(Producer/Author: Shouchuang Securities, Wang Bin, Li Zhixin)
1.1 Intelligence, digitalization, etc. are development trends, and the overall solution demand continues to increase
Pharmaceutical equipment refers to mechanical equipment and packaging materials used in process purposes such as drug production, testing, and packaging. The pharmaceutical equipment industry mainly provides various production equipment for pharmaceutical manufacturing enterprises (including pharmaceutical manufacturing enterprises and CMO/CDMO enterprises). According to the classification method of China Pharmaceutical Equipment Industry Association , pharmaceutical equipment can be divided into categories such as raw material medicine machinery and equipment, preparation machinery and equipment, pharmaceutical crushing machinery, syringe machinery, pharmaceutical water, gas (vapor) equipment, pharmaceutical packaging machinery, drug testing equipment, other pharmaceutical machinery and equipment (such as conveying devices and auxiliary machinery), etc., with a total of more than 3,000 specifications, which are used in various links of drug production such as traditional Chinese medicine, chemical medicine and biological preparations. In reality, it is usually classified according to the purpose of the equipment, such as raw material equipment, preparation equipment (solid preparations, injections, etc.), packaging equipment, etc. Among them, raw material equipment and preparation equipment are the two most core types of preparation equipment in the production process of chemical drugs and biological drugs. The corresponding equipment for different products and dosage forms requirements is different from the production line. For example, the equipment required for biopharmaceutical production includes a large number of complex equipment and integrated systems such as cell incubators, bioreactors, chromatography columns, ultrafiltration membranes, lyophilizers, isolators, and other large number of complex equipment and integrated systems.
The upstream of the pharmaceutical equipment industry is mainly suppliers of various raw materials such as steel, machinery, parts, control systems and membrane materials, involving the steel industry, electronic components and automation control system industries. The downstream is the pharmaceutical manufacturing industry, including chemical drugs, biological drugs, traditional Chinese medicines, raw material drug manufacturers and CMO/CDMO enterprises. The development of the pharmaceutical industry directly affects the demand for pharmaceutical equipment, and the two are highly correlated. On the one hand, the growth of industrial output value of pharmaceutical and the increase in fixed asset investment will bring about an increase in the demand for pharmaceutical equipment; on the other hand, pharmaceutical companies have increasingly strict requirements on the stability, continuity, accuracy, integration, automation level and intelligence of pharmaceutical equipment, which has also prompted pharmaceutical equipment companies to continuously increase R&D investment and carry out technological innovation.
Pharmaceutical equipment plays an important role in drug production. The setting of quality and process route parameters not only directly affects the quality and efficacy of drugs, but also affects the energy consumption, cost, economic benefits of pharmaceutical companies, etc. Pharmaceutical companies need equipment with higher technical level. The pharmaceutical market structure is also changing, and pharmaceutical equipment companies must also follow the changes in the needs of drugs, adjust the product structure in a timely manner, and meet market demand.
From the development trend of pharmaceutical equipment, automation, intelligence, digitalization and continuous production represent the future development direction of the industry. Leading companies in the pharmaceutical equipment industry have also mainly provided single-machine or system equipment, and have accelerated the improvement of system design and integrated delivery capabilities in recent years, and gradually upgraded to providing overall engineering solutions.
In January 2022, the China Pharmaceutical Equipment Industry Association issued the "Technical Development Outline of Pharmaceutical Equipment "14th Five-Year Plan". During the "14th Five-Year Plan" period, the pharmaceutical equipment industry will focus on "in-depth integration of informatization and pharmaceutical equipment" to innovate and develop high-efficiency, low-energy consumption, low-carbon emission, automation and intelligent pharmaceutical equipment, and put forward clear development directions in many aspects such as traditional Chinese medicine pharmaceutical equipment, biological pharmaceutical equipment, etc. We believe that the upgrading of demand for pharmaceutical equipment and product iteration will help leading companies with strong technical capabilities and complete product categories stand out.
1.2 The domestic pharmaceutical equipment market space exceeds 80 billion yuan, and high-end products have room for import substitution; overseas market expansion will open the growth ceiling of domestic enterprises
The market size of my country's pharmaceutical equipment industry has multiple statistical possibilities.The industry data of "Pharmaceutical Professional Equipment Manufacturing" released by the National Bureau of Statistics (the main statistical scope is pharmaceutical equipment companies above the scale) shows that the revenue of the pharmaceutical professional equipment manufacturing industry in 2021 was 27.69 billion yuan, and increased by 39.94% year-on-year. Among them, the export delivery value of the "pharmaceutical special equipment manufacturing" industry in 2018-2021 was RMB 2.011 billion, RMB 1.696 billion, and RMB 1.83 billion, respectively, accounting for 12.47%, 9.82%, 9.26% and 7.89% of the total industry revenue in the same period. Since the export delivery value was not released from 2015-2017, we have counted the export delivery value in 2008-2014 to the total industry revenue of the year, with an average of about 7%. It can be seen that the export proportion of pharmaceutical equipment industry is basically stable, and domestic demand is still the main factor that dominates industry performance at this stage.
China Pharmaceutical Equipment Industry Association also conducted statistics on the market size of the domestic pharmaceutical equipment industry, and the data source is the statistical reports submitted by member units. The sales revenue of pharmaceutical machinery products in 2018 was 33.7 billion yuan. Assuming that the growth rate of member units in 2018-2021 is the same as the growth rate of the "Pharmaceutical Professional Equipment Manufacturing" issued by the National Bureau of Statistics, the total revenue of domestic pharmaceutical equipment enterprises in 2021 was 57.9 billion yuan.
We can calculate the demand scale of the pharmaceutical equipment industry segment based on the proportion of the "equipment tools and equipment purchase amount" in . According to industry division, the pharmaceutical manufacturing industry consists of seven sub-industry: chemical drug raw materials manufacturing, chemical drug preparation manufacturing, traditional Chinese medicine processing, Chinese patent medicine production, veterinary medicine manufacturing, biological drug manufacturing and sanitary materials and pharmaceutical supplies manufacturing. After excluding veterinary drug manufacturing, sanitary materials and pharmaceutical supplies manufacturing, the total amount of fixed asset investment in the five pharmaceutical-related sub-industries accounts for about 85%-90%.
