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On the evening of April 10, 2023, HealthGen (600380.SH) released its 2022 annual report. In 2022, HealthGen celebrated its 30th anniversary. Facing the new situation and requirements of the greater health industry in its 'thirtieth year,' its strategy is clear, focusing on high-quality development. It firmly executed and implemented its dual-engine driven strategy of innovative drugs and high-barrier complex preparations, achieving sustained and steady growth in performance. During the reporting period, the company achieved revenue of 17.143 billion yuan, a year-on-year increase of 7.8%, net profit attributable to shareholders of 1.503 billion yuan, a year-on-year increase of 13.1%, and non-net profit of 1.419 billion yuan, a year-on-year increase of 15.8%. Cash flow from operating activities reached 3.978 billion yuan, a significant increase of 55.19% year-on-year.

While the revenue and profit of China's pharmaceutical manufacturing enterprises above designated size both declined in 2022, HealthGen's revenue and net profit achieved a double increase, which is quite remarkable. Based on this steady performance growth, HealthGen is also striving to create higher returns for shareholders. The report shows that the company plans to distribute a cash dividend of 1.80 yuan (including tax) per 10 shares in 2022.

HealthGen's segment net profit contribution exceeded 60%.

Respiratory preparation revenue continued to grow exponentially.

Public information shows that HealthGen is mainly engaged in the research, development, production, and sales of pharmaceutical products and health products. Its business scope covers multiple fields, including chemical preparations, chemical raw materials and intermediates, biological products, traditional Chinese medicine preparations, diagnostic reagents and equipment, and health foods. During the reporting period, each business achieved revenue of 9.226 billion yuan, 5.230 billion yuan, 1.297 billion yuan, 724 million yuan, 408 million yuan, and 121 million yuan respectively, and the growth rate of almost all businesses showed a steady upward trend. Among them, the gross profit margin of chemical preparations and chemical raw materials and intermediates businesses, which together account for 85% of revenue, increased by 0.09 percentage points and 2.7 percentage points respectively compared with 2021. The competitive advantage of the "main" business continued to strengthen, which undoubtedly laid a solid foundation for the steady operation of HealthGen, a "carrier-class" company with tens of billions of yuan in revenue.

Specifically, in terms of various main business segments, HealthGen's performance (excluding Lizhu Group and Lizhu Monoclonal Antibody) was very impressive during the reporting period, with both revenue and net profit achieving double-digit rapid growth. Revenue reached 4.832 billion yuan, an increase of nearly 20% year-on-year, and net profit attributable to shareholders reached 929 million yuan, a significant increase of 43% year-on-year, contributing 62% of the total profit. It is particularly noteworthy that the revenue of inhaled preparations reached 1.174 billion yuan, a surge of 103.37% year-on-year. It is reported that by taking advantage of the opportunities of three inhaled preparation products being selected in the fifth batch of centralized procurement and one inhaled preparation product being selected in the seventh batch of centralized procurement, the company's market share of inhaled preparations is rapidly increasing. It can be said that inhaled preparations have become the company's truly powerful growth "engine".

Furthermore, the company actively explores domestic and international markets. Currently, its sales network covers all provinces in China and more than 80 countries and regions worldwide. Data shows that in 2022, the company's domestic and overseas revenue reached 14.17 billion yuan and 2.842 billion yuan respectively, both achieving steady growth. The gross profit margin in overseas regions further increased by 4.17 percentage points. In addition, in September 2022, HealthGen's Global Depositary Receipts (GDRs) were successfully listed on the SIX Swiss Exchange, becoming the first biopharmaceutical company in China to issue and successfully list GDRs in Switzerland. It can be seen that the company's overseas market expansion continues to improve, and the internationalization strategy is also "highly effective." The company is constantly "advancing" towards becoming an innovative pharmaceutical company with international competitiveness.

R&D investment continues to increase; there are as many as 244 products under research.

Several innovative drugs and high-barrier complex preparations have made significant progress.

