Kangchen Pharmaceutical's core product revenue decreased by 25% Research and development expenses fell by 14.4% The single problem of products remains unsolved

Yangtze River Business Daily reporter Xu Jia

Kangchen Pharmaceutical (603590.sh), which relies on one product to go global, has experienced a decline in performance due to the reduction in demand for core products under the influence of the epidemic.

According to the annual report, in 2020, Kangchen Pharmaceutical achieved operating income of 809 million yuan, a year-on-year decrease of 24.14%; net profit attributable to shareholders of the parent company (net profit, the same below) was 183 million yuan, a year-on-year decrease of 31.09%. Due to the decrease in revenue and collection, the net cash flow generated by the company's operating activities during the reporting period was 58.4055 million yuan, a decrease of 77.71% year-on-year.

The reporter of Changjiang Business Daily noted that under the influence of the epidemic, Kangchen Pharmaceutical, which already had a single problem of product structure, decreased sales as a core product "Su Ling", which made the company's performance decline last year.

In 2020, kangchen pharmaceutical's operating income from injectable viper hemothrombin (Su Ling) was 792 million yuan, a year-on-year decrease of 24.76%, accounting for 97.97% of the current revenue.

It is worth mentioning that Kangchen Pharmaceutical, which has always emphasized the research and development of innovative drugs, has a research and development expenditure of 93.1072 million yuan in 2020, a year-on-year decrease of 14.41%, which is also the first time that the company's research and development expenses have declined after listing.

Net profit declined for the sixth consecutive quarter

In fact, the overall post-listing performance of Kangchen Pharmaceutical has not been as good as before the listing.

The Reporter of Changjiang Business Daily noted that from 2017 to 2019, Kangchen Pharmaceutical achieved operating income of 591 million yuan, 1.022 billion yuan and 1.066 billion yuan respectively, an increase of 70.58%, 73.08% and 4.28% year-on-year; net profit was 479 million yuan, 264 million yuan, 266 million yuan, an increase of 149.84%, -44.88% and 0.81% year-on-year.

Among them, in March 2017, Kangchen Pharmaceutical sold 49% of the equity of Sinopharm Kangchen to Sinopharm, generating an investment income of 352 million yuan, making the company reach the peak of performance in 2017. However, after listing on the main board of the Shanghai Market in August 2018, due to the lack of this equity transfer income in the current period, the net profit of Kangchen Pharmaceutical in the first year of listing decreased significantly.

After deducting non-recurring gains and losses, from 2017 to 2019, Kangchen Pharmaceutical achieved net profits of 169 million yuan, 188 million yuan and 235 million yuan respectively, an increase of 0.6%, 11.05% and 24.71% year-on-year.

On March 22, Kangchen Pharmaceutical disclosed its annual report that in 2020, the company achieved operating income of 809 million yuan, a year-on-year decrease of 24.14%; net profit of 183 million yuan, a year-on-year decrease of 31.09%; net profit after deducting non-recurring gains and losses of 150 million yuan, a year-on-year decrease of 35.93%.

For the sharp decline in performance, Kangchen Pharmaceutical explained that it was mainly due to the reduction of the company's sales revenue affected by the epidemic during the reporting period. At the same time, due to the impact of the epidemic on sales revenue and the reduction of payment collection, the net cash flow generated by kangchen pharmaceutical's operating activities in 2020 was 58.4055 million yuan, a year-on-year decrease of 77.71%.

In addition, due to the decrease in profits, the company's basic earnings per share last year were 1.15 yuan, a decrease of 30.72% year-on-year, and the weighted average return on net assets was 6.51%, a year-on-year decrease of 3.74 percentage points.

However, the Yangtze River Business Daily reporter noted that from the perspective of single-quarter performance, the decline in the performance of Kangchen Pharmaceutical has appeared as early as 2019.

According to the data of Tonghuashun, in the third quarter of 2019, the net profit growth rate of Kangchen Pharmaceutical turned from positive to negative, and in the following six quarters, the company's solid net profit was 54.2993 million yuan, 62.3844 million yuan, 32.2335 million yuan, 70.8226 million yuan, 38.7019 million yuan and 41.6007 million yuan, a year-on-year decrease of 3.79%, 41.69%, 34.45%, 29.34%, 28.72%, and 33.32%, all of which were negative growth.

The production and sales of the core product "Su Ling" have dropped by more than 20%

In the A-share market, there are not many companies that rely on a single product to go the world, and Kangchen Pharmaceutical is one of them. The company's core product "Su Ling" is currently the only national first-class new drug in the domestic hemothrombin preparation market, which is a high-purity, single-component snake venom hemothrombin preparation, mainly used in surgical hemostasis.

As early as before the listing, Kangchen Pharmaceutical has repeatedly reminded the company of the risk of a single product, saying that because the company's current research and development of products under development and the listing of sales still need a certain time and have certain uncertainty, so it is expected that "Su Ling" will still be the company's revenue and profit source in the future period of time, if the competition in the "Su Ling" market segment intensifies or the market environment changes significantly, it will adversely affect the company's future profitability.

According to the annual report, in 2020, the operating income of Kangchen Pharmaceutical from the blood coaguloid of the viper for injection was 792 million yuan, a year-on-year decrease of 24.76%, accounting for 97.97% of the current revenue. The gross profit margin of the product was 94.56%, a decrease of 1.18 percentage points year-on-year.

Under the influence of the epidemic, due to the "Su Ling" as a surgical hemostasis drug, due to the decrease in surgical patients, sales volume was affected to a certain extent, and Kangchen Pharmaceutical, which already had a single product structure, failed to resist the decline in performance.

From the perspective of production and sales, the production and sales volume of the company's injectable viper hemocoaguloids during the reporting period were 2.6642 million boxes and 2.632 million boxes, respectively, a year-on-year decrease of 22.17% and 24.58%. The inventory volume was 45,000 boxes, an increase of 189.16% year-on-year.

In addition, due to the single product type structure, Kangchen Pharmaceutical has also been facing the risk of relatively concentrated procurement channels, and the concentration has shown an increasing trend. In 2020, the company's procurement volume from the top five suppliers totaled 34.6855 million yuan, accounting for 84.74% of the total annual procurement. In 2018 and 2019, the company's procurement volume from the top five suppliers accounted for 74.07% and 78.79% respectively.

The reporter of Changjiang Business Daily also noted that Kangchen Pharmaceutical, which has always flaunted its commitment to the research and development of innovative drugs, is not as strong as in the past in research and development investment. In 2020, the company's research and development expenses were 93.1072 million yuan, a year-on-year decrease of 14.41%, which was also the first time that the company's research and development expenses fell after listing.

However, in order to broaden the product structure, in April last year, Kangchen Biologics, a subsidiary of Kangchen Pharmaceutical, acquired 100% of the equity of Tailing International after business restructuring with 900 million yuan in cash to achieve the acquisition of "miguel interest" assets and obtain the commercialization rights of teriparatide to enter the orthopedic drug market.

At that time, the counterparty promised that the net profit of the Migai-related business from 2021 to 2023 would not be less than 0.8 billion yuan, 100 million yuan and 120 million yuan respectively. If the performance is successfully completed in the future, it will play a strong supplementary role in the existing profitability of Kangchen Pharmaceutical.