Since the National Bureau of Statistics will no longer disclose the fixed asset investment completion amount of sub-industry after 2017, we calculate based on the 85% proportion of fixed asset investment in five sub-industies related to drugs in 2017; in 2021, the fixed asset investment in my country's pharmaceutical manufacturing industry was 958.4 billion yuan, and the fixed asset investment in in the pharmaceutical field in 2021 was 814.6 billion yuan.
2017 The proportion of fixed asset investment in the biopharmaceutical industry was 25%. Considering that the growth rate of biopharmaceuticals is faster than the average level of the drug market, this proportion is expected to continue to rise. We assume that the proportion of fixed asset investment in the biopharmaceutical industry in 2021 is 35% (taking into account the investment in the new crown vaccine production capacity), the completion of fixed asset investment in the biopharmaceutical industry that year is 285.1 billion yuan. In 2017, the "equipment and tool purchase" accounted for about 30% of the fixed asset investment in the biopharmaceutical industry. According to this proportion, the purchase amount of various equipment in my country's biopharmaceutical industry in 2021 was 85.5 billion yuan.
We further analyzed the fixed asset projects of some biological pharmaceutical companies. Generally speaking, the company's fixed assets are mainly composed of houses and buildings, machinery and equipment, transportation equipment, etc. In addition, the company will also disclose the original value of the assets of the main equipment. We analyze the original value of the main machinery and equipment of some biopharmaceutical enterprises (including pharmaceutical equipment, R&D equipment, infrastructure and other equipment), and calculate the proportion of the original value of the main pharmaceutical equipment assets to the original value of the machine equipment assets. It can be seen that the proportions of different companies vary greatly. We believe that on the one hand, it is related to the company's disclosure caliber, and on the other hand, because pharmaceutical equipment has the characteristics of non-standard customization, there are large differences in pricing between different customers and projects. Based on the average level of 33%, the market size of my country's biopharmaceutical equipment in 2021 was 28.2 billion yuan (85.5 billion yuan *33%). At the same time, we estimate that the market size of biopharmaceutical equipment is 35%, so the market size of my country's pharmaceutical equipment was about 80.6 billion yuan that year.
Previously, we have calculated that the total revenue of the domestic pharmaceutical equipment industry in 2021 was 57.9 billion yuan.According to incomplete statistics, by the end of 2019, there were more than 1,000 specialized and combined-produced pharmaceutical machinery companies in the pharmaceutical equipment industry, including 469 member units of . Considering that this statistical scope is only included in member units, it is estimated that the actual income of domestic pharmaceutical equipment industry enterprises will be between 65-70 billion yuan, which is a gap of 10-15 billion yuan compared with the calculated demand. We believe that it is mainly concentrated in the field of biopharmaceutical equipment such as vaccines and monoclonal antibodies, and there is a great opportunity for domestic substitution in the future.
According to Frost & Sullivan's analysis, the global drug market size in 2021 was US$144.5 billion, and the proportion of China's drug market was about 20%; with the growth of economic and medical demand, the growth rate of China's market size is higher than the global average, and it is expected that by 2023, the proportion of China's drug market will reach 24%. Assuming that the size of China's pharmaceutical equipment market in 2021 is 20% of the global market size (the same as the pharmaceutical market), the global pharmaceutical equipment market size was about 400 billion yuan that year. Biopharmaceuticals account for about 24% of the global drug market in 2021 and is expected to reach 37% by 2030. We believe that in the global pharmaceutical equipment market in the future, the demand for biopharmaceutical equipment will grow faster than that of chemical drugs. (Report source: Future Think Tank)
From a long-term perspective, the pharmaceutical equipment industry has good growth potential and does not show obvious cyclicality. From 2006 to 2021, the revenue of the "Pharmaceutical Equipment Manufacturing" industry increased from 3.496 billion yuan to 27.69 billion yuan, with an annual compound growth rate of 14.79%. During the same period, the revenue of the pharmaceutical manufacturing industry increased from 473.7 billion yuan to 292.89 billion yuan, with an annual compound growth rate of 12.91%, basically maintaining simultaneous growth with the pharmaceutical industry.
But from a specific time period, the pharmaceutical equipment industry is still cyclical, reflected in the decline in industry revenue growth and fluctuations in profitability. The operating conditions of the pharmaceutical equipment industry are closely related to the growth rate of fixed asset investment in the pharmaceutical manufacturing industry. From 2004 to the present, the pharmaceutical equipment industry has gone through three stages of development.
1.2004-2013: Rapid growth stage
The pharmaceutical manufacturing industry was generally in a high-speed growth stage from 2004-2013, with the annual compound growth rate of industry revenue reaching 24%. The strong demand for drugs has driven pharmaceutical companies to increase investment in fixed assets, and the growth rate of fixed asset investment in the pharmaceutical manufacturing industry has always maintained a high level, which has led to an increase in demand for pharmaceutical equipment. my country began to implement GMP compulsory certification in the pharmaceutical industry in 1999, which put forward rigid requirements on the production equipment and production environment of pharmaceutical companies, which greatly increased the demand in the pharmaceutical equipment industry, and enterprises need to re-certify every 5 years. In order to meet the GMP certification requirements, pharmaceutical companies need to increase their investment and purchase, update or replace original pharmaceutical equipment. GMP certification has brought cyclical incremental demand for pharmaceutical equipment. Fixed asset investment in the pharmaceutical manufacturing industry has shown a cyclical accelerated growth trend (2004-2005 and 2009-2011 can be regarded as equipment replacement nodes). The National Food and Drug Administration began to implement the new version of the GMP certification standard in March 2011, and required that the production of sterile drugs such as blood products, vaccines, injections and other sterile drugs in pharmaceutical manufacturers should meet the requirements of the new version of GMP before December 31, 2013, and the production of other categories of drugs should meet the requirements of the new version of GMP before December 31, 2015. Compared with the old standard in 1998, the new GMP certification standard has stricter requirements for aseptic production of pharmaceutical companies, and the demand for pharmaceutical equipment has seen explosive growth in the short term.
