Revenue and Profit Attributable to Owners are RMB 1, 907.2 million and RMB 611.4 million, respectively Representing an Increase of 80.9% and 307.6%
Two-wheel Drive Strategy in Sihuan Medical Aesthetics and Biopharmaceuticals Building a Leading Medical Aesthetics and Biopharmaceutical Company
Sihuan Pharmaceutical Holdings Group Ltd. is pleased to announce its interim results for the 6 months ended 30 June 2021 (the “Period”). Sihuan Pharmaceutical has successfully built a leading medica l aesthetic s and high quality pharmaceutical company through implementing a strong forward looking layout during its early years. Overcoming policy and environmental disruptions in the Group’s traditional main business in recent years, the Group successfully strengthened its market position as a medical aesthetic and high quality pharmaceutical company. During the Period, the Group recorded total revenue of RMB1,907.2 million, representing an increase of 80.9% over the total revenue of RMB1,054.5 million for the same period in 2020. During the Period, the Group achieved a gross profit of approximately RMB1,467.1 million, representing an increase of 86.6% year-on-year. The Group achieved a profit for the Period from continuing operations of RMB594.2 million, representing a significant increase of 252.2% year-on-year. The Group achieved a profit attributable to owners of the Company of RMB611.4 million, representing a significant increase of over 307.6% year-on-year.
The increase in revenue was mainly due to the Group’s new medical aesthetic products segment which realized revenue of RMB257.9 million. The medical aesthetics segment’s strong sales performance was mainly driven by Letybo® which was officially launched in February 2021. Letybo®, an injectable type A botulinum toxin manufactured by Hugel, is the number one selling botulinum toxin product in South Korea for five consecutive years. Moreover, the Group’s generic medicine segment recorded revenue of RMB1191.1 million from products not included in the National Key Drug List for Monitoring and Prescription Control (Chemical and Biological Products) (“Non-Key Monitoring List Products”), representing a year-on-year increase of 122.0% over the same period in 2020 and accounting for 78.9% of the total revenue of the generic medicine segment, representing a year-on-year increase of 19.2 percentage points over of the 59.6% for the same period in 2020. It proves that the Group’s Non-Key Monitoring List Products, which accounted for higher proportion in the Group’s revenue from generic medicine has achieved high growth, and the Group’s pharmaceutical sales has entered into the turning point of its performance results.
During the period, the Group achieved a profit for the year from continuing operations of RMB594.2 million, representing a significant increase of over 252.2% year-on-year; the overall net profit margin was 31.2%, compared to net profit margin of 16.0% in 2020, the increase in net profit margin was mainly due to the significant growth in the Group’s revenue and gross profit in the period and the lower growth rate of R&D expenses and administrative expenses as compared to the growth rate of total revenue.
During the period, the Group’s R&D expenses amounted to RMB333.6 million, representing an increase of 10.9%year-on-year, mainly due to the increasing R&D expenses as a number of products in the pharmaceuticals segment entered Phase II and Phase III clinical trials.
The Group’s financial position remained solid. As at 30 June 2021, the cash and cash equivalents plus wealth management products was approximately RMB5.310.1 million, and the cash and cash equivalents plus wealth management products, net of interest-bearing borrowings and other borrowings, amounted to RMB4,470.2 million. The Group's debt-to-equity ratio remained low at 8.2%.
Laid Out and Meticulously Incubated 5 Major R&D, Production and Marketing Platforms
The Group adhered to its overall strategic objective of “building a leading medical aesthetics and biopharmaceutical enterprise in China through innovation and promoting a two-wheeled drive strategy in Sihuan medical aesthetics and biopharmaceuticals”, and meticulously incubated five major R&D, production and marketing platforms. The blockbuster product Letybo®, exclusively distributed by the Group’s medical aesthetic platform Beijing MeiYanKongJian Biology Medicine Co., Ltd (“MeiYanKongJian”), also the No. 1 botulinum toxin product in South Korean, was launched at the China AI conference for Letybo® in February 2021 as it commenced sales in Mainland China. During the period, propelled by the cost effectiveness characteristics of Letybo®, the Group received enthusiastic response from the market, realised a rapid coverage to Chinese top medical aesthetic institutions during the Period. Letybo® achieved a strong performance of 257.9 million in revenue, helping the medical aesthetic platform to strengthen its position as a domestic first-class medical aesthetics company.