HealthGen has always focused on unmet clinical needs and continued to increase its R&D investment. Data shows that in 2022, the company's R&D expenses reached 1.742 billion yuan, a year-on-year increase of 24.69%, accounting for over 10% of revenue and ranking among the top three comparable companies in the industry. During the same period, the company had 1,717 R&D personnel, accounting for more than 10% of the company's total personnel. It is also worth mentioning that the company's founder has been deeply involved in the pharmaceutical industry for more than 30 years and possesses an international perspective and long-term strategic vision. Under his "unwavering" leadership, and with leading scientists in the industry leading various key R&D fields, the company has now fully established a mature R&D platform based on innovative drugs and high-barrier complex preparations, focusing on areas with significant clinical needs such as respiratory, digestive tract, assisted reproduction, mental health, and oncology. Furthermore, it is understood that HealthGen also makes full use of external scientific research and commercial resources, such as strategic cooperation with scientific research institutions and innovative companies such as the Chinese Academy of Sciences and Tencent Quantum Laboratory, and investment in cutting-edge biotechnology companies to expand the company's product matrix and R&D pipeline. According to statistics, as of now, the company has a total of 244 products under research, including 45 high-barrier complex preparations.

Based on the company's continuous "high-intensity" R&D investment and the "increasing" technological innovation capabilities, the report shows that in 2022, many innovative drugs and high-barrier complex preparation products in the company's R&D pipeline made significant progress: 6 products were approved for marketing, 5 products were filed for production, and 5 products obtained clinical approval documents.

Focusing on the inhaled preparations, which are the company's key areas of focus and where it already has a significant advantage, the company currently has 7 varieties and 11 specifications of products on the market, more than 30 respiratory products under research, and has successfully achieved coverage of all categories of asthma and COPD inhaled treatment drugs for existing and research products. Among them, it is worth noting that in October last year, the company's blockbuster product, tobramycin inhalation solution, was officially approved for marketing. Currently, only HealthGen has obtained the registration approval for this product in China. It is understood that this product is the world's first inhaled drug for the treatment of bronchiectasis and the first nebulized inhaled antibiotic approved for marketing in China. It has also received support from the national "Major New Drug Creation" major scientific and technological project. The launch of this product directly broke the long-standing situation of "no drugs available" for bronchiectasis patients in China, not only having milestone significance for the development of high-end inhaled preparations in China, but also fully highlighting the company's leading advantage in the inhaled preparation sector.

With the continuous increase in R&D strength and the continuous launch of blockbuster products, HealthGen has also quickly received the favor of the capital market. According to observations by the Red Weekly, since October last year, the company's stock price has started a continuous upward trend. As of now, the company's stock price has increased by more than 40%, which may mean that smart money is expressing its expectation for HealthGen's continued high-speed development in the future with "real money".

In addition, leveraging its technological advantages, HealthGen has also actively contributed to global epidemic prevention and control. During the reporting period, the recombinant novel coronavirus fusion protein vaccine (Likang® V-01) jointly developed by Lizhu Monoclonal Antibody, a subsidiary of the company, and the Institute of Biophysics, Chinese Academy of Sciences, was approved for emergency use, providing a better solution for global sequential booster immunization. At the beginning of this year, the company's tocilizumab injection (Anvita®) was also approved for marketing, becoming one of the two companies in China approved to register and produce this product. It is expected to benefit patients with autoimmune diseases while effectively alleviating the shortage of drugs for severe COVID-19 patients. Furthermore, based on the urgent need for the development of innovative influenza drugs, it is reported that in the first quarter of this year, the company immediately signed an exclusive license agreement with Taijing for its developed influenza antiviral new drug TG-1000 (which can effectively inhibit both influenza A and B viruses) in Greater China. This cooperation is also expected to bring more treatment options for patients.

Regarding the company's future development plan, Chairman Zhu Baoguo also stated in his speech that, amidst three decades of industry upheaval, the group has adhered to its mission of "For Health, For Tomorrow" and its vision of "Making Good Medicines with Care," focusing on the high-quality development of its pharmaceutical main business, maintaining strategic determination and demonstrating resilience and potential in tactics. Based on the development blueprint outlined in the 20th National Congress of the Communist Party of China report, the company will continue to cultivate the innovative drug and high-barrier complex preparation market, keenly observing market changes, breaking inertial thinking and path dependence, continuously consolidating the group's industry position in various sub-sectors, and accelerating the high-quality development of the industry.

Source: Securities Market Red Weekly