2.2013-2018: Industry demand shrinks, profitability declines
After 2013, due to the decline in the growth rate of pharmaceutical manufacturing revenue, the growth rate of fixed asset investment slowed down; the new version of GMP certification gradually entered the end, and the demand for pharmaceutical equipment continued to decline, and the growth rate of industry revenue declined sharply. On the other hand, due to weakening demand, intensified competition within the industry and corporate profitability declined. From the annual reports of industry leaders Dongfulong and Chutian Technology , it can be seen that the industry is facing great difficulties in operation.
3. 2018 to the present: The pharmaceutical manufacturing industry has entered a new round of fixed asset investment cycle, and new demand has emerged one after another
Since 2018, due to the recovery of fixed asset investment in the pharmaceutical manufacturing industry, the pharmaceutical equipment industry has gradually come out of the bottom, revenue has resumed growth, and profitability has been significantly improved. The demand for integrated, automated and intelligent mid-to-high-end pharmaceutical equipment will be further enhanced by the newly built production capacity. In addition, pharmaceutical equipment has a 5-10-year update cycle. On the one hand, it comes from the natural replacement after the service life of the original equipment expires, and on the other hand, it also comes from the upgrade of the needs of pharmaceutical companies. Enterprises are increasingly inclined to configure production lines with higher automation levels, better accuracy and better product quality consistency to meet the production needs of automation, integration and intelligence. Since the demand for the pharmaceutical equipment industry has been released quickly after the implementation of the new version of GMP certification in 2011, these equipment has entered the update and upgrade cycle according to the service life. Therefore, this part of the demand is also one of the reasons that promotes the prosperity cycle of this round of pharmaceutical equipment industry.
After analyzing the capital expenditure of listed companies, we found that fixed asset investment in different sub-sectors showed a certain differentiation.
Chemical pharmaceutical industry (formulation + raw materials) companies have grown steadily, but the growth rate has declined after the implementation of the centralized procurement policy in 2018. The amount of fixed assets maintained a rapid growth before 2018, but the growth rate also declined afterwards, reflecting the decline in profitability of post-production chemical preparations and corporate investments are more cautious. However, capital expenditure, fixed assets and projects under construction still have a certain growth, which is expected to be mainly due to: (1) The demand for chemical drugs still has a natural increase and there is a demand for expansion; (2) The market size of complex preparations such as microspheres, , liposomes, drug-loaded fatty milk, etc. has grown rapidly, thus driving the increase in demand for equipment; (3) The centralized procurement of generic drugs is constantly advancing, and preparations and raw material pharmaceutical companies have the motivation to improve the upstream and downstream of their own industrial chains, hoping to cover all supply chains, better control costs and expand production capacity.
The fixed assets of A-share listed companies in the traditional Chinese medicine industry are relatively stable, but they still maintain a certain intensity of capital expenditure. We believe that the main reasons include: (1) The traditional Chinese medicine industry has undergone structural changes in recent years. Due to the unclear clinical value of some traditional Chinese medicine injections, the incidence of adverse reactions is high, and various restrictive policies have been introduced one after another (restricting medical insurance reimbursement indications, medical institutions that apply reimbursement policies, included in the auxiliary drug monitoring catalog, etc.), the market size has declined, and the investment intention of enterprises has decreased, while the demand for oral dosage forms is relatively stable, and the market size has increased slightly. enterprises still have the intention to increase investment in investment; (2) The original production line has demand for automation and intelligent transformation.
Fixed asset investment in the biological products industry continues to be strong. The capital expenditure of companies such as blood products, vaccines and monoclonal antibodies in A-shares has continued to increase. On the one hand, it comes from the rapid growth of domestically produced drugs such as PD-1 monoclonal antibodies, and there is a demand for production expansion. On the other hand, the construction of the new crown vaccine production capacity has also brought considerable growth. According to data disclosed by the Ministry of Industry and Information Technology, as of the end of 2021, my country's annual production capacity of new crown vaccines reached 7 billion doses; the data in the "Convertible Bond Prospectus" of Kangtai Biologics shows that the "Baiwangxin Emergency Engineering Construction Project" can produce 200 million doses of new crown inactivated vaccines annually, and the investment amount of equipment purchase and installation is 384 million; the "Adenoviral Vector New Coronavirus Vaccine Workshop Project" can produce 200 million doses of adenoviral Vector New Coronavirus Vaccine Workshop Project can produce 200 million doses of adenoviral Vector New Coronavirus Vaccine Workshop Project, and the investment amount of equipment purchase and installation is 367 million. According to the above data, based on the average investment amount of 170 million yuan per 100 million doses of vaccines (excluding installation costs), the incremental demand for equipment brought by my country's new crown vaccine production line is 11.9 billion yuan.
2021 The growth rate of fixed assets, intangible assets and other long-term assets of listed companies in the biological products industry has increased significantly, mainly due to the significant expansion of production capacity of vaccine companies.On the other hand, Hong Kong stock biotech company has also entered the commercialization stage one after another, and the production capacity of biotech company represented by Innovent Biologics and Kangfang Biologics is also continuing to expand. In the first quarter of 2022, on the high base, capital expenditure of listed companies in the A-share biological products industry continued to grow. We believe that as the country's pharmaceutical industry gradually entered the commercialization stage and the incremental equipment demand brought by the new crown vaccine is gradually digested, the intensity of capital expenditure and equipment demand in the biological products industry are still expected to remain at a good level.
