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Recently, HealthGen (600380.SH) released its 2022 annual report. 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%. During the same period, cash flow from operating activities reached 3.978 billion yuan, a significant increase of 55.19% year-on-year.

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. As of April 16, this ranked among the top three comparable companies in the same industry, with a cumulative total exceeding 5.1 billion yuan in the past four years. Furthermore, in terms of R&D expense growth rate alone, HealthGen ranks fifth among the top 20 Chinese listed pharmaceutical companies in terms of R&D expenses and third among A-share listed pharmaceutical companies.

R&D intensity ranked among the top three in A-share peers

Internationally, the scale and intensity of R&D activities reflect a country's scientific and technological strength and core competitiveness. The funds spent on R&D activities reflect the degree of importance and support given to scientific and technological innovation activities, and this is also true for enterprises. R&D expenditure is an important factor in measuring a company's R&D innovation strength and potential, and is an important guarantee for maintaining its vitality. The level of R&D fundamentally determines the international competitiveness of the entire industry.

In recent five years, R&D investment by Chinese pharmaceutical companies has continued to increase. In 2018, the total R&D expenditure of the top 50 pharmaceutical companies was more than 33 billion yuan, and has grown at an annual rate of over 10% since then, reaching approximately 86.6 billion yuan in 2022.

Taking HealthGen as an example, HealthGen's R&D expenses have continued to increase in the past five years. Data shows that from 2019 to 2022, HealthGen's R&D expenses were 906 million yuan, 1.072 billion yuan, 1.397 billion yuan, and 1.742 billion yuan respectively, with a cumulative investment of 5.117 billion yuan in four years; the ratio of R&D expenses to revenue was 7.56%, 7.93%, 8.88%, and 10.16% respectively, showing a continuous increase. Since 2020, HealthGen's R&D investment has maintained double-digit growth, from an 18.32% increase in 2020 to 30.32% in 2021, and 24.69% in 2022. This shows that the growth rate of R&D investment has far exceeded the average annual growth rate of Chinese pharmaceutical companies.

Currently, HealthGen's R&D expense growth rate and the ratio of R&D expenses to revenue are both ranked third among A-share listed pharmaceutical companies, reflecting HealthGen's determination to grow stronger by increasing investment in innovation and R&D.

High-barrier complex formulations successively blossom and bear fruit

Currently, HealthGen has 1,717 R&D personnel, accounting for more than 10% of the company's total personnel. It is worth mentioning that the company's founder has been deeply involved in the pharmaceutical industry for more than 30 years and has an international perspective and long-term strategic vision. Under his leadership, and with leading scientists in each key R&D field, the company has now fully established a mature R&D platform based on innovative drugs and high-barrier complex formulations, with a rich pipeline layout in areas with significant clinical needs, such as respiratory, digestive tract, assisted reproduction, mental health, and oncology.

Furthermore, HealthGen 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, the company currently has a total of 244 products under development, including 45 high-barrier complex formulations.

Based on the company's continuous "high-intensity" R&D investment and the "increasing" technological innovation capabilities, the report shows that in 2022, several innovative drugs and high-barrier complex formulation 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.

Focusing on the company's key layout and already significant advantages in inhalation formulations, the company currently has 7 varieties and 11 specifications of products on the market, more than 30 respiratory products under development, and has successfully achieved coverage of all categories of asthma and COPD inhalation therapies for existing and under-development 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 certificate 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 "lack of drugs" situation for bronchiectasis patients in China, not only having milestone significance for the development of high-end inhaled formulations in China, but also fully highlighting the company's leading advantage in the inhaled formulation sector.

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 the company's subsidiary, Lizhu Monoclonal Antibody, 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 signed an exclusive license agreement with Taijing for its developed influenza antiviral 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.

Globalisation takes a firm step forward

With high-intensity and high-efficiency R&D investment, HealthGen has not only achieved great success domestically. Overseas, HealthGen has taken firm steps from product R&D to market development and international capital financing.

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, with the gross profit margin in overseas regions further increasing by 4.17 percentage points. In terms of market development, HealthGen's "sodium aprazolam for injection" and "enteric-coated aprazolam tablets" have been approved for marketing in Indonesia.

Currently, HealthGen Group has BD offices in the United States and the United Kingdom. Leveraging a global perspective, it explores global innovation projects to further broaden its R&D thinking. The company stated that while continuously strengthening independent innovation, it closely monitors new businesses and technological opportunities in the domestic and international pharmaceutical industry, actively considering investment and cooperation, such as investing in innovative pharmaceutical companies globally to obtain priority rights to products, and cooperating with biotech companies with late-stage projects in the commercialization of innovative drugs to enrich the company's R&D and sales pipeline, accelerate innovation and R&D and international industrial layout, and contribute new growth points to the company's long-term and high-quality development.

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. This global recognition brought tangible benefits to HealthGen.

Industry insiders say that from raw materials and intermediates to the highly sought-after COVID-19 vaccine, to inhalation products that break the monopoly of giants, and to the continuously blossoming high-barrier complex preparations, this represents a huge improvement in the company's comprehensive strength, especially in R&D. At the same time, by issuing GDRs, the company's overseas influence and reputation will achieve a qualitative breakthrough in the future. With persistent R&D investment and the effective promotion of its internationalization strategy, the company is constantly "advancing" towards becoming an innovative pharmaceutical company with international competitiveness.

Source: Serious Finance