The Group continued to exert its strength in the pharmaceutical business as the innovative drug platform Xuanzhu Biopharmaceutical Co., Ltd (“Xuanzhu Biopharm”) ushered in an explosion with its innovation-driven performance continuing to increase. Jilin Huisheng Biopharmaceutical Co., Ltd. (“Huisheng Biopharmaceutical”), which focuses on full solutions for diabetes and complications, achieved exceptional progress, The R&D of the core products of the two platforms has made rapid progress, and a number of products have made positive and rapid breakthroughs in clinical progress, further accelerating the pace of product launching. The generic drug R&D platform also continues to maintain high-efficiency and high-quality in terms of R&D and registration process. A number of products have been approved one after another, covering a comprehensive, professional and efficient academic marketing platform, providing super strong "realization" capability for the launching of new products. During the period, the Group promoted the sales of Non-Key Monitoring List Products and achieved revenue of RMB1190.7 million, representing a significant increase of 122.0% year-on-year, which continued to drive the Group 's performance into an upward cycle.
In addition, the active pharmaceutical ingredients (“APIs”) platform, Jilin Kangtong Pharmaceutical Group Co., Ltd (“Jilin Kangtong”) continued to enhance Sihuan Pharmaceutical’s competitive advantages in the overall chemical generic drug industry chain and its integrated strategy of “APIs + contract development and manufacturing organization (“CDMO”) + formulation.” The Group’s subsidiary Jilin Sihuan Aokang Pharmaceutical Co., Ltd. (“Aokang Yaoye”) continued to advance its scientific research planting qualification for industrial hemp and to focus on strengthening its position in the field of high-quality modern Chinese medicine. With continuous advancement of the five major R&D, production and marketing platforms business, the Group further implemented its aim of building a leading medical aesthetic and biopharmaceutical company in China.
Medical Aesthetic Platform Dedicates to Build China’s Leading Medical Aesthetic Company
The Group's meticulously incubated medical aesthetic platform made remarkable progress in recent years. With the increased sales from Letybo®, Sihuan medical aesthetic products segment became one of the first-tier medical aesthetic platform in China. Letybo® officially commenced sales in Mainland China in February 2021 and achieved revenue of approximately RMB257.9 million as a result of the Group’s strong online and offline sales network. As of end-July, Letybo® was available in over 1,800 medical aesthetic institutions, of which nearly 400 are among the top 500 medical aesthetic institutions. The Group is confident that it will achieve its target of covering 3,000 medical aesthetic institutions by the end of the year and capture 30% of the botulinum toxin market share in China within three years.
During the period, the Group entered into an exclusive distribution agreement with Dongbang Medical Co., Ltd to introduce two types of products from South Korea to China: absorbable suture and incontinence sling kit. Both products have been approved in the PRC and are ready for sale. During the period, Meiyen Laboratory Inc, an American subsidiary of the Group, entered into a strategic cooperation with the American company Genesis Biosystems to obtain the exclusive distribution rights for its LipiVage® fat collection system in Greater China (mainland China, Hong Kong, Macau, Taiwan) and South Korea. The inclusion of these products into the Group’s medical aesthetic platform not only enriches and expands the product portfolio, but also demonstrates the Group’s effective product layout strategy to diversify and internationalize.
