●In the more than 20 years since its listing, Hengrui Pharmaceutical's first revenue and net profit have dropped. What's the situation?
● Last year, more than 6 billion yuan was spent on R&D, setting a new high. The investment far exceeded the net profit. What are you planning?
Yangcheng Evening News reporter Chen Zeyun
After a year of adjustment, Hengrui Medicine, the former "big brother of pharmaceutical market value", has not yet come out of the labor pain period.
Hengrui Medicine's latest annual report for 2021 is a double surprise: for the whole year of last year, its revenue and net profit were reported at 25.906 billion yuan and 4.53 billion yuan, down 6.59% and 28.41% year-on-year, respectively.
This is also the first time in more than 20 years since Hengrui Medicine was listed in 2000 that both revenue and net profit have fallen.
However, at the same time, it will spend 6.2 billion yuan in research and development in 2021, setting a record high.
This also means that its R&D investment is far more than a year's net profit.
Under the background of performance pressure, market value evaporation, executives leaving, layoffs and slimming down, and Hillhouse Capital's withdrawal from the top ten shareholders, can "Yao Mao" rely on research and development to "turn over the wind"?
Is its prospect still worth looking forward to?
The price of popular products has dropped significantly
A reporter from the Yangcheng Evening News found that Hengrui Medicine has maintained high growth in the past few years.
From 2018 to 2020, its revenue growth rate was 25.89%, 33.7%, and 19.09%, respectively; the non-net profit growth rate was 22%, 30%, and 20%, respectively.
The rapid progress in performance also once helped Hengrui Medicine to sit on the position of "the first brother of pharmaceutical market value".
As in 2021, the negative growth of both revenue and net profit is the first time since its listing. Why did Hengrui Medicine come to this point?
In the annual report, Hengrui Medicine explained that due to the company's accelerated R&D investment, centralized procurement with volume, and the substantial price reduction of products negotiated by the national medical insurance, the gross profit margin has declined, and the cost prices of raw and auxiliary materials and other various costs have continued to rise. The high cost of personnel has a comprehensive impact on the company's performance.
The reporter combed and found that Hengrui Pharmaceutical's revenue and net profit both declined, which was related to the sharp drop in the price of products under centralized procurement and national medical insurance negotiation.
Since 2018, Hengrui Medicine has selected a total of 18 types of generic drugs that have been centrally purchased by the country, and the selected price has dropped by an average of 73%.
The 6 drugs involved in the third batch of centralized procurement started in November 2020 will have sales revenue of 1.9 billion yuan in 2020, and will decline by 55% in 2021; the fifth batch of 8 drugs involved in centralized procurement started in September 2021 Drugs, with sales revenue of 4.4 billion yuan in 2020, will decline by 37% in 2021.
The centralized procurement of generic drugs is very "injured", and the sales of innovative drugs are also frustrated.
Hengrui Innovative Drugs’ main innovative drug product, Carrelizumab, began to implement the negotiated price of medical insurance on March 1 last year, with a decrease of 85%. Zizumab sales revenue decreased year-on-year.
According to Hengrui Medicine's 2021 financial report data, among the 6 main sales varieties listed by the company, there are 4 anti-tumor drugs, of which camrelizumab (PD-1) sold 1.4143 million bottles last year, an increase of 360.77% over 2020. %; at the same time, the sales of breast cancer drugs supegfilgrastim and pyrrotinib maleate increased by 37.51% and 22.85% respectively compared with 2020; Paclitaxel for injection (albumin-bound) increased by 18.35% compared with 2020 %.
The increase in the sales of the above-mentioned anti-tumor drugs is mainly due to the increased volume of drugs entering medical insurance and volume purchases.
According to the annual report, Hengrui Medicine’s anti-tumor business revenue reported 13.071 billion yuan, down 14.39% from 2020.
The reporter noticed that as a leading company in innovative drugs, Hengrui Medicine had a difficult time last year: its performance was under pressure, its market value evaporated, executives left, layoffs and slimmed down, and Hillhouse Capital also withdrew from the top ten shareholders.
