Seizes Opportunities from Industry Policies to Pursue Strategic Transformation
Accelerates New Drug Development and Builds Internet Ecosystem
Revenue from New Products Soars 66.9% to RMB6.66 Billion
Sino Biopharmaceutical Limited (“Sino Biopharmaceutical” or the “Company”, together with its subsidiaries, the “Group”) (HKEX:1177), a leading and innovation-driven pharmaceutical conglomerate in the PRC, has announced its unaudited third quarterly results for the nine months ended 30 September 2020 (the “review period”). During the review period, the Group accelerated new drug development and established an internet ecosystem to strategically pursue its transformation by capturing opportunities arising from industry policies. These efforts were reflected in significant sales growth from new products of 66.9% to RMB6.66 billion, marking a step forward in its transformation.
- The Group has achieved considerable sales growth from a number of new products and oncology products, with sales from new products soaring by 66.9% to RMB6.66 billion, representing 36.7% of the total revenue.
- The proportion of innovative medicines increased from approximately 20% same period last year to approximately 25%, and a large number of important products will be launched soon.
- Sales of oncology medicines amounted to approximately RMB 5,792.06 million, an increase of approximately 37.8% over the same period last year.
- – Satisfactory progress in R&D has been achieved and 11 new production approvals were obtained. For the nine months ended 30 September 2020, the total R&D expenditure accounted for approximately 11.6% of the Group’s revenue.
- The Group had 13 newly launched products in 2018, 26 newly launched products in 2019, and has 26 newly launched products since 2020.
- – The Group has facilitated convenient communications between doctors and patients via various Internet platforms. It has also commenced Internet marketing activities through a number of qualified platforms, reaping satisfactory results.
- The Group’s member company, CT Tianqing, has achieved a top 20 ranking on the list of “Top 100 Pharmaceutical Enterprises in China” by China National Pharmaceutical Industry Information Center for the sixth consecutive year. It has also been named “Chinese Pharmaceutical Enterprise with the Best Drug Pipeline in 2020”.
- Sino Biopharmaceutical has been ranked 2nd on the “Top 100 Chemical Pharmaceutical Enterprises” among the “2019 Top 100 Series of Pharmaceutical Industries in China”, which was announced during the “2020 National Pharmacy Week, China Pharmaceutical Industry Top 100 Annual Conference, and China Pharmaceutical Internet Economy Annual Conference”.
During the review period, the Group recorded revenue of approximately RMB18.13 billion (9M2019: RMB19.32 billion). The proportion of new product sales to total revenue increased from approximately 20.6% in the same period last year to approximately 36.7% during the review period. Profit attributable to the owners of the parent was approximately RMB1.85 billion (9M2019: RMB2.26 billion). Basic earnings per share were approximately RMB9.81 cents (9M2019: RMB11.95 cents). Excluding the impact of amortization expenses of new identifiable intangible assets arising from the acquisition of 24% interests in Beijing Tide (net of related deferred tax and non-controlling interests), the unrealized fair value losses (net) on equity investments and financials assets, as well as the fair value loss of Convertible Bond embedded derivative component and effective interest expenses of Convertible Bond debt component, underlying profit would have been approximately RMB2.29 billion (9M2019: RMB2.60 billion). Based on underlying profit, the earnings per share were approximately RMB12.16 cents (9M2019: RMB13.77 cents). The Group has maintained a strong financial position with cash and bank balances reaching approximately RMB16.10 billion at the period end
The Board of Directors declared a quarterly dividend of HK2 cents per share. Together with the first quarterly dividend of HK2 cents per share and the second quarterly dividend of HK2 cents paid, the total dividend of the three quarters amounted to HK6 cents per share (9M2019: 6 cents).
COVID-19 hits the whole world, industry policies expedite business reform
During the review period, the pandemic crisis remained far from over. However, China has implemented strict anti-epidemic measures, production and businesses gradually returns to normal. As a result, the number of outpatients and inpatients began to climb, resulting in the improvement in drug sales.
The government published several documents to establish a tiered diagnosis and treatment model, and partnerships between medical institutions operating, so as to facilitate initial consultations at the lower tier. To encourage “Internet + Health Care” and medical informatization, restrictions on the coverage of online consultations have been further relaxed, trying to include eligible medical services in the medical insurance reimbursement list.
The government also intensified its reforms of medical expenses control. At the diagnosis end, national trials of multiple-payment models such as Diagnosis-Related Groups payment or disease category-based payment have commenced. Measures for managing essential drugs covered by medical insurance have also been published to enhance pertinent controls. Also, the third centralized drug procurement program has been expanded to cover a greater variety of drugs, with average prices down by 53%, and some even falling by more than 90%. In expanding the coverage of the centralized drug procurement program, establishing its relevant methodology, and making it a regular practice, competition will intensify, profitability and product structure of the industry will be notably impacted, reform of drug sales and marketing model will accelerate, and the business landscape will be polarized.
Adjustments to the National Reimbursement Drug List (“NRDL”) have also commenced, which marks the beginning of dynamic adjustments of the list to come. Innovative drugs and oncology drugs have higher chances to be included quickly. As the NRDL expands its coverage, the coverage for outpatient reimbursement will also be expanded, hence, accessibility to and fairness of the products above are likely to be enhanced.
