The Two-wheel Drive Strategy of Medical Aesthetics and Biopharmaceuticals Achieved Corporate Business Transformation and Development
Leveraging on the Three Core Capabilities of Registration, Production, Sales, the Group Helps and Accelerates the Launching and Commercialization of the High-quality Product Pipelines of Sihuan Medical Aesthetics and Pharmaceuticals Segments
30 August 2022,Sihuan Pharmaceutical Holdings Group Ltd. is pleased to announce its interim results for the 6 months ended 30 June 2022 (the “Period”).In the first half of 2022, the Group continued to excavate in the field of medical aesthetics, further diversified its product pipeline, and expanded in the key medical aesthetics field, as well as enhanced its product sales capabilities, increased its sales channel coverage, strengthened its services to downstream end institutions, and provided more sales supports and medical trainings.
Due to the impact of the continued development of the domestic epidemic and policy changes of the pharmaceutical industry in the first half of the year, the Group recorded a total revenue of RMB1,464.2 million, the medical aesthetic business segment achieved a revenue of RMB 98.6 million, the generic drug business segment achieved a revenue of RMB1,233.0 million, operating profit amounted to RMB 230.2 million. The Group continued to ramp up the investment in R&D to create a pipeline of over 100 medical aesthetic and biopharmaceutical products. It rapidly promoted the R&D progress of the Group’s product pipeline, accelerated the product industrialization and gradually realized value amplification. During the Period, the total R&D expenses amounted to RMB 457.3 million. In thanking Shareholders’ and investors’ support, the Board declared an interim dividend of RMB0.1 cents per ordinary share and a special cash dividend of RMB3.2 cents per ordinary share.
Huisheng Biopharm completed Round A equity financing, which attracted a total investment amounted over RMB500 million, with a post-investment valuation of RMB5 billion. This was a further round of financing for the Group’s biopharmaceutical segment following Xuanzhu Biopharm’s Round B financing of RMB610 million in 2021,which fully demonstrated the recognition of the R&D capabilities, product pipelines, management team, future industrialization and commercialization capabilities of the Group’s two innovative and biological drug platforms from the capital market, as well as proved the high valuation of the product pipelines of the Group’s two biopharmaceutical segments.
1. MeiYan KongJian：Transformed from single product distribution sales model into a one-stop medical aesthetic platform with its product layout covering the whole life cycle.
Relying on the extensive coverage of institutional channels built in the past year, the focus of product sales of MeiYan KongJian this year is on in-depth exploration. During the Period, MeiYan KongJian improved its service quality for key accounts to further empower the sales channels and entered into strategic cooperation agreements with leading institutions, with the premise of ensuring sales of the whole year, it provided more sales support solutions.
Through the overall layout of “direct sales and distribution”, MeiYan KongJian not only has strengthened the ability to serve high-quality major customers to further empower the sales channels, but also kept continuous increase in the number of institutions covered. Furthermore, the doctor training system is gradually built through the medical department to improve and facilitate the resources binding of doctors.
During the Period, MeiYan KongJian continued to build its medical aesthetic product matrix and to provide non- or minimally invasive medical aesthetic comprehensive solutions through further layout in filling, supporting, supplementing, optoelectronic devices, skin care and other areas. MeiYan KongJian entered into an exclusive distribution agreement with VIOL from South Korea in respect of the SYLFIRM XTM golden microneedle ( 黃 金 微 針 ) product and obtained the exclusive distribution right of the product in Mainland China, Hong Kong and Macau, and later has entered into an equity transfer agreement and a capital increase agreement with Shenzhen Yimei and its original shareholder to invest in Shenzhen Yimei by way of equity transfer and capital increase both can show the long development of triple pattern space in the field of medical aesthetics field.
In January 2022, the Group formed a joint venture with Bluepha Co., Ltd , a Chinese unicorn company in the field of synthetic biomaterials, to jointly develop PHA microspheres, the next-generation regenerative material, and bio-manufacturing-based regenerative medical materials, entering into the blue ocean of synthetic biology field in advance. In March 2022, MeiYan KongJian, has recently reached an exclusive distribution agreement in relation to Cellbooster® series products with Suisselle SA (“Suisselle”) from Switzerland, and obtained the exclusive distribution rights for the products in mainland China, Hong Kong, Macau and Taiwan.
