Watson Bio: BoC International Securities, BOCI Securities and other 4 institutions investigated our company on October 30

On November 1, 2021, Watson Bio (300142) issued an announcement that BOCI Securities Deng Zhouyu, BOCI Securities Shao Zihang, CITIC Construction Investment Securities Liu Ruofei, CITIC Construction Investment Securities He Juying investigated our company on October 30, 2021.

The main contents of this survey are:

Q: What was the company's operating situation in the first three quarters?

A: From January to September 2021, the company achieved a total operating income of 2.129 billion yuan, an increase of 35.90% year-on-year, and a net profit attributable to shareholders of listed companies of 364 million yuan, down 16.33% year-on-year. The factors affecting the net profit in the first three quarters mainly include an increase of about 180 million yuan in research and development expenses year-on-year, an increase in management expenses of about 70 million yuan year-on-year due to the increase in stock option incentive sharing expenses and other expenses, and a decrease of 255 million yuan in fair value change income from the same period last year, all three of which were relatively large compared with the year-on-year change in the first three quarters of last year. From the perspective of product sales, the company's vaccine product sales in the first three quarters still maintained a rapid growth trend overall. In terms of product production, the 13-valent pneumonia conjugate vaccine in the first three quarters was approved and issued 4,033,303 doses, an increase of 21.75% over the same period of the previous year, and the total number of batches issued by the company's vaccine products was 26,282,891 doses (bottles), a decrease of 26.54% over the same period of the previous year, mainly due to the decline in the number of batches of vaccines issued by the first class of seedlings. In terms of product research and development, the research and development progress of each product that the company has entered the clinical research and registration declaration is generally steadily advancing in accordance with the research and development plan, among which the quadrivalent flow brain conjugate vaccine was approved to carry out phase III clinical trials in October, and officially entered the phase III clinical research stage. In terms of international sales, the cooperation project between the company and the Moroccan partner on the export of 13-valent pneumonia conjugate vaccine to Morocco is progressing smoothly, at present, the company's registration of the 13-valent pneumonia conjugate vaccine in Morocco is underway, and the bidding work will be carried out after the registration is completed, and the export can be realized after winning the bid.

Q: What was the sales of the 13-valent pneumonia conjugate vaccine in the first three quarters, and did the sales of other vaccines change significantly?

A: The sales revenue of 13-valent pneumonia conjugate vaccine is still relatively large compared with last year, and the sales volume of 13-valent pneumonia conjugate vaccine in October is very good. The sales of the company's first-class vaccines are basically the same as last year, but because of the epidemic situation, the disease control gives priority to ensuring the vaccination of the new crown vaccine and the first-class vaccine, and at the same time, coupled with the impact of epidemic prevention and control on the vaccination work, the sales decline of the 23-valent pneumonia polysaccharide vaccine is more serious, and the sales of other second-class vaccines have also been affected to varying degrees. From a nationwide perspective, the vaccination of the original second-class vaccines of most domestic vaccine companies this year has been affected to varying degrees.

Q: Kangtai Biotech's 13-valent pneumonia conjugate vaccine is also on the market, what kind of impact will it have on the company's future sales?

A: 13-valent pneumonia conjugate vaccine is a large variety, the market space is very large, but there are currently only 3 vaccine manufacturers, with the listing of Kangtai Biological 13-valent pneumonia conjugate vaccine, market publicity efforts have been further increased, which is very helpful for improving the overall market penetration of the vaccine. From the sales of 13-valent pneumonia conjugate vaccine, in China, it is mainly necessary to further improve the penetration rate of cdchacs, as well as strengthen the first vaccination of small age groups, and the company will also cooperate with local governments to do some projects to benefit the people. At the same time, the 13-valent pneumonia conjugate vaccine is an international vaccine variety, which is a vaccine variety listed by the World Health Organization as a very high priority vaccination, and the company will continue to promote the export pace of 13-valent pneumonia conjugate vaccine and expand the international market. The company's 13-valent pneumonia conjugate vaccine in Morocco can be exported after the completion of registration and bidding, the export project will greatly enhance the company's brand and international influence, is conducive to the company's subsequent product exports continue to deepen, the formation of a good positive promotion effect. After the Moroccan partner completes the construction of the sub-packaging workshop, we will further cooperate with Morocco in the export of the 13-valent pneumonia conjugate vaccine stock solution, and the stock solution can be exported to other countries after being packaged in Morocco. The export of stock liquid is a good way to cooperate and greatly increase the export volume of products, and in this way we are also communicating with many countries on export projects.

Q: What happened to the international multicenter clinical trial of mRNA vaccines?

A: At present, clinical trials are continuing to advance, domestic phase III data is expected to come out soon, international phase III data will also come out in the future, and we have also submitted applications for sequential vaccination in individual countries abroad. In September this year, the data on the new crown mRNA vaccine at the "Second Global Science and Life Health Forum" of the 2021 Zhongguancun Forum was relatively objective, and you can go and have a look.