During the review period, the National Medical Products Administration published three technical documents, including the Working Procedures for the Review and Approval of Breakthrough Therapy Designed Drugs (for Trial Implementation) to expedite the filing and assessment of innovative drugs, and facilitate the implementation of the assessment and approval policy that encourage innovation.
Pursue product mix transformation in response to policy changes
During the review period, with a rebound in the number of hospitalized patients, the Group gradually resumed its work on sales of pharmaceutical products. Also, implementation of the third round of the centralized drug procurement program, which covered a number of the Group’s key products in the hepatitis, cardio-vascular and analgesic therapeutic areas, had differing effects on sales of the Group’s various products. For newly approved products such as the oncology medicines, Qingkeshu, Anxian, Jizhi, and Weishou; the respiratory system medicine, Tianqingsuchang; the cardio-vascular medicines, Anbeining, Taishule, Anxinfen and Beilishu; and the osteoarthritis medicines, Taiyan and Sulibao, their sales volume have increased rapidly following implementation of the centralized drug procurement program.
The Group actively addressed the impact of centralized drug procurement on its sales cost structure by quickly shifting academic and promotion investments to new products, as well as by building a strong sales portfolio of the selected products and their associated products that are able to capitalize on the centralized drug procurement program. The results from such strategies were encouraging. The Group’s new oncology medicines, Anxian, Yinishu, Leweixin, Yijiu, and Qingkeyi; antiemetic medicine associated with chemotherapy, Shanqi; new analgesic medicines, Fenkexin and Yu’an; new anti-infective medications, Tianming, Kangsuping, Fengruineng, and Yiruida; and contrast agents, Xian’ai and Qingliming, all delivered robust results.
Sales transformation by building Internet ecosystem
Amid the pandemic, the Group has facilitated convenient communications between doctors and patients via various Internet platforms. In addition, it has stepped up efforts in chronic disease management of the cardio-vascular, respiratory, analgesic, hepatitis and oncology therapeutic areas to enhance patients’ professional knowledge and awareness of product applications. It has also commenced Internet marketing activities through a number of qualified platforms, reaping satisfactory results.
During the review period, satisfactory results were achieved in R&D. During the third quarter, the Group was granted 6 clinical trial approvals, 11 production approvals, and 15 approvals for Consistency Evaluation, and made 6 clinical trial applications, 6 applications for Consistency Evaluation and 2 production applications. Cumulatively, a total of 398 pharmaceutical products had obtained clinical trial approval, or were under clinical trial or applying for production approval. Out of these, 37 were for hepatitis medicines, 190 for oncology medicines, 22 for respiratory system medicines, 20 for endocrine, 16 for cardio-cerebral medicines and 113 for other medicines.
Over the years, the Group has been placing high importance on R&D and innovation, as well as through collaboration and imitation, to raise both R&D standards and efficiency. Regarding R&D as the lifeblood of the Group’s development, the Group continues to devote into more resources. For the nine months ended 30 September, 2020, the total R&D expenditure of approximately RMB2.11 billion, which accounted for approximately 11.6% of the Group’s revenue.
The Group also emphasizes on the protection of intellectual property rights. During the third quarter, the Group has received 37 authorized patent notices and filed 119 new patent applications. Cumulatively, the Group has obtained 879 invention patent approvals, 30 utility model patents and 115 apparel design patents.
Looking ahead, the Group will continue to act proactively along with the varying characteristics of times and trends, accelerate its development of new drugs, and continuously optimize products in the R&D pipeline. The Group will also continue to optimize the layout of the Internet ecosystem, while promote the transformation and upgrade of organizational structure, so as to achieve a comprehensive strategic transformation in the Group as soon as possible, which in turn will lay a more solid foundation for the Group’s long-term development and create long-term value for shareholders.
About Sino Biopharmaceutical Limited (HKEX:1177)
Sino Biopharmaceutical Limited is a leading, innovative R&D driven pharmaceutical conglomerate in the PRC. Its business encompasses a fully-integrated chain which covers an array of R&D platforms, a line-up of intelligent production and a strong sales system. The Group’s products have gained a competitive foothold in various therapeutic categories with promising potentials, comprising a variety of biopharmaceutical and chemical medicines for treating tumors, liver diseases, respiratory system diseases, anti-infectious diseases and orthopedic diseases.
Sino Biopharm is a constituent stock of the following indices: MSCI Global Standard Indices – MSCI China Index, Hang Seng Index, Hang Seng Index – Commerce & Industry, Hang Seng Composite Index, Hang Seng Composite Industry Index – Consumer Goods, Hang Seng Composite LargeCap Index, Hang Seng Composite LargeCap & MidCap Index, Hang Seng China (Hong Kong-listed) 100 Index and Hang Seng Stock Connect Hong Kong Index. Sino Biopharm was ranked as one of “Asia’s Fab 50 Companies” by Forbes Asia for three consecutive years in 2016, 2017 and 2018.