2. Innovative Drug and other business segments: Successfully achieved the innovative transformation from traditional generic drug companies to biopharmaceutical companies, and promote the upgrading and development toward a leading biopharmaceutical company in China at full speed
The Group has continuously deepened the development of the biopharmaceutical segment, accelerated the rapid development of product R&D and capital market operation of Xuanzhu Biopharm and Huisheng Biopharm, and simultaneously promoted the further integration and development of CDMO business segment. During the Period, Xuanzhu Biopharm, a leading innovative drug enterprise focusing on oncology drugs, made breakthroughs in multiple product R&D, and simultaneously promoted the process of spin-off and listing on the STAR Market, continuing to promote innovative drives. The fourth-generation insulin degludec injection, a blockbuster product of Huisheng Biopharm, became the first domestic product that has applied for an NDA in China, further establishing the position of Huisheng Biopharm as the biopharmaceutical leader with full product coverage in the field of diabetes and complications.
Sihuan further integrates and divests assets and resources of CDMO business, implements the integrated CDMO two-wheel drive strategy of API + formulation, and is committed to providing global customers with leading integrated solutions with special APIs as the core and undertaking high-end CDMO businesses. The three platforms in the innovative drug and other business segment have developed side by side based on their respective advantages and paces, driving the Group to continue its innovation and transformation, and laying a solid foundation for building a leading biomedical company in China.
2.1 Xuanzhu Biopharm: One of the companies with the most comprehensive layout in the breast cancer track in China and a leading biopharmaceutical company in China with comprehensive innovative drug development capabilities in the fields of small molecules and macro molecules
During the Period, two indications of Birociclib (XZP-3287 CDK4/6 (cyclin-dependent kinases 4 and 6) inhibitor), the class I new drug candidate of Xuanzhu Biopharm, have entered into phase III clinical trials in combination with aromatase inhibitor and fulvestrant. In July 2022, the marketing application for fulvestrant of Xuanzhu Biopharm was also accepted by NMPA. In the same month Xuanzhu Biopharm’s self-developed Anaprazole Sodium Enteric Dissolve Tablets obtained approval from the NMPA on the investigational new drug (IND) application of phase II clinical trials for the treatment fornew indication of reflux esophagitis (RE) in adults and the control of its associated symptoms (acid reflux, heartburn, retrosternal pain or discomfort, belching reflux, etc.). In May 2022, Xuanzhu Biopharm has successfully received IND approval from NMPA for its application of capsuleXZB-0004, a highly potent and highly selective AXL inhibitor, in clinical trial on advanced solid tumors and hematologic malignancies. In March 2022, the application for the class 1 macro molecules innovative drug XZP-KM257 (recombinant anti-HER2 domain II and domain IV bispecific antibody injection), independently developed by Xuanzhu Biopharm, has been approved successfully by the NMPA to initiate clinical trials for the treatment of advanced solid tumors with intermediate and high expression of HER2+.In June 2022, Xuanzhu Biopharm and Shanghai SPH New Asia Pharmaceutical Co., Ltd. reached an agreement on exclusive license of APIs and formulations of two new anti-infection drugs, Benapenem and Plazomicin in the Greater China Territory (including Mainland China, Hong Kong SAR, Macau SAR and Taiwan).
During the Period, the Board of Directors of the Company made an important decision unanimously to spin off the shares of Xuanzhu Biopharm for applying for listing on the STAR Market of the Shanghai Stock Exchange. The Group believes that the spin-off will help Xuanzhu Biopharm further become an independent innovative drug R&D platform company with direct access to debt and equity capital markets, thereby increasing the financial flexibility of Xuanzhu Biopharm and enhancing its ability to raise external funds, to support the rapid growth and industrialization of its business.