The "decline" in performance will continue into 2022.
In the first quarter of this year, Hengrui Pharmaceutical’s revenue fell by 20.93% year-on-year to 5.479 billion yuan, and the net profit attributable to the parent decreased by 17.35% year-on-year to 1.237 billion yuan.
Can the 6.2 billion yuan overweight R&D turn around against the wind?
With its performance under pressure, Hengrui Medicine began to actively "rescue itself" - layoffs and slimmed down.
Hengrui Medicine confirmed to reporters that in 2021, Hengrui Medicine will cancel the regional hierarchy, greatly reduce low-performing provinces and offices, integrate sales operations, marketing finance, and support functions, and streamline sales staff. The number of employees has been optimized to 13,208, further reducing sales and operating costs.
At the same time, last year, 63-year-old Sun Piaoyang came back and took the helm of Hengrui Medicine again.
After Sun Piaoyang's return, Hengrui's development direction is positioned as: innovative drugs and internationalization.
In the second month after returning to China, Sun Piaoyang spent 1.4 billion yuan to introduce the "First-in-Class" immune anti-tumor drug Plinabulin.
In 2021, the company's cumulative R&D investment will reach 6.203 billion yuan, a year-on-year increase of 24.34% and a record high.
This also means that Hengrui Medicine's R&D investment far exceeds one year's net profit.
"The company's research and development of innovative drugs is endless." The relevant person in charge of Hengrui Medicine also emphasized in an interview with reporters that the company's innovative research and development situation will not change. Hengrui has a rich research and development pipeline in the field of oncology drugs. It is also rapidly expanding to other fields such as ophthalmology and nuclear medicine.
The financial report shows that in 2021, Hengrui has listed 10 innovative drugs, and more than 60 innovative drugs are under clinical development, and more than 250 clinical trials are being carried out at home and abroad.
It is worth noting that not only Hengrui, but also under the influence of high-pressure policies such as centralized procurement and medical insurance negotiations, the market value of domestic innovative pharmaceutical companies has generally dropped sharply.
More than 400 billion shareholders are still entering the market after the market value has evaporated in one year
Regarding the performance of Hengrui Medicine last year, many securities companies still maintain the evaluation of Hengrui Medicine's "buy" and "overweight".
The Sinolink Securities Research Report believes that in 2021, the company's 3 innovative drugs Haitrombopag ethanolamine, isethionate dalcilil and proline henggliflozin will be approved for the first time on the market, and there are 6 indications for 5 other drugs. NDA has been filed, and it is expected that the company's innovative drug pipeline will gradually enter a period of heavy volume.
East Asia Qianhai Securities Research Report believes that the short-term correction of innovative drug valuations will not be too large, but the value of high-quality companies in the industry is gradually becoming more prominent. It is recommended to focus on leading products with rich product pipelines, original products with high clinical value, and sufficient cash reserves company.
As of April 26, the share price of Hengrui Medicine fell to 27.74 per share, with a market value of only 177 billion yuan.
In January last year, the stock price of Hengrui Medicine reached a peak of 97.16 yuan per share, with a market value of 619.7 billion yuan.
This also means that in just over a year, its market value has evaporated by more than 440 billion yuan, and it has completely fallen to the altar of the first brother in market value.
But at the same time, the decline in performance has not completely stopped the enthusiasm of investors, and many investors are waiting for the opportunity to "buy the bottom."
According to the first quarterly report of 2022, as of the end of the reporting period, the number of ordinary shareholders of Hengrui Medicine has exceeded 800,000.
As of December 31, 2020, this number was only 281,800, which also means that in the past year or so, at least 500,000 new investors have entered the market.
Under the background of the continuous impact of the epidemic, industry changes and intensified competition, the adjustment of the pharmaceutical industry has entered a deep-water period. Is the innovative drug track still worth looking forward to?