In addition to distributing botulinum toxin Letybo® and a number of overseas medical aesthetic products, the Group places great emphasis on product R&D and transformation. The Group set up a medical aesthetic product research institute in Southern California, USA, to research and develop new medical aesthetic technologies with high technical barriers. Manufacturing will be done domestically in an effort to fully maximise the synergies of combining international technologies and local manufacturing as it creates Sihuan medical aesthetic’s proprietary quality medical aesthetic product pipeline. The Group is also conducting independent research and development on medical aesthetic products in China. Currently, there are more than 10 products under development, including PLLA injections, PCL injections, collagen-based products and lipolysis products. All of these medical aesthetic products are expected to be approved and launched within the next 3-4 years, which when combined with Letybo® will form a broad medical aesthetic product offering to better serve institutions and consumers.
Continual Independent Innovation and R&D Drives Strategic Transformation into an International Biopharmaceutical Leader
With national policies increasingly supporting pharmaceutical innovation, the speed of launching new drugs is accelerating, further driving the booming development of the innovative drug industry, especially in regards to independent innovation. The Group has positioned itself to maximize this opportunity by creating strong synergies with its highly efficient platforms, including integrating its low cost and full dosage form production platform, and a comprehensive, professional and efficient academic marketing and sales platform.
Firstly, Xuanzhu Biopharm is the core driver of the Group’s innovation driven, as well as transformation and upgrading. It is also one of the few innovative drug companies among large pharmaceutical companies that can realise its spin-off potential. Xuanzhu Biopharm has always adhered to its own R&D path, it does not rely on license-in or contract research organisations (CROs), and has the ability to focus on its continuous innovation and production. Currently, Xuanzhu Biopharm has an extensive product pipeline with over 25 products under development, focusing on a number of therapeutic areas such as oncology, metabolism, anti-infection and digestion, and is committed to the development of Class 1.1 innovative drugs. In the oncology field, Xuanzhu Biopharm focuses on two major diseases: breast cancer and lung cancer. For breast cancer, Xuanzhu Biopharm developed a comprehensive layout for the main targets of breast cancer, making it the company with most comprehensive layout in breast cancer in China. The blockbuster product Birociclib, an independently developed CDK4/6 inhibitor for advanced breast cancer, has started the single agent registrational clinical trial. In addition, its clinical studies of 1st and 2nd line therapy in combination with AI and fulvestrant have completed phase I clinical trials. The clinical study of 2nd line therapy in combination with fulvestrant is in phase III clinical trial. Moreover, Xuanzhu Biopharm completed its acquisition of Beijing Combio Pharmaceutical Inc. (“Combio Pharmaceutical”) in early 2021. The company has two antibody technology platforms, “Mab Edit” (antibody editing) and “MebsIg” (antibody editing bispecific antibodies); its main products include KM257, a bispecific antibody drug targeting bile duct cancer, breast cancer and gastroesophageal cancer, and KM254-ADC, a broad-spectrum anti-tumour antibody drug targeting breast cancer with low HER2 expression, gastric, colorectal and lung cancers. As the leading bispecific ADC in China and the first patent-pending bispecific ADC in China, KM254 has the potential to be first-in-class. In other therapeutic areas, Xuanzhu Biopharm’s self-developed proton pump inhibitors (PPIs), has completed phase III clinical trial and is ready to apply for NDA. As Xuanzhu Biopharm further enriches its product pipeline and advances in product development, it is expected to become a leading biopharmaceutical company in China with comprehensive innovative drug development capabilities in both small and large molecule areas, and the capability to conduct independent R&D on both bispecific antibody and bispecific ADC drugs.
