On July 2, CDE issued the "Clinical Value-Oriented Anti-tumor Drug Clinical Research and Development Guidelines", which triggered a successive plunge in CRO concept stocks in the A-share and Hong Kong stock markets. In fact, the release of the "New Regulations for Anticancer Drugs" is a natural product of my country's Pharmaceutical industry's transformation from generic drugs to innovative drugs, from overly focusing on the development of Metoo drugs to the development of Firstinclass or Bestinclass drugs, which also makes the CRO sector "differentiated" The trend is obviously accelerating. As of August 30, there have been 9 CRO companies in the A-share market, including WuXi AppTec, Kanglong Chemical, Tigermed, Zhaoyan New Drug, Medicilon, Yakshi Technology, Chengdu Pioneer, Ruizhi Pharmaceutical, Boji Pharmaceutical, etc. Interim results for 2021. This article will select key companies for a comprehensive analysis. 1. The lead of preclinical CRO or CXO rose even higher On the whole, as of the close of August 27, 2021, there are only three CRO companies with a total market value of more than 100 billion yuan: WuXi AppTec (383.7 billion yuan), Kanglong Chemical (154 billion yuan), Tigermed (119.1 billion yuan) ), and two with a total market value of less than 10 billion yuan: Ruizhi Pharmaceutical (6.924 billion yuan) and Boji Pharmaceutical (2.822 billion yuan). 1) Tigermed: The total market value has decreased the most, and the increase has been the last Tigermed, the leader in clinical trial research services, has a total market value of 145.267 billion yuan at the beginning of the year (January 4, 2021). As of the close of August 27, the latest total market value is 119.1 billion yuan, and the total market value has fallen since the beginning of the year. 26.167 billion yuan; the stock price fell 15.39%, which was also the largest drop among the three 100 billion CRO leaders, and ranked bottom in the CRO industry. In terms of performance, Tigermed achieved total revenue of 2.056 billion yuan in the first half of the year, a year-on-year increase of 41.62%; net profit was 1.255 billion yuan, a year-on-year increase of 25.65%; non-net profit was 543 million yuan, a year-on-year increase of 79.1%. The net profit in the second quarter was 799 million yuan, a year-on-year increase of 7.48%. In terms of main business, the company's clinical trial technical services, clinical trial-related services and laboratory services achieved revenues of 1.034 billion and 1.016 billion in the first half of the year, an increase of 45.36% and 38.43% year-on-year. At the same time, in terms of non-main business income, the company realized investment income of 113 million yuan in the first half of the year, accounting for 6.65% of total profit; realized fair value change gains and losses of 906 million yuan, accounting for 53.53% of total profit, all mainly due to the report During the period, the company's other non-current financial assets were held during the period and due to the confirmed investment income on disposal. 2) Kanglong Chemical: the largest increase in total market value The total market value of Kanglong Chemical at the beginning of the year was 94.919 billion yuan. As of the close of August 27, the latest total market value reached 154 billion yuan, an increase of 59.81 billion yuan, which is almost equivalent to Zhaoyan New Medicine (53.86 billion yuan) plus Ruizhi Pharmaceutical (6.924 billion yuan). Yuan) market value. Secondly, WuXi AppTec and Medicilon increased by 50.22 billion yuan and 31.4 billion yuan respectively from the beginning of the year, ranking second and third. 3) Medicilon: Stock price increase, total market value increase the highest Medicilon's stock price rose by 323.05% from the beginning of the year, and its total market value increased by 31.4 billion yuan, an increase of 324.42%, ranking first. The financial report shows that Medicilon achieved total revenue of 485 million yuan in the first half of the year, a year-on-year increase of 86.26%; net profit attributable to the parent company was 113 million yuan, a year-on-year increase of 142.29%, ranking in the forefront of the industry, and its performance is quite beautiful. In the first half of 2021, benefiting from the continuous growth of domestic and foreign drug research and development, Medicilon's operating performance achieved steady growth. The two main businesses of drug discovery and pharmaceutical research, and preclinical research achieved revenues of 260 million and 225 million respectively. A substantial year-on-year increase of 78.59% and 95.38%. In summary, WuXi AppTec and Kang Long Chemical, which realize the entire CXO industry chain, have gained 15.06% and 62.24% year-to-date by virtue of their high competitive barriers. At the same time, the market leader in the pre-clinical CRO business has also increased significantly. The molecular block leader Yaoshi Technology has increased 56.96% year-to-date, the drug safety evaluation leader Zhaoyan New Drug has increased by 93.39%, and Medicilon has increased by 93.39%. It is as high as 323.05%. This means that the CRO sector has shown obvious performance "differentiation". 