2.2 Huisheng Biopharm: The biopharmaceutical leader with full product coverage in the field of diabetes and complications
Huisheng Biopharm is a biopharmaceutical company under the Group focusing on the field of diabetes and complications. At present, the NDA of the insulin degludec injection, the fourth-generation insulin analogue developed by Huisheng Biopharm, was accepted by NMPA. It is the first domestic fourth-generation insulin analogue, the insulin degludec, that has applied for an NDA having been accepted in China after the original drug Tresiba®. At the same time, the NDA of Janagliflozin developed by Huisheng Biopharm has been accepted by the NMPA. It is the second domestic SGLT-2 inhibitor, a Class 1 innovative drug, that has submitted an NDA in China and with the application having been accepted. Besides, the NDA of Insulin Aspart Injection, Insulin Aspart 30 Injection and Insulin Aspart 50 Injection developed by Huisheng Biopharm also have been accepted by the NMPA.
Huisheng Biopharm is one of the two innovative drug platforms meticulously incubated by the Group. Targeting the diabetes and complications market with huge potential in China, in the future, with the gradual implementation of Huisheng Biopharm’s product pipelines and the continuing emergence of innovative products, Huisheng Biopharm will become a biopharmaceutical leader in China to achieve full product coverage in the field of diabetes and complications, reaching continuous value amplification.
2.3 CDMO of Sihuan Pharmaceutical: Implementing an integrated CDMO two-wheel drive strategy of API + Formulation to help launch innovative drug products and significantly enhance the competitive barrier of the innovative drug segment
The CDMO business segment of Sihuan Pharmaceutical is an integrated CDMO service platform of high-quality API + formulation meticulously incubated by the Group. Since 2020, the Group has actively revitalized its redundant API production resources and production capacity from its subsidiaries to optimize the ratio of input and output, and achieve business transformation and upgrade, which has achieved preliminary results. In the first half of 2022, the Company has integrated its premium API/advanced intermediates production bases and Aohe Research Institute for unified management to enhance its R&D technical strength and industrial transformation capabilities. Relying on a team highly experienced in the development and industrialization of high-end APIs, the Company has built a high-standard production management system and implemented an integrated CDMO two-wheel drive strategy of API + formulation. The Company is committed to providing global customers with leading integrated solutions focusing on special APIs and high-end CDMO business.
Sihuan Pharmaceutical has successfully transformed and upgraded its CDMO business in the first half of 2022. It has gradually developed from serving the leading CDMO companies in China for the customized production of advanced intermediates in the early days to providing CDMO services to end customers of pharmaceutical companies, including listed companies with international influence. Meanwhile, relying on the Group’s pharmaceutical formulation companies, it has gradually formed an API + formulation integrated CDMO business.
The Group reorganized original APIs business segment, optimized input and output, and transformed and upgraded the business from general APIs to high-end special APIs.
3. Generic drugs: Proposed disposal of some or all generic drugs that do not meet performance expectations or do not meet long-term strategic development objectives and other non-core traditional pharmaceutical or healthcare businesses and assets, so as to fully optimize and upgrade the Company’s asset structure and enhance its long-term financial performance
The generic drug business has been the Group’s steady “cash cow” in the past. However, the Group’s generic drug business has completed its “historical mission” after a long period of platform cultivation and incubation over the past decade, during which the Group’s innovative drug and medical aesthetics businesses gradually matured with products beginning to generate revenues, and each platform starting to operate separately and gaining independent financing capabilities.
The Group believes that after the selective disposal of the traditional generic business which bears declining profitability and is materially affected by policies, the overall profit structure of the Company will be optimized and improved efficiently; meanwhile, with the income from cash assets generated from the disposal of the relevant business, a series of “cages” are vacated for the Group to make room for innovative businesses and further focus its management and corporate resources on the medical aesthetics segment with high growth and profitability, and the biopharmaceutical segment with high value growth, so as to solidly implement the Group’s two-wheel drive strategy of “medical aesthetics + biopharmaceuticals”, improve the efficiency of the Group’s resource allocation and enhance the Group’s mid- to long-term financial performance.
In the first half of 2022, the Group has disposed of the entire equity interest in Beijing Xuansheng Pharmaceutical Co., Ltd., the Group’s important strategic initiatives are in fact fully in line with the past developing trends and layout of leading international pharmaceutical giants. Through the reorganization and integration of key businesses and the separation of non-core businesses, the Group is able to focus more on two major strategic segments, namely the medical aesthetics and biopharmaceuticals and enhance the efficiency of resource allocation. In addition, these initiatives also bring more clarity to the Group’s valuation system and fully demonstrate the long-term value that the innovative drugs plus medical aesthetics business system can bring to the Group after the disposal of the generics business, thus helping to maximize shareholders’ value.