On August 26, 2019, the new version of " Drug Administration Law " was voted and passed at the 12th meeting of the Standing Committee of the 13th National People's Congress and implemented from December 1, 2019. The new version of the Drug Administration Law deletes the "drug supervision and administration department to authenticate whether drug manufacturers comply with the requirements of the "Drug Production Quality Management Standards" in accordance with regulations; for those who pass the certification, a certification certificate will be issued", confirm the cancellation of GMP certification, and the supervision method of GMP for drug manufacturers has changed from the past "re-approval and light supervision" to "strengthening supervision and inspection, weakening licensing approval", and dynamic management and process supervision of the effectiveness of pharmaceutical companies' execution of GMP through "flight inspection", daily random inspection and other means. We believe that the new version of " Drug Registration Management Measures " has canceled the GMP certification and has instead strengthened the dynamic supervision of the entire drug production process and the entire life cycle of drugs. It is expected that the demand for pharmaceutical equipment will be released smoothly in the future, and the industry is expected to transform from short-term cyclical explosive growth to long-term steady growth. It is expected that the cyclical nature of the industry will be weakened to a certain extent in the future. On the other hand, GMP relevant institutional regulations are constantly being updated and improved dynamically, and are encouraged to be applied in pharmaceutical companies through daily inspections, which will greatly shorten the marketing cycle of new products and new technologies in the pharmaceutical equipment industry. According to the calculations of Zhuoshi Consulting, the competitive landscape of my country's pharmaceutical equipment market will still be relatively scattered in 2020, and the market share of the leading pharmaceutical equipment industry with rich customer resources accumulation, leading product quality and technical level and outstanding R&D capabilities is also expected to gradually increase.
The contract liabilities of listed companies in the pharmaceutical equipment industry are mainly composed of order advance payments (usually 30% of the order amount) and the withdrawal payments (usually 60% of the order amount). Therefore, contract liabilities have certain forward-looking significance for predicting the company's performance. We have counted the contract liabilities of 6 listed companies in the pharmaceutical equipment industry, including Dongfulong. Since 2017, the total contract liabilities of the above companies have begun to bottom out and rebound. The year-on-year growth rate of the total contract liabilities in 2021 was 76%. We believe that listed companies in the pharmaceutical equipment industry are still in the period of performance release. In the first quarter of 2022, the month-on-month growth rate of contract liabilities of some listed companies slowed down. We believe that it is mainly due to: (1) 2020-2021 is the peak period for capital expenditure of the new crown vaccine project, and the relevant demand in 2022 decreased, resulting in a decrease in order advance payment; (2) Factors such as the epidemic have led to delays in manufacturer delivery and customer acceptance, and the shipment has been affected, thus reducing the confirmed receipt of goods. We believe that after removing the new crown order factor, the orders for other equipment of the company will continue to grow. In the future, after digesting the impact of the new crown-related orders, we believe that the performance of pharmaceutical equipment companies will still have good growth potential.
From the company's perspective, due to the existence of the operating leverage effect, the fluctuation range of profits is much greater than the fluctuation range of profits, which is also one of the reasons for the cyclical changes in performance. For example, from 2011 to 2021, Dongfulong's revenue increased from 822 million yuan to 4.192 billion yuan, with an annual compound growth rate of 20.51%, but its profitability fluctuated greatly. On the one hand, it is due to fluctuations in gross profit margin, especially after 2015, which is significantly reduced, mainly due to the decline in equipment demand and intensified competition among companies in the same industry. On the other hand, due to the changes in the drug demand structure, enterprises need to make R&D investment and layout in new fields in advance, and the increase in rigid costs such as expenses has also brought a significant drag on performance.
(Producer/Author: Shouchuang Securities, Wang Bin, Li Zhixin)
1.1 Intelligence, digitalization, etc. are development trends, and the overall solution demand continues to increase
Pharmaceutical equipment refers to mechanical equipment and packaging materials used in process purposes such as drug production, testing, and packaging. The pharmaceutical equipment industry mainly provides various production equipment for pharmaceutical manufacturing enterprises (including pharmaceutical manufacturing enterprises and CMO/CDMO enterprises). According to the classification method of China Pharmaceutical Equipment Industry Association , pharmaceutical equipment can be divided into categories such as raw material medicine machinery and equipment, preparation machinery and equipment, pharmaceutical crushing machinery, syringe machinery, pharmaceutical water, gas (vapor) equipment, pharmaceutical packaging machinery, drug testing equipment, other pharmaceutical machinery and equipment (such as conveying devices and auxiliary machinery), etc., with a total of more than 3,000 specifications, which are used in various links of drug production such as traditional Chinese medicine, chemical medicine and biological preparations. In reality, it is usually classified according to the purpose of the equipment, such as raw material equipment, preparation equipment (solid preparations, injections, etc.), packaging equipment, etc. Among them, raw material equipment and preparation equipment are the two most core types of preparation equipment in the production process of chemical drugs and biological drugs. The corresponding equipment for different products and dosage forms requirements is different from the production line. For example, the equipment required for biopharmaceutical production includes a large number of complex equipment and integrated systems such as cell incubators, bioreactors, chromatography columns, ultrafiltration membranes, lyophilizers, isolators, and other large number of complex equipment and integrated systems.
The upstream of the pharmaceutical equipment industry is mainly suppliers of various raw materials such as steel, machinery, parts, control systems and membrane materials, involving the steel industry, electronic components and automation control system industries. The downstream is the pharmaceutical manufacturing industry, including chemical drugs, biological drugs, traditional Chinese medicines, raw material drug manufacturers and CMO/CDMO enterprises. The development of the pharmaceutical industry directly affects the demand for pharmaceutical equipment, and the two are highly correlated. On the one hand, the growth of industrial output value of pharmaceutical and the increase in fixed asset investment will bring about an increase in the demand for pharmaceutical equipment; on the other hand, pharmaceutical companies have increasingly strict requirements on the stability, continuity, accuracy, integration, automation level and intelligence of pharmaceutical equipment, which has also prompted pharmaceutical equipment companies to continuously increase R&D investment and carry out technological innovation.
Pharmaceutical equipment plays an important role in drug production. The setting of quality and process route parameters not only directly affects the quality and efficacy of drugs, but also affects the energy consumption, cost, economic benefits of pharmaceutical companies, etc. Pharmaceutical companies need equipment with higher technical level. The pharmaceutical market structure is also changing, and pharmaceutical equipment companies must also follow the changes in the needs of drugs, adjust the product structure in a timely manner, and meet market demand.
From the development trend of pharmaceutical equipment, automation, intelligence, digitalization and continuous production represent the future development direction of the industry. Leading companies in the pharmaceutical equipment industry have also mainly provided single-machine or system equipment, and have accelerated the improvement of system design and integrated delivery capabilities in recent years, and gradually upgraded to providing overall engineering solutions.
