Shuangcheng Pharmaceutical (002693, SZ), which once ranked the eighth in the market share of synthetic peptide drugs in China, has not been able to get out of the weak performance since the net profit turned from profit to loss in 2016. As of 2008, the net profit of Shuangcheng pharmaceutical has been negative after deducting non post profit for three consecutive years. Shuangcheng pharmaceutical disclosed the problems faced by the company's product development and sales in its reply to the annual report inquiry letter of Shenzhen Stock Exchange on the evening of June 6.

In the whole year of 2018, the main products of Shuangcheng pharmaceutical industry, the new operating revenue of thymus injection method decreased by 27.33 million yuan compared with 2017, and the overall operating revenue of polypeptide products decreased by 17% year on year. Shuangcheng pharmaceutical said that due to policy reasons in the past three years, the company's new product launch lags behind, and the old product is facing greater competitive pressure, which has a negative impact on the company's net profit after deducting non profits. Shuangcheng pharmaceutical believes that the two peptide varieties that have been declared for conformity assessment in China and more varieties that may pass the conformity assessment in the future are the hope of improving the company's performance.

Net profit decreased by 1200% year on year in 2018

According to the 2018 annual report of Shuangcheng Pharmaceutical Co., Ltd., the company's main business is the production, sales and R & D of chemical synthetic peptide drugs. At present, it has successfully developed four chemical synthetic peptide drugs in the Chinese market. Among them, the main polypeptide drugs are thymus injection, bivarutine injection and somatostatin injection.The reporter of "daily economic news" learned that at present, peptide drugs produced by domestic manufacturers mainly include peptide APIs, peptide compounds, customized peptide drugs, etc., for example, more than 20 peptide drugs developed by Hanyu Pharmaceutical (300199, SZ), a leading Chinese peptide drug company, have been able to cover the fields of APIs, preparations, high-end chemicals, etc.

According to the 2018 annual report of Shuangcheng Pharmaceutical Co., Ltd., the annual revenue was 337 million yuan, a year-on-year increase of 37%; while the net profit loss attributable to the shareholders of the listed company was 69.46 million yuan, a year-on-year decrease of 1200%. In the annual report inquiry letter, the exchange paid attention to the reason why Shuangcheng pharmaceutical industry "increased revenue but not increased profit" throughout the year. In response to this, Shuangcheng pharmaceutical said that the reason is that the increase of the company's sales expense far exceeds the increase of revenue, the increase of management expense year on year, and the decrease of investment income by 50.16 million yuan year on year.

The reporter studied the company's sales expenses and found that in 2018, the sales expenses increased by nearly 80 million yuan, but the operating revenue only increased by 90.47 million yuan, which swallowed up the company's profits. A similar situation also occurred in Hanyu pharmaceutical. In 2018, the company's operating revenue only increased by 1.46% year-on-year, but its sales expenses increased by 47.81%. Intensified product competition is the common reason mentioned by the two companies.

"Waterloo" in the acquisition of Hangzhou AoYaAfter the listing of Shuangcheng pharmaceutical in 2012, the net profit has always been hovering below 70 million yuan. In 2015, it can be called the turning point of Shuangcheng pharmaceutical, and it is also "Waterloo". In the context of merger and acquisition of Daniel market, Shuangcheng Pharmaceutical Co., Ltd. has also joined the ranks of merger and acquisition, and one shot is a large project close to 1.5 billion yuan. In February of that year, the company announced that it planned to purchase Hangzhou AoYa, one of the largest freeze-dried powder injection processing outsourcing enterprises in China at that time, with a net profit of no less than 360 million yuan in 2015-2017.

It seems that the beautiful M & a transaction will soon encounter setbacks. In February 2016, Shuangcheng pharmaceutical announced the termination of the acquisition of Hangzhou AoYa. The reason is that the policy changes of the pharmaceutical industry in 2015 have a great impact on the performance of Hangzhou AoYa. But at this time, because 46% of the shares of Hangzhou AoYa have been acquired, Shuangcheng pharmaceutical industry has been "riding the tiger". According to the 2015 annual report of Shuangcheng pharmaceutical, the net profit of Hangzhou AoYa was 51 million yuan, only about half of the promised performance.

