2022 inventory: The market value of A-share CXO lost 300 billion, and only 6 stock prices achieved positive growth...

In 2022, the entire pharmaceutical industry is still shrouded in a spreading cold, with the A-share market and the pharmaceutical and biological sector falling by 23.7% as a whole, and 330 pharmaceutical companies falling, accounting for nearly 70%.

Among them, the CXO (medical R&D outsourcing) industry suffered a more tragic decline after a brief recovery:

Among the 25 listed companies in the flush industry that belong to the A-share market, including medical R&D outsourcing, 19 fell, accounting for 76%, with an average decline of more than 37%.

Stock prices continue to fall

The market value shrank by 300 billion

Only 6 of the 25 A-share CXO companies (the statistical field is: flush medical R&D outsourcing industry) achieved positive stock price growth, and these 6 CXO companies are all newly listed companies in 2022. The average decline of the 19 companies reached 37.02%, and the total market value shrank by 300.67 billion yuan compared with the beginning of 2022, equivalent to 130 Baihua Pharmaceutical.

◆Kailaiying, Botten shares

The largest decline in stock prices was Kailaiying, down 65.98%, with a total market value of 53.505 billion yuan, a decrease of 57.740 billion yuan compared with the same period in 2021, and the market value shrank by more than half.

The main reason for the decline was concerns that it was too dependent on overseas orders.

Especially in recent years, the United States has emphasized the return of manufacturing and has become the sword of Damocles hanging over the head of the domestic CXO industry. From the "Entity List" incident in December 2021 to the signing of the "Biden Act", at least 3 "black swan" events have occurred that have caused the collapse of the domestic CXO industry.

Similar to the situation of Kaileying is Porton shares, both of which are the biggest beneficiaries of the new crown order. Among them, the three new crown orders from Merck and Pfizer reached 481 million US dollars, 2.72 billion yuan and 3.542 billion yuan respectively; The two orders from Pfizer and Roche amounted to US$681 million and US$217 million, respectively.

However, the outside world generally believes that the new crown large order should be regarded as an independent positive event, which is not sustainable, and once the sales of new crown drugs are less than expected, it will directly affect the performance of upstream CDMO.

In 2022, Porton shares fell by 54.33%, and the market value evaporated by 26.392 billion yuan, which also shrank by more than half.

◆Haoyuan Pharmaceutical

The second largest decline in stock price was Haoyuan Pharmaceutical, which fell by 56.42%, and its market value decreased by 6.943 billion yuan.

The main reason for the decline is the change in performance after listing, and the performance of Haoyuan Pharmaceutical immediately fell into a bottleneck period after listing in June 2021, and the net profit in the fourth quarter fell month-on-month, which is in sharp contrast to the 110.23% year-on-year increase in net profit reported at the beginning of listing.

Due to concerns about performance, shareholders collectively reduced their holdings, and the National Social Security Fund 504 Portfolio, China Construction Bank Co., Ltd., and Xingquan Social Responsibility Hybrid Securities Investment Fund all started to reduce their holdings and cash out.

◆Wise Pharmaceutical

The lowest valuation (dynamic P/E ratio) is Wise Pharmaceutical, only 3.81 times, mainly because the net profit reported in the third quarter was 1.023 billion yuan, a year-on-year increase of 67.99 times.

But behind the glamorous performance growth is the helplessness of selling assets. In order to improve its operating conditions and enhance business efficiency, in the first half of 2022, Wise Pharma disposed of its small molecule CDMO business and prebiotic business for $266 million and US$237 million respectively.

After divesting the prebiotic business, Wise Pharma focused on the core business of CXO, and on the basis of consolidating the small molecule CRO business, increased efforts to explore the potential market of large molecule CRO+CDMO.

After several rounds of decline, CXO industry valuations have now returned to a reasonable range, and most companies are at historical lows. Among them, the five companies with the largest valuation declines were Ruizhi Pharmaceutical, Kailaiying, Boteng, Zhaoyan New Drugs, and WuXi AppTec, all of which fell by more than 60%.

Performance is polarized

Gross margins generally declined

Unlike the generally miserable stock price, CXO companies have performed very well in terms of performance.

The total revenue of the 25 CXO companies in the third quarter was 65.12 billion yuan, of which 22 achieved positive revenue growth, with an average growth rate of 49.03%. However, the total revenue of the top five CXO companies reached 54.233 billion yuan, accounting for 83.3%, which is obviously polarized.

In terms of net profit, the total net profit of 25 CXO companies in the first three quarters was 17.557 billion yuan, of which 10 showed negative growth, with an average decline of 36.67%. Similarly, the top five CXO companies had a total net profit of 14.305 billion yuan, accounting for 81.48%.