In January 2022, the China Pharmaceutical Equipment Industry Association issued the "Technical Development Outline of Pharmaceutical Equipment "14th Five-Year Plan". During the "14th Five-Year Plan" period, the pharmaceutical equipment industry will focus on "in-depth integration of informatization and pharmaceutical equipment" to innovate and develop high-efficiency, low-energy consumption, low-carbon emission, automation and intelligent pharmaceutical equipment, and put forward clear development directions in many aspects such as traditional Chinese medicine pharmaceutical equipment, biological pharmaceutical equipment, etc. We believe that the upgrading of demand for pharmaceutical equipment and product iteration will help leading companies with strong technical capabilities and complete product categories stand out.
1.2 The domestic pharmaceutical equipment market space exceeds 80 billion yuan, and high-end products have room for import substitution; overseas market expansion will open the growth ceiling of domestic enterprises
The market size of my country's pharmaceutical equipment industry has multiple statistical possibilities.The industry data of "Pharmaceutical Professional Equipment Manufacturing" released by the National Bureau of Statistics (the main statistical scope is pharmaceutical equipment companies above the scale) shows that the revenue of the pharmaceutical professional equipment manufacturing industry in 2021 was 27.69 billion yuan, and increased by 39.94% year-on-year. Among them, the export delivery value of the "pharmaceutical special equipment manufacturing" industry in 2018-2021 was RMB 2.011 billion, RMB 1.696 billion, and RMB 1.83 billion, respectively, accounting for 12.47%, 9.82%, 9.26% and 7.89% of the total industry revenue in the same period. Since the export delivery value was not released from 2015-2017, we have counted the export delivery value in 2008-2014 to the total industry revenue of the year, with an average of about 7%. It can be seen that the export proportion of pharmaceutical equipment industry is basically stable, and domestic demand is still the main factor that dominates industry performance at this stage.
China Pharmaceutical Equipment Industry Association also conducted statistics on the market size of the domestic pharmaceutical equipment industry, and the data source is the statistical reports submitted by member units. The sales revenue of pharmaceutical machinery products in 2018 was 33.7 billion yuan. Assuming that the growth rate of member units in 2018-2021 is the same as the growth rate of the "Pharmaceutical Professional Equipment Manufacturing" issued by the National Bureau of Statistics, the total revenue of domestic pharmaceutical equipment enterprises in 2021 was 57.9 billion yuan.
We can calculate the demand scale of the pharmaceutical equipment industry segment based on the proportion of the "equipment tools and equipment purchase amount" in . According to industry division, the pharmaceutical manufacturing industry consists of seven sub-industry: chemical drug raw materials manufacturing, chemical drug preparation manufacturing, traditional Chinese medicine processing, Chinese patent medicine production, veterinary medicine manufacturing, biological drug manufacturing and sanitary materials and pharmaceutical supplies manufacturing. After excluding veterinary drug manufacturing, sanitary materials and pharmaceutical supplies manufacturing, the total amount of fixed asset investment in the five pharmaceutical-related sub-industries accounts for about 85%-90%.
Since the National Bureau of Statistics will no longer disclose the fixed asset investment completion amount of sub-industry after 2017, we calculate based on the 85% proportion of fixed asset investment in five sub-industies related to drugs in 2017; in 2021, the fixed asset investment in my country's pharmaceutical manufacturing industry was 958.4 billion yuan, and the fixed asset investment in in the pharmaceutical field in 2021 was 814.6 billion yuan.
2017 The proportion of fixed asset investment in the biopharmaceutical industry was 25%. Considering that the growth rate of biopharmaceuticals is faster than the average level of the drug market, this proportion is expected to continue to rise. We assume that the proportion of fixed asset investment in the biopharmaceutical industry in 2021 is 35% (taking into account the investment in the new crown vaccine production capacity), the completion of fixed asset investment in the biopharmaceutical industry that year is 285.1 billion yuan. In 2017, the "equipment and tool purchase" accounted for about 30% of the fixed asset investment in the biopharmaceutical industry. According to this proportion, the purchase amount of various equipment in my country's biopharmaceutical industry in 2021 was 85.5 billion yuan.
We further analyzed the fixed asset projects of some biological pharmaceutical companies. Generally speaking, the company's fixed assets are mainly composed of houses and buildings, machinery and equipment, transportation equipment, etc. In addition, the company will also disclose the original value of the assets of the main equipment. We analyze the original value of the main machinery and equipment of some biopharmaceutical enterprises (including pharmaceutical equipment, R&D equipment, infrastructure and other equipment), and calculate the proportion of the original value of the main pharmaceutical equipment assets to the original value of the machine equipment assets. It can be seen that the proportions of different companies vary greatly. We believe that on the one hand, it is related to the company's disclosure caliber, and on the other hand, because pharmaceutical equipment has the characteristics of non-standard customization, there are large differences in pricing between different customers and projects. Based on the average level of 33%, the market size of my country's biopharmaceutical equipment in 2021 was 28.2 billion yuan (85.5 billion yuan *33%). At the same time, we estimate that the market size of biopharmaceutical equipment is 35%, so the market size of my country's pharmaceutical equipment was about 80.6 billion yuan that year.
Previously, we have calculated that the total revenue of the domestic pharmaceutical equipment industry in 2021 was 57.9 billion yuan.According to incomplete statistics, by the end of 2019, there were more than 1,000 specialized and combined-produced pharmaceutical machinery companies in the pharmaceutical equipment industry, including 469 member units of . Considering that this statistical scope is only included in member units, it is estimated that the actual income of domestic pharmaceutical equipment industry enterprises will be between 65-70 billion yuan, which is a gap of 10-15 billion yuan compared with the calculated demand. We believe that it is mainly concentrated in the field of biopharmaceutical equipment such as vaccines and monoclonal antibodies, and there is a great opportunity for domestic substitution in the future.