In addition, Huisheng Biopharmaceutical was established in 2014. After years of rapid development, Huisheng Biopharmaceutical now owns a rich product pipeline with strong production, marketing and R&D capabilities. With the prevalence of diabetes increasing in China, there is a large market opportunity in the domestic diabetes market. Currently, Huisheng Biopharmaceutical focuses on the R&D, production and sales of drugs for diabetes and complications. Its pipeline has more than 40 products, of which a number of products are in phase I to phase III clinical trials. The new Class 1.1 drug Janagliflozin has completed phase III clinical trial and is ready to apply for NDA. The fourth-generation Insulin Degludec Injections is in phase III clinical trial and is ahead of similar competing products in development. Insulin aspart injections, Insulin aspart 30 injection and Insulin aspart 50 injection, have completed phase III clinical trials and are preparing for NDA filing. Being the first in China with its advanced research and development progress, insulin degludec and insulin aspart injections have been approved for clinical trials. With the launch of numerous heavyweight products over the next three years and the continued growth of the diabetes market in China, Huisheng Biopharmaceutical targets to reach over RMB10 billion sales in the future. Underpinning the Group’s extensive R&D pipeline is Huisheng Biopharmaceutical’s R&D team, which has more than 200 members. Its core members have over 10 to 20 years experiences in multinational pharmaceutical companies or local leading diabetes companies, and have led more than 20 projects in diabetes treatment. Moreover, Huisheng Biopharmceutical has prioritised a strong production capacity. Its production capacity is among the largest in China with an annual production capacity of 150 million units when in full operation and can support the production needs for RMB15 billion sales. In terms of sales, relying on Sihuan Pharmaceutical’s system, Huisheng Biopharmaceutical will establish a direct sales + distribution, offline + online sales network to fully cover over 10,000 hospitals nationwide and actively explore online/ retail terminals to gain a broader market share. During the period, Huisheng Biopharmaceutical entered into a strategic cooperation agreement with Porton Pharma Solutions Ltd. (“Porton Pharma”) on 27 April 2021. Pursuant to the strategic cooperation agreement, Huisheng Biopharmaceutical and Porton Pharma will strategically cooperate in developing and supplying active pharmaceutical ingredients and related preparations therapeutics for diabetes and products for associated complications. The strategic cooperation will enhance the competitiveness for both Huisheng Biopharmaceutical and Porton Pharma, and well as provide mutual enrichments and benefits.
In addition to further promoting the development of innovative drugs, the group also continued to promote the R&D Progress of generic drugs. The Group’s generic drug R&D platform has over 100 products under development, including 53 high-end generic drugs with high technical barriers. Additionally, a number of the Group’s products already obtained approvals from the NMPA. During the period, the Group promoted the sales of Non-Key Monitoring List Products and achieved revenue of RMB1190.7 million, representing a significant increase of 122.0% year-on-year and increasing its proportion to 78.9% over total revenue in generic medicines. Among them, key products such as nicotinamide injection, monoammonium glycyrrhizinate and cysteine and sodium chloride injection (Huineng®) and niacin injection (Shucheng®) achieved strong revenue growth. The Group believes that it will experience continued growth in sales of Non-Key Monitoring List Products and continued increase in its proportion over total revenue as a result of its 53 high-end generic drugs with high technical barriers in the R&D pipeline which provides a constant stream of drugs to be submitted for approval and launched for sale. The generic medicine segment entered a turning point of sales and will continue to grow, contributing to the Group’s strong and continuous cash flow which will be used to support sustainable development of the Group’s overall business.
New Business Incubation to Drive Growth Momentum in the Future
In 2018, the Group seized a new development opportunity in industrial hemp. It prioritised a comprehensive layout to launch its industrial hemp business in Jilin Province. Focusing on the R&D and industrialization of high-content CBD medicinal and medical materials, the Group’s subsidiary Aokang Yaoye is currently the only enterprise in Jilin Province that has obtained the qualification to grow industrial hemp with high CBD content. Aokang Yaoye also has a strategic cooperation with the Institute of Bast Fibre Crops of the Chinese Academy of Agricultural Sciences (“IBFC-CAAS”), and jointly established the “Northern Industrial Hemp Research Center”. It is committed to building an R&D, production and marketing centre of industrial hemp in north China.