By 2016, the situation had turned sharply. According to the annual report of that year, the valuation of Hangzhou AoYa dropped from 1.47 billion yuan a year ago to 450 million yuan, and Shuangcheng pharmaceutical also accrued a large amount of goodwill impairment reserves. The net profit loss of that year was 388 million yuan, while the accumulated net profit of the company in the four years of listing was only 246 million yuan, and the loss in one year was 50% more than the accumulated profit generated in the four years of listing.

In the first battle of AoYa in Hangzhou, Shuangcheng pharmaceutical industry suffered "great loss of vitality" and deducted non net profit as loss for three consecutive years since 2016.Shuangcheng pharmaceutical explained that in the past three years, due to policy changes, the company's new product launch lags behind, the old product faces greater market competition pressure, and the subsidiary has not yet been put into production, resulting in a large fixed cost. As a result, the company's net profit after deducting Non Profits continues to be negative.

Lack of follow-up research and development of highly dependent single products

Behind the weak performance, in addition to the "heavy losses" caused by the merger and acquisition of Hangzhou AoYa, the company's high dependence on the main product thymus innovation is also an important reason. According to the company's annual report in 2017, the proportion of thymus method new preparation in the operating revenue is as high as 67%. In 2018, the proportion of thymus method new preparation in the operating revenue decreased to 31% due to the volume of agent product taurochordeoxycholic acid capsule and other reasons. However, it should be noted that in 2017, the new sales revenue of thymus injection method was 165 million yuan, while in 2018, the sales revenue decreased to 131 million yuan. In the context of sales expense growth of only 80 million yuan, the revenue of main products decreased significantly.

According to people's livelihood weekly, in 2018, Henan announcement resource trading center asked Shuangcheng pharmaceutical to implement thymus method in Tianjin market price was rejected, and then the product was removed from the large quantity catalog of Henan drug centralized bidding platform. The reporter of "daily economic news" inquired the website of the State Drug Administration and found that there are 9 domestic thymus injection new manufacturing enterprises, among which the industry leader Hanyu pharmaceutical similar products obtained the "drug registration approval document" in February 2019. In the context of medical insurance and fee control, more cities will follow up the "4 + 7" urban volume procurement, which will further intensify the market competition, and the performance of Shuangcheng pharmaceutical industry will face further tests.
In addition, taurochordeoxycholic acid capsule, which achieved nearly 80 million yuan of revenue in 2018, is an agent of Hainan Weile Pharmaceutical Co., Ltd., a subsidiary of Shuangcheng Pharmaceutical Co., Ltd. for Italian imported drugs, with low gross profit rate and less contribution to performance.

Over the years, the R & D investment of Shuangcheng pharmaceutical industry is insufficient, resulting in a single product structure. According to statistics, the company invested only 87 million yuan from 2016 to 2018. When replying to the inquiry letter of Shenzhen Stock Exchange's annual report, the company disclosed that at present, the main research and development projects are only pantoprazole sodium for injection used for the treatment of duodenal and gastric ulcer, etc. the product has completed laboratory research and is in the stage of verification batch stability inspection. In addition, in January this year, the company obtained the approval document for drug registration of bevaludine for injection approved and issued by the State Food and Drug Administration for the previously developed bevaludine API and its preparation project, and now has received the acceptance notice for consistency evaluation issued by the State Food and drug administration.

Shuangcheng Pharmaceutical Co., Ltd. said that in view of the company's continuous loss, it plans to speed up the consistency evaluation of the two main varieties of thymus injection and bevaludine injection in the future. At present, the two varieties have passed the approval of the national registration place of the original research drug (Europe and America), and the quality has reached the same level as the original research drug. After passing the consistency evaluation in the future, the company will be greatly improved Competitive power.

In addition to the products that have been listed, what are the products Shuangcheng pharmaceutical is planning to apply for consistency in the future? Wang Chengdong, chairman of Shuangcheng pharmaceutical, was interviewed by a short message from the reporter of daily economic news, but no reply was received as of the date of publication, while the staff of the Securities Department said that "the content of the subsequent announcement shall prevail".

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