According to Frost & Sullivan's analysis, the global drug market size in 2021 was US$144.5 billion, and the proportion of China's drug market was about 20%; with the growth of economic and medical demand, the growth rate of China's market size is higher than the global average, and it is expected that by 2023, the proportion of China's drug market will reach 24%. Assuming that the size of China's pharmaceutical equipment market in 2021 is 20% of the global market size (the same as the pharmaceutical market), the global pharmaceutical equipment market size was about 400 billion yuan that year. Biopharmaceuticals account for about 24% of the global drug market in 2021 and is expected to reach 37% by 2030. We believe that in the global pharmaceutical equipment market in the future, the demand for biopharmaceutical equipment will grow faster than that of chemical drugs. (Report source: Future Think Tank)
From a long-term perspective, the pharmaceutical equipment industry has good growth potential and does not show obvious cyclicality. From 2006 to 2021, the revenue of the "Pharmaceutical Equipment Manufacturing" industry increased from 3.496 billion yuan to 27.69 billion yuan, with an annual compound growth rate of 14.79%. During the same period, the revenue of the pharmaceutical manufacturing industry increased from 473.7 billion yuan to 292.89 billion yuan, with an annual compound growth rate of 12.91%, basically maintaining simultaneous growth with the pharmaceutical industry.
But from a specific time period, the pharmaceutical equipment industry is still cyclical, reflected in the decline in industry revenue growth and fluctuations in profitability. The operating conditions of the pharmaceutical equipment industry are closely related to the growth rate of fixed asset investment in the pharmaceutical manufacturing industry. From 2004 to the present, the pharmaceutical equipment industry has gone through three stages of development.
1.2004-2013: Rapid growth stage
The pharmaceutical manufacturing industry was generally in a high-speed growth stage from 2004-2013, with the annual compound growth rate of industry revenue reaching 24%. The strong demand for drugs has driven pharmaceutical companies to increase investment in fixed assets, and the growth rate of fixed asset investment in the pharmaceutical manufacturing industry has always maintained a high level, which has led to an increase in demand for pharmaceutical equipment. my country began to implement GMP compulsory certification in the pharmaceutical industry in 1999, which put forward rigid requirements on the production equipment and production environment of pharmaceutical companies, which greatly increased the demand in the pharmaceutical equipment industry, and enterprises need to re-certify every 5 years. In order to meet the GMP certification requirements, pharmaceutical companies need to increase their investment and purchase, update or replace original pharmaceutical equipment. GMP certification has brought cyclical incremental demand for pharmaceutical equipment. Fixed asset investment in the pharmaceutical manufacturing industry has shown a cyclical accelerated growth trend (2004-2005 and 2009-2011 can be regarded as equipment replacement nodes). The National Food and Drug Administration began to implement the new version of the GMP certification standard in March 2011, and required that the production of sterile drugs such as blood products, vaccines, injections and other sterile drugs in pharmaceutical manufacturers should meet the requirements of the new version of GMP before December 31, 2013, and the production of other categories of drugs should meet the requirements of the new version of GMP before December 31, 2015. Compared with the old standard in 1998, the new GMP certification standard has stricter requirements for aseptic production of pharmaceutical companies, and the demand for pharmaceutical equipment has seen explosive growth in the short term.
2.2013-2018: Industry demand shrinks, profitability declines
After 2013, due to the decline in the growth rate of pharmaceutical manufacturing revenue, the growth rate of fixed asset investment slowed down; the new version of GMP certification gradually entered the end, and the demand for pharmaceutical equipment continued to decline, and the growth rate of industry revenue declined sharply. On the other hand, due to weakening demand, intensified competition within the industry and corporate profitability declined. From the annual reports of industry leaders Dongfulong and Chutian Technology , it can be seen that the industry is facing great difficulties in operation.
3. 2018 to the present: The pharmaceutical manufacturing industry has entered a new round of fixed asset investment cycle, and new demand has emerged one after another
Since 2018, due to the recovery of fixed asset investment in the pharmaceutical manufacturing industry, the pharmaceutical equipment industry has gradually come out of the bottom, revenue has resumed growth, and profitability has been significantly improved. The demand for integrated, automated and intelligent mid-to-high-end pharmaceutical equipment will be further enhanced by the newly built production capacity. In addition, pharmaceutical equipment has a 5-10-year update cycle. On the one hand, it comes from the natural replacement after the service life of the original equipment expires, and on the other hand, it also comes from the upgrade of the needs of pharmaceutical companies. Enterprises are increasingly inclined to configure production lines with higher automation levels, better accuracy and better product quality consistency to meet the production needs of automation, integration and intelligence. Since the demand for the pharmaceutical equipment industry has been released quickly after the implementation of the new version of GMP certification in 2011, these equipment has entered the update and upgrade cycle according to the service life. Therefore, this part of the demand is also one of the reasons that promotes the prosperity cycle of this round of pharmaceutical equipment industry.
After analyzing the capital expenditure of listed companies, we found that fixed asset investment in different sub-sectors showed a certain differentiation.
Chemical pharmaceutical industry (formulation + raw materials) companies have grown steadily, but the growth rate has declined after the implementation of the centralized procurement policy in 2018. The amount of fixed assets maintained a rapid growth before 2018, but the growth rate also declined afterwards, reflecting the decline in profitability of post-production chemical preparations and corporate investments are more cautious. However, capital expenditure, fixed assets and projects under construction still have a certain growth, which is expected to be mainly due to: (1) The demand for chemical drugs still has a natural increase and there is a demand for expansion; (2) The market size of complex preparations such as microspheres, , liposomes, drug-loaded fatty milk, etc. has grown rapidly, thus driving the increase in demand for equipment; (3) The centralized procurement of generic drugs is constantly advancing, and preparations and raw material pharmaceutical companies have the motivation to improve the upstream and downstream of their own industrial chains, hoping to cover all supply chains, better control costs and expand production capacity.
The fixed assets of A-share listed companies in the traditional Chinese medicine industry are relatively stable, but they still maintain a certain intensity of capital expenditure. We believe that the main reasons include: (1) The traditional Chinese medicine industry has undergone structural changes in recent years. Due to the unclear clinical value of some traditional Chinese medicine injections, the incidence of adverse reactions is high, and various restrictive policies have been introduced one after another (restricting medical insurance reimbursement indications, medical institutions that apply reimbursement policies, included in the auxiliary drug monitoring catalog, etc.), the market size has declined, and the investment intention of enterprises has decreased, while the demand for oral dosage forms is relatively stable, and the market size has increased slightly. enterprises still have the intention to increase investment in investment; (2) The original production line has demand for automation and intelligent transformation.
