The epidemic accelerates the transfer of the global innovative drug industry

The third quarterly report of the CRO/CDMO sector in 2020 has come to an end. We selected several representative and highly marketed CROs and core targets of the CDMO innovative drug industry chain to form the CRO and CDMO sectors, respectively, and assess various financial indicators for the third quarter of 2020. Interpretation and discover the industry trends behind the data.

In the first three quarters of 2020, domestic CRO/CDMO continued to prosper, and revenue and profits increased rapidly. In the first three quarters of 2020, revenue from the CRO sector increased by 27.08% year-on-year, and net profit attributable to the parent increased by 64.34% year-on-year. The revenue of the CDMO sector in the first three quarters of 2020 increased by 21.89% year-on-year, and the net profit attributable to the parent increased by 39.46% year-on-year. The CRO/CDMO sector continued to maintain growth in the third quarter of 2020, and revenue hit a single-quarter high. Affected by fluctuations in overseas exchange rates, profit growth in a single quarter has slowed slightly, and financial expenses have increased significantly. As domestic companies increase foreign exchange derivatives trading quotas and other hedging methods, 2020Q4 exchange gains and losses will improve. It is worth noting that in the first three quarters of 2020, the fixed assets and construction in progress of the CDMO sector accelerated investment (year-on-year growth of 20.55% and 38.89% respectively), accelerated capacity expansion, laid the foundation for continuous growth, and the industry’s continued boom is expected.

The epidemic has accelerated the transfer of the global innovative drug industry chain. On October 30, the Ministry of Commerce announced the development of China's service outsourcing industry from January to September. Among them, China's offshore implementation of pharmaceutical and biotechnology R&D outsourcing was 30.98 billion yuan, a year-on-year increase of 26.1%. The fight against the epidemic has driven rapid global biomedical R&D demand Growth, the epidemic has accelerated the transfer of the global innovative drug industry chain to the country. Relying on national policy support and the release of engineer dividends, domestic CDMO companies will accelerate the empowerment of overseas customers, reduce the cost and increase efficiency of new drug research and development, strengthen customer stickiness, and accelerate the transfer of the global innovative drug industry chain.

Domestic Biotech is developing rapidly, and the wave of innovative research and development continues to promote the rapid development of CRO/CDMO. In recent years, domestic innovative drug research and development technology has continued to advance, and many domestic innovative drugs have excellent efficacy, such as the 2020 ESMO announcement and Huang Pharmaceutical’s Sofatinib for the treatment of advanced pancreatic nerve The stage III objective response rate of endocrine tumors reached 19.2%, becoming the Bestinclass in this field. The emergence of major achievements and the continuous opening of financing channels such as the domestic science and technology innovation board may drive more and more returned scientists to return to China to start Biotech. The outsourcing rate of Biotech is generally about 50%. With their continuous rise, It will bring long-term growth to domestic CRO/CDMO.

Recommendations for key stocks: The epidemic accelerates the transfer of the global innovative drug industry chain + the rise of domestic Biotech, boosts the long-term high prosperity of CRO/CDMO, and focuses on Wuxi AppTec, Kanglong Chemical, Tigermed, Kailaiying, and Pharmacotech.

Risk warning events: risk of failure of new drug development, risk of exchange rate fluctuations, environmental protection and safety production risks, certain screening of data samples, or the risk of deviations from actual conditions.