Dr. Che Fengsheng, Chairman and Executive Director of Sihuan Pharmaceutical Holdings Group commented: “The Group will continue to focus on the two major business segments of medical aesthetics and biopharmaceuticals to further upgrade its corporate value in 2022 based on the high growth in 2021.
As the “star” business of the Group, MeiYan KongJian, a medical aesthetics platform, will accelerate the upgrading and development of 2.0 version for marketing and sales, strengthen its capacity as an international medical aesthetics platform integrated with R&D, production and sales, and with a full product matrix covering the life cycle of beauty seekers. It will continue to launch and register a number of products while continuously optimizing the layout of production capacity, enriching the content of marketing service, and enhancing the capability of connecting with quality major customers and the empowerment of sales channels, to further ensure the high growth of revenue, earnings, team and network coverage. Looking forward to the future development direction of the Group’s medical aesthetic business, we will leverage on the development experience from international giant Allergan and achieve the goal of building a leading platform of the domestic medical aesthetic industry through comprehensive product matrix, “self-developed + BD” dual engine-driven and overseas high-quality mergers and acquisitions.
Xuanzhu Biopharm will accelerate the spin-off and listing on the STAR Market while continuing to
promote the product R&D and introduce industry-leading technology and blockbuster products. It will insistently adhere to independent R&D and continuous innovation. It aims at transforming the R&D investment into profit and from Biotech to Biopharma, so as to become a leading innovative drug company focusing on the field of tumor drugs as well as small molecules and macro molecules with the capabilities to develop comprehensive innovative drugs in China.
Huisheng Biopharm has successfully completed its Round A financing of RMB500 million, establishing its valuation to RMB5 billion. In the future, Huisheng Biopharm will advance the R&D of diabetes pipelines to guarantee the leading position of various innovative products in terms of the R&D and registration. Through a complete layout of multi mechanisms, multiple varieties of diabetes pipelines, it continues to provide full coverage and comprehensive treatment solutions. With its localized production and cost advantages and leveraging the sales advantages of Sihuan Pharmaceutical, it will further achieve the strategic goal of building a biopharmaceutical leader in the field of diabetes and complications with a full product matrix coverage.
Relying on the team with extensive high-end API development and industrialization experience, the Group will build high-standard production management system for CDMO business, implement the integrated CDMO two-wheel drive strategy of API + formulation, expand from the tailor-made production of advanced intermediates to providing CDMO services to pharmaceutical companies as end customers, transform and upgrade from the common API business to special high-end API business. Quality domestic and foreign customers will be constantly introduced as the Group is committed to providing global customers with leading integrated solutions with special APIs as the core and undertaking high-end CDMO businesses.
Generic drug segment of the Group will continuously implement the disposal of some or all generic drugs that do not meet performance expectations or do not meet long-term strategic development objectives and other non-core pharmaceutical or healthcare businesses and assets. However, for products and businesses that still have high growth or have key growth potential, they will continue to remain within the Group’s system and serve as a stable source of cash income together with the medical aesthetics business. The Group believes that these strategic measures for the generic drug business segment will further improve the efficiency of the Group’s resources allocation, enhance the mid- to long-term financial performance, allow the Company to focus on the medical aesthetics and biopharmaceutical business segments, so as to promote the further release of enterprise valuation.”
Sihuan Pharmaceutical Holdings Group Ltd.
Founded in 2001 and listed on the Main Board of the Hong Kong Stock Exchange Limited in 2010, Sihuan Pharmaceuticals Holdings Group Ltd. (“Sihuan Pharmaceutical” or the “Company”, together with its subsidiaries the “Group”) (HKSE: 00460.HK) is an international pharmaceutical company led and driven by both innovation and generic, with an independent and leading independent research and development (“R&D”) technology platform, a rich global product pipeline and a mature and excellent sales system. Focusing on high-growth therapeutic areas such as oncology, metabolic diseases, medical aesthetics, anti-infectives, digestive system, cardiovascular and cerebrovascular, Sihuan Pharmaceutical is building a leading medical aesthetics and biopharmaceutical leader in China with a two-wheel drive strategy of independent innovation and research and incubation to cultivate high growth new businesses.