Fixed asset investment in the biological products industry continues to be strong. The capital expenditure of companies such as blood products, vaccines and monoclonal antibodies in A-shares has continued to increase. On the one hand, it comes from the rapid growth of domestically produced drugs such as PD-1 monoclonal antibodies, and there is a demand for production expansion. On the other hand, the construction of the new crown vaccine production capacity has also brought considerable growth. According to data disclosed by the Ministry of Industry and Information Technology, as of the end of 2021, my country's annual production capacity of new crown vaccines reached 7 billion doses; the data in the "Convertible Bond Prospectus" of Kangtai Biologics shows that the "Baiwangxin Emergency Engineering Construction Project" can produce 200 million doses of new crown inactivated vaccines annually, and the investment amount of equipment purchase and installation is 384 million; the "Adenoviral Vector New Coronavirus Vaccine Workshop Project" can produce 200 million doses of adenoviral Vector New Coronavirus Vaccine Workshop Project can produce 200 million doses of adenoviral Vector New Coronavirus Vaccine Workshop Project, and the investment amount of equipment purchase and installation is 367 million. According to the above data, based on the average investment amount of 170 million yuan per 100 million doses of vaccines (excluding installation costs), the incremental demand for equipment brought by my country's new crown vaccine production line is 11.9 billion yuan.
2021 The growth rate of fixed assets, intangible assets and other long-term assets of listed companies in the biological products industry has increased significantly, mainly due to the significant expansion of production capacity of vaccine companies.On the other hand, Hong Kong stock biotech company has also entered the commercialization stage one after another, and the production capacity of biotech company represented by Innovent Biologics and Kangfang Biologics is also continuing to expand. In the first quarter of 2022, on the high base, capital expenditure of listed companies in the A-share biological products industry continued to grow. We believe that as the country's pharmaceutical industry gradually entered the commercialization stage and the incremental equipment demand brought by the new crown vaccine is gradually digested, the intensity of capital expenditure and equipment demand in the biological products industry are still expected to remain at a good level.
On August 26, 2019, the new version of " Drug Administration Law " was voted and passed at the 12th meeting of the Standing Committee of the 13th National People's Congress and implemented from December 1, 2019. The new version of the Drug Administration Law deletes the "drug supervision and administration department to authenticate whether drug manufacturers comply with the requirements of the "Drug Production Quality Management Standards" in accordance with regulations; for those who pass the certification, a certification certificate will be issued", confirm the cancellation of GMP certification, and the supervision method of GMP for drug manufacturers has changed from the past "re-approval and light supervision" to "strengthening supervision and inspection, weakening licensing approval", and dynamic management and process supervision of the effectiveness of pharmaceutical companies' execution of GMP through "flight inspection", daily random inspection and other means. We believe that the new version of " Drug Registration Management Measures " has canceled the GMP certification and has instead strengthened the dynamic supervision of the entire drug production process and the entire life cycle of drugs. It is expected that the demand for pharmaceutical equipment will be released smoothly in the future, and the industry is expected to transform from short-term cyclical explosive growth to long-term steady growth. It is expected that the cyclical nature of the industry will be weakened to a certain extent in the future. On the other hand, GMP relevant institutional regulations are constantly being updated and improved dynamically, and are encouraged to be applied in pharmaceutical companies through daily inspections, which will greatly shorten the marketing cycle of new products and new technologies in the pharmaceutical equipment industry. According to the calculations of Zhuoshi Consulting, the competitive landscape of my country's pharmaceutical equipment market will still be relatively scattered in 2020, and the market share of the leading pharmaceutical equipment industry with rich customer resources accumulation, leading product quality and technical level and outstanding R&D capabilities is also expected to gradually increase.
The contract liabilities of listed companies in the pharmaceutical equipment industry are mainly composed of order advance payments (usually 30% of the order amount) and the withdrawal payments (usually 60% of the order amount). Therefore, contract liabilities have certain forward-looking significance for predicting the company's performance. We have counted the contract liabilities of 6 listed companies in the pharmaceutical equipment industry, including Dongfulong. Since 2017, the total contract liabilities of the above companies have begun to bottom out and rebound. The year-on-year growth rate of the total contract liabilities in 2021 was 76%. We believe that listed companies in the pharmaceutical equipment industry are still in the period of performance release. In the first quarter of 2022, the month-on-month growth rate of contract liabilities of some listed companies slowed down. We believe that it is mainly due to: (1) 2020-2021 is the peak period for capital expenditure of the new crown vaccine project, and the relevant demand in 2022 decreased, resulting in a decrease in order advance payment; (2) Factors such as the epidemic have led to delays in manufacturer delivery and customer acceptance, and the shipment has been affected, thus reducing the confirmed receipt of goods. We believe that after removing the new crown order factor, the orders for other equipment of the company will continue to grow. In the future, after digesting the impact of the new crown-related orders, we believe that the performance of pharmaceutical equipment companies will still have good growth potential.
From the company's perspective, due to the existence of the operating leverage effect, the fluctuation range of profits is much greater than the fluctuation range of profits, which is also one of the reasons for the cyclical changes in performance. For example, from 2011 to 2021, Dongfulong's revenue increased from 822 million yuan to 4.192 billion yuan, with an annual compound growth rate of 20.51%, but its profitability fluctuated greatly. On the one hand, it is due to fluctuations in gross profit margin, especially after 2015, which is significantly reduced, mainly due to the decline in equipment demand and intensified competition among companies in the same industry. On the other hand, due to the changes in the drug demand structure, enterprises need to make R&D investment and layout in new fields in advance, and the increase in rigid costs such as expenses has also brought a significant drag on performance.Since 2019, Dongfulong's gross profit margin has bottomed out and rebounded. On the one hand, due to the recovery of industry demand, competition among peers has weakened, and product profitability has been restored; on the other hand, the company has also begun to provide customers with more integrated and systematic solutions, and customer stickiness and market competitiveness have been greatly enhanced.