◆WuXi AppTec

In the first three quarters of 2022, WuXi AppTec achieved revenue of 28.395 billion yuan, a year-on-year increase of 71.87%, of which the new crown revenue was about 6.879 billion yuan, accounting for 24.2% of the total revenue; The net profit was 7.378 billion yuan, a year-on-year increase of 107.12%.

As the absolute leader of the domestic CXO industry, WuXi AppTec continued to promote its "long tail" strategy, even excluding the new crown business, the revenue of conventional chemical business achieved a year-on-year increase of 38.30% (including a 106.6% increase in the new crown business), interpreting the theory that CXO is stronger with actual results.

◆Zhaoyan new drug

In addition to the three companies that made a lot of money due to new crown orders, Zhaoyan New Drug also doubled its net profit, a year-on-year increase of 154.85%.

In terms of future increment, Zhaoyan New Drug is still in the stage of large-scale expansion of production capacity, and new production capacity such as Suzhou 20,000 square meters, Wuzhou 50,000 square meters, Chongqing 20,000 square meters, Guangzhou 18,000 square meters, Wuxi 3,000 square meters and other new production capacity will be put into use within one or two years. As of the third quarter report, the company's orders in hand exceeded 4.6 billion yuan, an increase of 500 million yuan in a single quarter, and the expanded production capacity can fully release the orders in hand.

Worryingly, 16 of the 25 CXO companies experienced a decline in gross margin, with the largest decline being SMOC. Among the top five CXO companies in terms of revenue, only Kanglong Chemical and Tigermed Pharmaceutical's gross profit margin declined, and there was a situation where revenue increased without increasing profit.

◆Tigermed Pharmaceutical

In the first three quarters of 2022, Tigermed achieved revenue of 5.406 billion yuan, a year-on-year increase of 59.23%; net profit was 1.605 billion yuan, down 9.9% year-on-year; Gross margin was 40.11%, down -14.22% year-on-year.

This was mainly due to the higher payment fees of third-party suppliers and the increase in costs caused by the impact of the epidemic in the first half of 2022, and the gross profit margin of clinical trial technical services in the first half of the year decreased from 51.22% in the same period of the previous year to 37.12%.

◆Kanglong Kasei

R&D innovation level is one of the most important sources of core competitiveness in the CXO industry, and the total R&D expenses of 25 CXO companies in the third quarter were 3.425 billion yuan. Among them, the bottom of the R&D expense ratio is Kanglong Chemical, which is only 2.4%.

In recent years, Kanglong Chemical has frequently acquired, expanded production capacity and laid out new businesses, but the emerging segment business is still in the investment stage, and it is expected that the sector will continue to lose money. In the first three quarters of 2022, with revenue growth of 39.63%, net profit fell by 7.59%.

8 new listings

and meta-organisms are the most anticipated

In 2022, a total of 8 CXO companies successfully landed on A-shares, raising a total of 9.934 billion yuan. Compared with 5 in 2021, there were 3 more companies, but the average actual financing amount of each company shrank by 7.17%.

From the post-listing performance, except for Chengda Pharmaceutical and Bede Pharmaceutical, the stock price achieved positive growth.

◆Chengda Pharmaceutical

Before listing, Chengda Pharmaceutical was not optimistic by the market because of its issuance price-to-earnings ratio of 83 times, far exceeding the average price-earnings ratio of 38 times in the same industry. However, on the first day of listing, the stock price soared 76.85%, and the original plan to raise 510 million yuan turned out to be 1.1 billion yuan.

When the market returned to calm, Chengda Pharmaceutical's valuation returned to about 40 times, and the stock price fell by 30.11% from the issue price.

◆Hongbo Pharmaceutical

Contrary to the hot market situation listed at the beginning of the year, the pricing of Hongbo Pharmaceutical, which was listed at the end of the year, is more reasonable. Under the condition that it is comparable in size to Chengda Pharmaceutical, the price-earnings ratio of the issuance is 43 times, and the actual amount of funds raised is 770 million yuan, which is less than half of Chengda Pharmaceutical.

◆ and meta-organisms

Heyuan Biologics, which focuses on providing gene therapy CRO/CDMO services, is one of the most closely watched newly listed pharmaceutical companies in 2022. Gene therapy is an emerging hot field in recent years, and its corresponding CDMO market has developed more rapidly, and at present, with its first-mover advantage and technical advantages, Heyuan Bio occupies 7.65% of the gene therapy CDMO market, temporarily ranking second in China.

Therefore, even if the price-to-earnings ratio of Heyuan Biotech is as high as 244 times, it is still popular in the market, with an increase of 44.07% in 2022, the highest increase among all new stocks.

epilogue

Looking back on 2022, the CXO industry has fallen to historical lows under the dual blow of cold weather and black swan events. With the recovery of the pharmaceutical industry in 2023 and the continuous increase in global pharmaceutical R&D investment, the CXO industry will continue to maintain high growth and become a more certain industry in the pharmaceutical industry.