2. Obvious performance differentiation: WuXi AppTec has the highest revenue scale, and Medicilon has the fastest growth rate On the whole, the nine CRO companies achieved positive growth in their total revenue and net profit growth in the first half of 2021, with a total of 18.639 billion yuan and 5.183 billion yuan in total. 1) WuXi AppTec: The largest total revenue and net profit income In the first half of 2021, WuXi AppTec achieved total revenue of 10.537 billion yuan, a year-on-year increase of 45.71%; net profit was 2.675 billion yuan, a year-on-year increase of 55.79%. WuXi AppTec’s main business is divided into China laboratory services, contract manufacturing R&D services (CDMO), clinical research and other CRO services, and U.S. laboratory services. In the first half of the year, revenues were 5.487 billion yuan, 3.599 billion yuan, and 7.83 respectively. 100 million yuan, 659 million yuan. Among them, clinical research and other CRO services, due to the negative impact of the domestic new crown epidemic, have been basically removed, showing a significant increase compared to the comparable period: the first half of the year achieved revenue of 783 million yuan, an increase of 56.51% year-on-year. During the reporting period, WuXi AppTec Clinical Trial Services (CDS) team provided clinical trial development services for a total of more than 170 projects in China and the United States. At the same time, it helped customers complete 3 new drug listing registrations and 5 clinical research applications were approved. Helped 5 ADC projects to achieve important milestones and a number of clinical research and development for COVID-19 products. 2) Medicilon: The highest growth rate of total revenue and net profit Although Yaoshi Technology achieved a net profit of 381 million yuan in the first half of the year, with a year-on-year growth rate of 336.5%, but after deducting 236 million yuan of non-recurring gains and losses, the deduction of non-net profit would be 145 million yuan, an increase of 77.16% year-on-year. Among the 236 million yuan of non-recurring gains and losses of Yaoshi Technology, the highest proportion is the acquisition of Zhejiang Huishi, a CDMO company, completed in April 2021. The profit amounted to 222 million yuan. Relatively speaking, Medicilon’s profit quality is higher: in the first half of the year, it achieved total revenue of 485 million yuan, an increase of 86.26%; A substantial increase of 150.14%. Source of Medicilon's income composition: 2021 mid-year report
During the reporting period, Medicilon’s new orders have maintained a good growth trend. The newly signed orders amounted to 1.026 billion yuan, with a growth rate of 93.64%. Sufficient orders have laid a good foundation for future development. The company has provided drug research and development services to more than 1,100 customers at home and abroad, and 161 new customers were added during the reporting period. During the reporting period, drug discovery and pharmaceutical research services signed a new order of 476 million yuan, a year-on-year increase of 85.65%. Among them, new orders for drug discovery were 321 million yuan, an increase of 106.78% year-on-year; new orders for pharmaceutical research were 155 million yuan, an increase of 53.29% year-on-year. 3) Smart Medicine: Net profit and its lowest growth rate Ruizhi Pharmaceutical is mainly engaged in CRO, CMO business, R&D, production and sales of prebiotic series products such as fructo-oligosaccharides and galacto-oligosaccharides, and micro-ecological medical services. In the first half of 2021, Ruizhi Pharmaceutical achieved total revenue of 845 million yuan, an increase of 26.14% year-on-year, but its net profit was only 5.138 million yuan, a year-on-year decrease of 87.43%; non-net profit was a loss of 1.078 million yuan, a year-on-year decrease of 103.26%. During the reporting period, the company's pharmaceutical R&D and production outsourcing services (CRO/CDMO) segment achieved operating income of 684 million yuan, accounting for 81% of the company's total revenue. Among them, preclinical drug R&D outsourcing services (preclinical CRO), as an important part of the pharmaceutical R&D and production outsourcing services (CRO/CDMO) sector, achieved operating income of 578 million yuan during the reporting period, accounting for 84% of the CRO/CDMO sector. In summary, the leading CRO companies that realize the entire CXO industry chain, establish platform advantages, or specialize in clinical research businesses have higher revenue scale and stable performance growth. However, in terms of pre-clinical research such as drug safety evaluation, molecular building blocks, drug discovery and pharmaceutical research services, the segmented CRO leader that has established a competitive advantage, although the income scale is low, the performance growth rate is very fast. 3. WuXi AppTec has invested the most in R&D, while Chengdu Pioneer