Net profit doubled for two consecutive years, how does the "Putian" CRO counterattack?

Recently, Medicilon released its 2021 annual performance report

In the CRO industry, there is a growth logic of "the strong stay strong and the strong get stronger", and the development paths of WuXi AppTec, Tigermed, and Pharmaron seem to confirm this point of view

Sufficient orders in hand and high performance certainty

Similar to the development path of WuXi AppTec and Pharmaron, Medicilon positions itself as a one-stop service provider for preclinical CRO.

▲Source of China’s CRO industry chain: Snowball

Thanks to the capital obtained in the A-share market, Medicilon's performance after 2019 is like a wild horse and has been soaring all the way

In terms of sub-sectors, the three major sectors of Medicilon have developed steadily, and their service capabilities have continued to increase:

▲Source of income of each main business segment: annual report

drug discovery

Drug discovery mainly includes services such as compound synthesis and screening

pharmaceutical research

Pharmaceutical research mainly includes services such as API and preparation technology research

Preclinical studies

Preclinical research services mainly include pharmacodynamic research, pharmacokinetic research, toxicology research and other services

In 2021, preclinical research will achieve operating income of 554 million yuan, a year-on-year increase of 78.

The continuous improvement of the market's recognition of Medicilon's R&D service capabilities has led to its continuous expansion of customers.

In terms of production capacity, it currently has a research and development laboratory of 74,000 square meters, of which the laboratory area that has been put into use is 66,900 square meters, and the laboratory area under construction is 7,100 square meters

At the same time, due to the increase in production capacity, the improvement of operating efficiency and the further manifestation of the scale effect, the gross profit margin of Medicilon in 2021 will increase by 4.

R&D drives performance, the most dazzling star of "Putian Department"

Different from other CRO companies in China, Medicilon is a typical "Putian" family business

As of December 31, 2021, among the top ten shareholders of Medicilon, Chen Jianhuang holds 9.

▲The source of the list of top ten shareholders of Medicilon: straight flush

As a "Putian" CRO company, Medicilon has the characteristics of being good at seizing opportunities and daring to fight.

Different from the impression of traditional "Putian-based" enterprises, Medicilon attaches great importance to R&D investment, digs deep moats, and enhances core competitiveness

From 2019 to 2021, Medicilon's R&D expenses are 28.

In the CRO industry, under the logic of "talented people win the world", the number of Medicilon R&D personnel will continue to increase in 2021, reaching 2,117, a year-on-year increase of 54.
3%, accounting for 86.
76% of the company's total number of employees
.
At the same time, in 2021, the core executive team will continue to expand, and Dr.
Dai Xuedong will be introduced as the executive vice president of the International R&D Service Department, which will lay the foundation for future overseas business expansion; the pre-clinical research business will introduce Dr.
Cao Baohong and Dr.
Wan Hong to join; CMC business The department introduced Dr.
Guo Zhenrong as executive vice president to further improve the business capability layout
.

With continuous talent team building and high R&D investment, Medicilon continues to promote and improve the construction of a series of important innovative R&D technology platforms
.
Including starting the construction of AI-based drug development platform; strengthening the development of high-end formulations, drug impurity analysis and detection, nucleotide drug development, protein degradation technology (PROTAC), peptide conjugated drug research and development and other technology platforms; development of deuterium technology in drug synthesis The application of metal catalysts and ligands in new drug process research and development and other new technology methods
.

In addition, Medicilon is one of the few CRO companies with GLP qualifications in China and the United States.
In 2021, 85 new drug projects that have participated in research and development have been approved by NMPA and entered clinical trials, and 15 have been approved by the US FDA and Australian TGA.
into clinical trials
.
During the reporting period, the company's project revenue in accordance with the requirements of the Sino-US double reporting standard was 405 million yuan, a year-on-year increase of 181.
25%, accounting for 34.
72% of the company's main business revenue
.
The research experience of the Sino-US dual reporting project has become one of Medicilon's core competitive advantages in acquiring innovative drug customers
.

▲The source of safety assessment related laboratories: the company's official website

The CRO market is still booming, and there are still opportunities for small and medium-sized CROs

A large part of the rapid growth of Medicilon's performance is due to the fact that the scale of China's CRO market is still growing rapidly
.

According to the latest Frost & Sullivan report, the global pharmaceutical industry R&D investment will increase from US$224.
1 billion in 2021 to US$312.
9 billion in 2026, with a compound annual growth rate of about 6.
9%
.

At the same time, as small and medium-sized biological companies have become an important driving force for global pharmaceutical innovation, the outsourcing rate of new drug research and development has continued to increase
.
According to the report, the outsourcing ratio of China's pharmaceutical R&D investment will increase from 39.
4% in 2021 to 49.
9% in 2026, and the global pharmaceutical R&D investment outsourcing ratio will increase from 43.
0% in 2021 to 52.
7% in 2026
.

With lower labor costs, faster service response and advantages in upstream and downstream industrial chains, Chinese CRO companies have obtained a large number of overseas orders and achieved higher market growth.
It is estimated that in the next five years, the annual average of China's CXO industry will be The increase can still reach 25%
.

▲Data source: Frost & Sullivan

Therefore, China's CRO market is still in the stage of "staking the field".
In 2021, there will be 6 CRO companies listed in the A-share market alone.
With the help of capital, the growth momentum of small and medium-sized CROs is still strong
.

However, judging from foreign experience, international CRO giants have actively expanded their core businesses to develop one-stop CRO services in the process of development, gradually forming a monopoly pattern of several giants
.
Although the concentration of domestic CRO business is not high at present, several major CRO giants such as WuXi AppTec and Pharmaron Chemical are also following this development path, actively exploring and improving the integrated empowerment platform, and building a complete industrial service chain has become a One of the important development trends of CRO enterprises in the future, and the concentration of CRO business in the top enterprises will also become a trend
.

Small and medium-sized enterprises are subject to capital, management and other reasons, and they have almost no chance to become a large and comprehensive CXO enterprise.
Business refinement and characteristic development have become one of their development directions
.
Taking advantage of first-mover advantages or technical advantages in subdivided fields, digging the moat to become a leader in a certain field, for example, Zhaoyan New Drug focuses on the field of safety assessment, and Tigermed focuses on the field of clinical CRO
.

In addition, due to the current trend of multi-field and increasing complexity of diseases, and rapid technological updates and iterations, pharmaceutical companies will select distinctive CRO companies based on different needs for some hot research and development fields of medicine
.
For example, Heyuan Bio, which has just landed on the Science and Technology Innovation Board, focuses on gene therapy CDMO
.
Having a characteristic technology platform will make it easier for enterprises to stand out, so building differentiated and characteristic services may become one of the development paths for small and medium-sized CRO enterprises in the future
.

Epilogue

Under the background of China's pharmaceutical reform and development, Medicilon seized the opportunity of accelerated expansion of the CRO market and gave full play to its core competitiveness.
With the blessing of capital, the growth rate far exceeded the industry average growth rate, and it has grown rapidly from a small and medium-sized CRO enterprise to a The preclinical integrated CRO company is expected to become one of the global preclinical CRO leaders in the future
.

references

1.
Quarterly and annual reports of major companies
.
Source: official website

2.
"Research Report on Medicilon in the Pharmaceutical Industry", Huaxi Securities 2022.
3.
8

3.
"The stock price soared 15 times within 21 months of listing, and Medici became a dark horse on the CRO track", Fujian Business Observation, 2021.
8.
16