Benefiting from global capacity transfer and domestic policy dividends, China’s CDMO market is expected to reach US$52.6 billion in 2024. In 2020, the Group revitalised its redundant API production resources and production capacity from its subsidiaries, integrated the business of some subsidiaries and established Jilin Kangton, and adhered to implement the integrated strategy of “APIs + CDMO + formulation” as it aims to become a leading integrated CDMO company for pharmaceutical intermediates and APIs. Currently ,Jilin Kangtong has more than 100 overseas customers, including Kaneka, the largest generic drug pharmaceutical company in Japan, Hanmi and Dong-A, two of the top three generic drug pharmaceuticals in South Korea, and more than half of the top 20 factories in India. They all have established long-term friendly cooperative relations with Jilin Kangtong. Additionally, Jilin Kangtong has nearly 50 domestic customers, including Jiangsu Hengrui Medicine Co.,Ltd., Jiangsu Chia Tai-tianqing Pharmaceutical Co., Ltd., Lianzijiang doctors and doctors, Yangtze River Pharmaceutical Group, and Sichuan Kelun Pharmaceutical Co.,Ltd.
Future Prospects
Dr. Che Fengsheng, Chairman and Executive Director of Sihuan Pharmaceutical Holdings Group commented, “The year 2021 is the first year of Sihuan Pharmaceutical to implement its 2.0 version of its two-wheeled drive strategy in medical aesthetics and biopharmaceuticals. It is also the year when the company entered its turning point of realizing strong growth. The Sihuan Pharmaceutical’s management team will never forget our original ideals and aspirations as we adhere to being a friend of time. We are dedicated to building our product pipeline step by step while maintaining high quality and carefully cultivating, and incubating our 5 major R&D, production and marketing platforms. We will efficiently fulfill our two-wheeled drive strategy of "medical aesthetics plus pharmaceuticals", and dedicate to build a leading medical aesthetics and biopharmaceutical company in China, which in turn will enhance investment returns to the respected shareholders and investors who have always believed in us and been supportive to us.”
From the perspective of the Group's development strategy, Sihuan pharmaceutical will continue to ensure the simultaneous development of its multi-dimensional business, no matter whether it is the pharmaceutical business segment that adheres to innovation-led and generics, or the new business segments that are incubating and will become growth drivers of our future financial performance. Each sector not only has its own growth path and motivation, but can also complement and connect with each other to support the Group’s overall sustainable growth.
Regarding the rest of this year, the pharmaceuticals segment is expected to have several key generic drug products launched as soon as they are approved. The drugs will enhance the Group’s product pipeline in the high-growth therapeutic areas, and contributed to our sustained growth of over 20% year-on-year to the company's pharmaceutical business revenue. For medical aesthetic segment, the sales of botulinum toxin, Letybo®, continue to be strong. As the fourth approved and internationally competitive blockbuster medical aesthetic product, Letybo® is expected to increase its sales volume rapidly, with the help of the professional and strong medical aesthetics sales team of MeiYan KongJian, and contribute to a double-digit growth in the Group’s annual revenue and profit.
In the medium and long term：For the innovative drug sector, Xuanzhu Biopharm’s core product Anaprazole sodium and blockbuster product Birociclib are expected to be launched and achieved sales growth within 2-3 years; Huisheng Biopharmaceutical is expected to achieved full product coverage for diabetes and complications, its Insulin aspart injection, Insulin aspart 30 injection and Insulin aspart 50 injection are planned to be launched by the end of 2022. For the medical aesthetic sector, the sales of botulinum toxin, Letybo® are expected to continue to increase in sales volume. Subsequent products launched by the Group include hyaluronic acid, PLLA hybrid gel, PLLA injections, and PCL injections, as well as overseas middle and high-end medical aesthetic products distributed by the Group, will strengthen the already strong medical product matrix and contribute to Sihuan medical aesthetic segment’s strong growth momentum and valuation guarantee. The industrial hemp and CDMO business incubated by the Group is also expected to enter a period of rapid development, boosting value and contributing to revenue growth.