increase of 21.75% over the same period of the previous year; Yuxi Watson vaccine products decreased by 26.54% over the same period of the previous year, mainly due to the decline in the number of dtAP vaccine batches.

The reporter noted that in addition to the 13-valent pneumonia conjugate vaccine and AC conjugate vaccine, AC polysaccharide vaccine batch issuance volume increased year-on-year, other varieties of vaccine batch issuance volume showed a year-on-year decline.

The main reason for the decline in the number of vaccine batches issued by the above-mentioned varieties should be that the focus of grass-roots vaccination is still COVID-19 vaccination, and other varieties of vaccination have decreased.

The 2-valent HPV vaccine that has attracted much attention from Watson Bio is being declared for production and is in the review stage; the 9-valent HPV vaccine, the new coronavirus mRNA vaccine, and the recombinant new crown vaccine are still in the clinical research stage.

It is worth noting that as of the end of the third quarter, Yangshengtang Co., Ltd., controlled by Zhong Shui, appeared in the list of the top ten shareholders of Watson Biologics. According to the financial report, Yangshengtang Co., Ltd. holds 16.76 million shares of Watson Biology, accounting for 1.05%.

<h2>Progress in mRNA vaccine development is key</h2>

As a new crown mRNA vaccine concept stock, Watson Biotech's mRNA vaccine research and development progress has attracted much attention. InBev, the founder of its partner Aibo Biologics, said in April this year that the vaccine will be put into production in the third quarter of this year, and it is expected to release 120 million doses of production capacity, all of which will be produced by Watson.

However, at present, there is no news that the Watson biological mRNA vaccine has been put into production. From 2020 to 2021, the investment progress bar of the third phase of its Yuxi Watson Vaccine Industrial Park has always remained at 99.56%. However, the reporter also noted that in the three quarterly reports, the amount of construction projects under construction of Watson Bio increased significantly compared with the semi-annual report, and its follow-up products may have progressed in putting them into production and listing.

However, the concept stock of the new crown vaccine that was once hot in the capital market has been frequently cold in recent months. In the past three months, the cumulative decline of CanSino, Fosun Pharma and Watson Bio has reached 53%, 29% and 24% respectively.

As far as the public progress of Watson's mRNA vaccine is concerned, it also faces fierce competition.

On July 21 this year, ARCoVaX (ARCoV), developed by Watson Biology and Aibo Biology and the Military Medical Research Institute of the Academy of Military Sciences, registered a Phase III clinical trial at the China Clinical Trial Registry Center. At present, the project has obtained approval for Phase III clinical trials issued by the drug regulatory departments of mexico, Indonesia and Nepal. On the 22nd of this month, Kingsley Vigorous Biologics, Aibo Biologics and Watson Biologics announced that the three parties have reached a cooperation on the BLA (Biological Product Licensing Application) declaration and commercial production of the mRNA vaccine project (hereinafter referred to as "ABO-028M"). Watson Bio is the main applicant for the ABO-028M project, and Jinsrui Boom Biotech will provide exclusive services for the commercial production of plasmids in the ABO-028M project.

In the mRNA vaccine, Watson Bio also needs to compete with Fosun Pharma "Fu bi thai". In addition, the number of participants in other technical routes is also increasing. Clover has recently disclosed data from Phase II/III clinical trials in the development of a recombinant protein COVID-19 vaccine. Biotech company Edi Weixin has developed the only DNA vaccine in clinical trials, and its technology was introduced from the American vaccine company Inovio. At present, both companies have launched the Hong Kong stock listing plan.

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