is most willing to invest in R&D The key to WuXi AppTec's outstanding performance lies in its strong technical research and development capabilities and the support of a strong team. Specifically, WuXi AppTec’s R&D investment in the first half of 2021 reached 404 million yuan, an increase of 21.29% over the same period of the previous year. A series of new capacity building R&D activities such as synthesis and resource sorting algorithm development. image.png However, the one who is most willing to invest in R&D is Chengdu Pioneer. In the first half of the year, it invested RMB 33,521,500 in R&D. Although it fell by 27.92% year-on-year, the R&D expense ratio (R&D investment as a percentage of operating income) is still as high as 21.43%. At the same time, the gross profit margin of sales is as high as 52.2%. The main business of Chengdu Lead is to provide R&D services in the early stage of drug discovery and the transfer of new drug R&D projects. The product types include DEL screening services, DEL library customization services, chemical synthesis services, and new drug R&D project transfers. During the reporting period, Chengdu Pioneer increased the introduction of R&D personnel in related fields of core technology platforms, enriched the R&D team, and maintained the company’s R&D and innovation capabilities. The number of R&D personnel increased to 379, accounting for 82.93% of the company's total number of employees. At the same time, by increasing R&D investment and expanding business cooperation, continue to strengthen the construction of its core technology platform-DNA encoding compound library, and optimize the trillion-level DEL new molecular entity library. 
Chengdu Pilot R&D Investment Status Source: 2021 Interim Report
In addition, Boji Pharmaceuticals (9.92%), Pharmaceutical Stone Technology (8.21%), and Medicilon (7.01%) have high R&D expense ratios; WuXi AppTec and Medicilon also accounted for the proportion of R&D personnel in the company's total in the first half of the year. Reach 82.88% and 85.48%. Among them, Medicilon's R&D investment in the first half of the year increased by 77.04% year-on-year, mainly because the company continued to increase its investment in independent R&D projects in order to improve R&D service capabilities and business undertaking capabilities, and strengthen the company's competitive advantage.During the reporting period, the company expanded the scale and application of the protein degradation technology (PROTAC) platform; established a small molecule drug discovery and development platform and scaled-up production process safety evaluation system that meets the requirements of international standards; continued to promote the improvement of new biotechnology drugs (including stem cells, CAR -T cells, ADC drugs, oncolytic virus and other gene therapy products, mRNA vaccines, etc.) Bioanalysis technology and the construction of preclinical effectiveness and safety evaluation technology platforms. 
Among the many CRO companies, the employees of Yaoshi Technology are the most profitable. In the first half of this year, the per capita income and per capita profit were as high as 454,000 yuan/person and 278,000 yuan/person respectively. This is mainly due to the company's active market expansion, increased sales orders and enhanced delivery capabilities . During the reporting period, in addition to the derivative growth of mid- and late-stage projects, Yakushi Technology has accumulated a large number of early-stage projects, forming a sustainable growth project pipeline. In the first half of the year, among the projects undertaken by Yaoshi Technology, more than 320 were from preclinical to clinical phase II, and 29 were from clinical phase III to commercialization; in addition to the above projects, there were more than 350 kilogram-level projects. At the same time, Yaoshi Technology continues to expand its customer base, especially small and medium-sized biotech companies. During the reporting period, the number of customers that formed orders was 722, a year-on-year increase of 5%; the number of end customers above the kilogram level (including only domestic and foreign pharmaceutical companies and small and medium-sized innovative drug companies) was 105, a year-on-year increase of 25%; sales were more than 5 million The number of customers was 27, a year-on-year increase of 42%. Fourth, the conclusion In summary, in the first half of 2021, due to the impact of policies and significant differences in performance, CRO companies have shown a clear "differentiation" market in the capital market. WuXi AppTec and Kang Long Chemical occupy the platform advantages of the entire CXO industry chain and maintain the leading position of the strong. Favored by the capital market. On the whole, under the general trend and background of my country's accelerated transformation of generic drugs to innovative drugs, high-quality CRO companies will continue to maintain a high level of prosperity for a long time and have long-term investment value.
September 02, 2021
