Taige pharmaceutical plans to go public for nearly 100 billion yuan, and it is still difficult to enter the first echelon of CRO

category:Finance
 Taige pharmaceutical plans to go public for nearly 100 billion yuan, and it is still difficult to enter the first echelon of CRO


Since the beginning of this year, the stock price of TEG has continued to rise, up as high as 83.68%. By the end of the afternoon of July 23, Taige pharmaceutical reported 115.6 yuan / share, with a market value of 86.637 billion yuan.

Photo source: Snowball

However, tiger pharmaceutical is still in the second echelon in the domestic cro market, and there is still a certain distance from the first echelon of yaomingkant and yaomingbio, which have a market value of over $200 billion.

A + H shares listed

It is a very long process from R & D to marketing. Because of the complicated process of clinical trials and the relatively simple business, many pharmaceutical enterprises outsource this part of the business, especially when foreign pharmaceutical companies enter the Chinese market, they need to carry out clinical trials in China. The business of OEM clinical trials is cro.

From 2017 to 2019, tiger pharmaceutical has completed more than 400 clinical R & D outsourcing projects. If calculated by revenue in 2019, TEG pharmaceutical can be considered as one of the top ten clinical cros in the world.

In 2012, tiger pharmaceutical was listed on the Shenzhen Stock Exchange, mainly providing services such as phase I-IV clinical trials, data management and biostatistics, registration and application, etc. for the development of pharmaceutical products. On December 13, 2019, tiger pharmaceuticals board of directors deliberated and approved the H-share listing plan, and passed the hearing of the Hong Kong Stock Exchange on July 19, which is expected to become the third a + H company in the domestic cro field.

According to the prospectus, the funds raised by Tiger pharmaceuticals IPO in Hong Kong are mainly used to enhance the operation capacity, meet the increasing demand of overseas market, provide funds for future potential acquisition or investment, supplement existing business, etc.

At present, Chinas cro market shows an accelerated growth trend, with an annual compound growth rate of 29.5%. It is estimated that the market size will reach 21.4 billion US dollars by 2023.

Liu Shengyu told Shidai finance and economics that affected by domestic pharmaceutical innovation, procurement with volume, consistency evaluation and other policy dividends, the overall prosperity of domestic cro, cdmo (contract R & D and production service) and other pharmaceutical outsourcing fields is relatively high. Enterprises including Yaoming Kant and tiger pharmaceutical are all beneficial industrial chains, and will continue to benefit in the next few years.

The crisis of Goodwill under frequent M & A

Among them, the revenue of TEG has increased from 1.683 billion yuan to 2.803 billion yuan in the past three years, but the growth rate is slowing down year by year, with a year-on-year growth of 21.91% in 2019 and 36.67% in 2018.

Source: Taige pharmaceutical prospectus

While the growth of revenue slowed down, in 2019, the net profit attributable to parent company of tiger pharmaceutical increased by 78.24% year-on-year. The reason is that nearly half of the net profit of tiger pharmaceutical comes from outside of operation, including 185 million profit and loss from fair value change and 180 million from investment. Both of these two incomes are attributed to the appraisal income generated by Taige pharmaceutical in the process of equity trading of its subsidiaries.

In fact, Taige pharmaceutical has made frequent mergers and acquisitions since its listing. From 2015 to 2019, TEG acquired dozens of companies, including Fonda pharmaceutical, Beiyi Renzhi, dreamcis, Jietong Tairui, etc,

In 2019 alone, tiger pharmaceuticals acquired Beijing yashencheng, Fangda Suzhou, RMI and bri at a cost of 119 million yuan, 41.7 million yuan, 31.95 million yuan and 20.26 million yuan respectively.

In 2015, the companys goodwill was 470 million yuan. By the end of the first quarter of 2020, its book goodwill increased to 1.363 billion yuan, accounting for 16.54% of the total assets. This means that once the target of M & A can not complete the performance of the bet, it is likely to cause the impairment of goodwill.

In view of frequent acquisitions, the performance is not up to expectations, and the goodwill is too high. Time finance called Tiger pharmaceutical on July 22, and the person in charge of its securities didnt explain clearly, saying that its just a potential risk.

It is worth mentioning that under the influence of the new crown epidemic, tiger medicine has also been affected. In the first quarter of 2020, tiger pharmaceutical achieved 650 million revenue, a year-on-year increase of 6.77%, and the growth rate slowed down.

However, the person in charge of the above-mentioned securities office told time finance that the impact of the epidemic on the companys overall business is limited. As early as February this year, the company has returned to work, and its operation is normal.

TEG is still in the second tier

According to Liu Shengyu, although there are a large number of domestic cro enterprises, their main business coverage is different and the competition is relatively small.

According to the times finance and economics review, Yaoming Kant is mainly engaged in chemical drug research and drug manufacturing, Yaoming bio mainly involves macromolecular cdmo, Fangda holdings focuses on clinical trial research and biological preparations, and KANGLONG Huacheng is more inclined to pre clinical drug production and manufacturing. There is no obvious competition relationship between Yaoming Kant and the preclinical and clinical trial research involved in TEG medicine.

In addition, tag bio has 66 subsidiaries, covering almost all the business of clinical cro.

However, the perfect business layout of clinical cro does not mean that the layout of pharmaceutical outsourcing field is complete.

In the whole drug research and development, in addition to preclinical cro and clinical cro, there are also follow-up CMO / cdmo process development. At present, the field of pharmaceutical outsourcing is in the pattern of one super and many strong. The Yaoming system, represented by Yaoming Kant and Yaoming bio, basically covers preclinical cro, clinical cro and chemical drug manufacturing, becoming the first echelon in cro field. However, tiger pharmaceutical only occupies the business of clinical research I-IV of clinical cro, and other parts of business are basically not involved.

This is also reflected in the personnel structure and R & D investment. In 2019, the number of R & D personnel of Wuxi apptec is 17872, and that of TEG is 468, which is 37 times of that of TEG. In terms of R & D investment, the total R & D investment of yaomingkant in 2019 is 590 million yuan, accounting for 4.59% of the revenue; the R & D investment of tiger pharmaceutical is 124 million yuan, accounting for 4.43% of the revenue, and the absolute value of investment is still far less than that of Wuxi Kant. From the perspective of revenue composition, at present, 9.907 billion yuan of the revenue of YaoMing Kant in 2019 comes from overseas, accounting for 76.96%. The main customers are global large multinational pharmaceutical companies and start-up biotechnology companies. In contrast, TEGs customers are concentrated in China, and the proportion of overseas revenue in 2019 is only 42.92%, which shows a downward trend year by year (62.66%, 57.22%, 46.35% and 42.92% respectively from 2016 to 2019). This also means that if you want to catch up with Yao Ming Kant and become the absolute leader in the cro field, the listing of Hong Kong stock and opening up the overseas market are the key steps for tiger pharmaceutical. Source: time weekly editor: Yang Bin_ NF4368

From the perspective of revenue composition, at present, 9.907 billion yuan of the revenue of YaoMing Kant in 2019 comes from overseas, accounting for 76.96%. The main customers are global large multinational pharmaceutical companies and start-up biotechnology companies. In contrast, TEGs customers are concentrated in China, and the proportion of overseas revenue in 2019 is only 42.92%, which shows a downward trend year by year (62.66%, 57.22%, 46.35% and 42.92% respectively from 2016 to 2019).

This also means that if you want to catch up with Yao Ming Kant and become the absolute leader in the cro field, the listing of Hong Kong stock and opening up the overseas market are the key steps for tiger pharmaceutical.