Q: What are the other projects developed by the company in cooperation with foreign countries? What's the current progress?

A: At present, other non-COVID-19 vaccine projects developed by the company are mainly: herpes zoster mRNA vaccine developed in cooperation with Abbott Biology, respiratory syncytial virus mRNA vaccine and influenza virus mRNA vaccine developed in cooperation with Blue Magpie Biology, and siRNA drugs for universal influenza virus developed in cooperation with Shengnuo Biology. The work of the above vaccines and drugs after entering the clinic is the main responsibility of the company, the company is the holder of the listing approval of the product, and the production and sales are the responsibility of the company, which is a deep cooperation.

Q: What is the progress of the tetravalent flow brain polysaccharide vaccine WHO-PQ?

A: At present, the on-site inspection has ended, according to the requirements of the on-site inspection, according to the WHO-PQ process, there will be a 6-month rectification period after the on-site inspection, and the rectification results will be reviewed after the rectification is completed, and the certificate will be issued after passing. The company will further accelerate the progress of the WHO-PQ for the 2-valent HPV vaccine and the 13-valent pneumonia conjugate vaccine next year.

Q: What is the progress of the declaration and production of the 2-valent HPV vaccine?

A: The three professional reviews, clinical on-site inspections, and production site inspections of the 2-valent HPV vaccine have been completed, and the last expert meeting is also over before the National Day. The follow-up CDE will submit all the information to the Drug Registry for administrative review, and according to the relevant procedures, it is expected to be listed for sale next year.

Q: Why aren't the increases in accounts receivable and operating income synchronized?

A: In the first three quarters of this year, the company's accounts receivable collection situation is relatively good, in addition to the normal collection of products sold this year, the amount of accounts receivable retained last year is also relatively large, so the growth of accounts receivable is not as large as the growth of revenue. According to the business process of China Securities Depository and Clearing Co., Ltd., the exercise money of the company's employees in September was transferred to the company's account in October, and on September 30, the exercise payment of this part has not been recorded in the account, so a relatively large balance of other receivables has been formed.

Q: How is the 2-valent HPV vaccine priced? How big is the current production capacity? How is sales considered?

A: The company will fully consider the market price of the currently listed products, the company's product positioning, pricing strategy and the synergy with the subsequent 9-valent HPV vaccine to determine the market price of the 2-valent HPV vaccine. The production workshop of the 2-valent HPV vaccine that has been built is designed to have a production capacity of about 15 million doses. In terms of sales, the initial sales management team and sales promoters will still cooperate.

Q: Are there any advantages in government procurement of vaccine products?

A: The company's vaccine product line is relatively rich, and some vaccine products have cooperation projects with local governments to benefit the people. The company has full advantages in terms of production quantity and cost control, in addition, the amount of Huimin Project is relatively stable, which will be more convenient for the company's production and batch issuance arrangements, at the same time, the sales expense rate of vaccine products of Huimin Project is low, and the profit is better guaranteed.

Q: What do you think of The Yangshengtang's entry into the top 10 shareholders of the company?

A: As of the end of the third quarter, Yangshengtang Co., Ltd. held 16.76 million shares of the company's shares, with a shareholding ratio of 1.05%, ranking 9th in the shareholding. Yangshengtang Co., Ltd.'s increase in the company's shares is a normal increase in the shareholders' secondary market, and the company will continue to pay attention to it.

Watson Biologics main business: vaccine products research and development, production, sales.

According to the third quarterly report of Watson Biology in 2021, the company's main revenue was 2.129 billion yuan, up 35.9% year-on-year; the net profit attributable to the mother was 364 million yuan, down 16.33% year-on-year; the deduction of non-net profit was 385 million yuan, down 10.96% year-on-year; among them, in the third quarter of 2021, the company's single-quarter main revenue was 779 million yuan, down 21.53% year-on-year; the single-quarter net profit attributable to the mother was 45.1745 million yuan, down 87.92% year-on-year. In the single quarter, the non-net profit was 145 million yuan, down 61.34% year-on-year; the debt ratio was 23.51%, the investment income was 58.0846 million yuan, the financial expense was -26.1407 million yuan, and the gross profit margin was 87.32%.

In the past 90 days, a total of 6 institutions have given ratings, 4 buy ratings and 2 overweight ratings; the target average price of institutions in the past 90 days has been 90.0; the net inflow of financing in the past 3 months has increased by 380 million, and the net outflow of margin has increased; and the net outflow of margin is 165 million, and the balance of margin has decreased. The Securities Star Valuation Analysis Tool shows that Watson Bio (300142) has a good company rating of 3 stars, a good price rating of 1.5 stars, and a valuation composite rating of 2.5 stars.