At present, the product lines of leading pharmaceutical equipment companies are already relatively rich, covering a variety of drugs, and the revenue structure is more diversified. Dongfulong's revenue structure has been mainly composed of freeze-dried machines and systems for injections. At present, it has formed a pattern of common development of multiple product lines such as injection system/stand-stand-stand- bioengineering single machine and system. As of 2021, the company's revenue share of three major products, including injection single machine and system, bioengineering single machine and system, purification engineering and equipment, was 32.95%, 21.63% and 13.28% respectively. Chutian Technology has also gradually formed a pattern of common development of sterile preparation solutions and stand-alone, testing packaging solutions and stand-alone and bioengineering solutions and stand-alone products from the beginning of its launch. In 2021, the company's sterile preparation solutions and stand-alone and bioengineering solutions and stand-alone revenues were 24.21% and 30.54%, respectively, and accessories and after-sales service accounted for 16.27%. Bioengineering solutions and stand-alone revenues achieved 244 million yuan, an increase of 84.30% year-on-year.
With the improvement of its R&D and manufacturing capabilities, domestic leading pharmaceutical equipment companies have continued to enrich their product lines and have got rid of their dependence on a single product. Especially after the outbreak of the epidemic, due to the generally long delivery cycle of foreign pharmaceutical equipment and delays, product imports are restricted, and domestic pharmaceutical equipment companies have ushered in a good opportunity to replace imports in the fields of biopharmaceutical equipment and consumables. For example, Dongfulong provides Sinopharm Zhongsheng with core process equipment such as the raw liquid dispenser of the new crown vaccine, P3 isolator, and honeycomb culture system, and provides a large number of disposable liquid dispensing devices and consumables for Sinovac Zhongwei . Chutian Technology's mid- and late-stage product lines such as sterile assembly and intelligent testing backpack are widely used by customers such as Zhongsheng Group, Zhifei Longcoma, Beijing Kexing , and CanSino , and the product performance and quality have been tested.
We believe that through the expansion of product lines and the upgrading and iteration of products, pharmaceutical equipment companies, on the one hand, adapt to the needs of downstream companies, and enter high-profile fields such as biopharmaceutical equipment from the field of traditional pharmaceutical equipment with relatively low prosperity. On the other hand, the layout of multi-production line can also avoid the impact of fluctuations in demand of a single product line on the overall performance. On the other hand, as the revenue volume increases, the scale effect gradually begins to emerge, ultimately leading to a much larger growth rate of company profit than revenue growth. In the future, as the demand cycle attributes of the pharmaceutical equipment industry weakens, the product structure continues to be optimized, the scale effect gradually reflects and import substitution, the profitability of leading pharmaceutical equipment companies is expected to continue to maintain a relatively good level in the future. (Report source: Future Think Tank)
3.1 The increase in the volume of biological drugs and the increase in the research and development enthusiasm of biological innovative drugs will continue to drive the continuous growth of demand for related equipment and consumables.
mNiteNet data shows that in 2020, my country's drug market size was 1.64 trillion yuan, of which the sales of drug in public medical institutions that year were 1.21 trillion yuan. In the proportion of sales revenue of biopharmaceuticals in public medical institutions, the market size is 142.8 billion yuan. After the same proportion is enlarged, it is estimated that the size of biopharmaceuticals in China in 2020 will be 193.5 billion yuan. Since Mine.com data only counts public medical institutions and retail terminals, and has not been counted in private hospitals, private clinics, village bathrooms, etc. By variety, it is estimated that blood products will be about 40 billion yuan, vaccines will be about 60 billion yuan (excluding new crown vaccines), single resistance will be about 70 billion yuan, the insulin market size will be more than 20 billion yuan (the caliber before centralized procurement), and other biological drugs will be expected to be 10-20 billion yuan.
According to the calculations of Sedolis , the scale of China's biological products market in 2020 was US$38 billion, or approximately RMB 240 billion ( exchange rate is calculated at 6.3:1), which is basically consistent with the statistics of Minnei.com.Sadolis expects that the size of China's biological products market will grow to US$67 billion by 2024, with an annual compound growth rate of 15% (not considering the new crown vaccine). During the same period, the global biologics market size increased from US$250 billion to US$365 billion, with a 5-year compound growth rate of 7.9%, and the domestic market growth rate far exceeds the global average.
Since 2015, driven by the reform of the drug review and approval system, traditional pharmaceutical companies have actively transformed into innovative drugs and the innovation of capital market system has greatly improved the financing environment for innovative drugs. The national innovative drugs IND, NDA and approved markets have all shown a rapid upward trend. In 2020, the number of INDs in China's production of drug products began to increase significantly. In 2021, the number of INDs in China's production of drug products reached 228, with a year-on-year growth rate of more than 70%. According to the time of phase I clinical, it takes 1 year, phase II clinical, phase III clinical, phase III clinical, 1.5-2 years, data analysis and statistics, and NDA, it takes about 1-1.5 years to calculate that the total time from entering the clinical stage to being launched is about 5-7 years. It is expected that the innovative drugs in China will usher in the concentrated marketing period around 2025. The increase in the volume of biopharmaceuticals and the increase in the R&D popularity of bioinnovative drugs will continue to drive the continuous growth of demand for related equipment and consumables.
3.2 The domestic market space of biopharmaceutical consumables is nearly 10 billion yuan, there is a strong demand for disposable products, and the prospect of import substitution is broad
The production process of biopharmaceuticals is relatively complex. Taking monoclonal antibody as an example, it can be divided into two parts: stock solution production and preparation production, among which stock solution production can be subdivided into two parts: upstream fermentation and downstream separation and purification. Upstream fermentation includes cell line construction, culture amplification, production and other processes. Downstream isolation and purification include centrifugation and , chromatography , nanofiltration , ultrafiltration , virus removal filtration, etc. The main equipment required for large-scale production of biological drugs include CO 2 shaker, various types of bioreactors, chromatography systems, ultrafiltration, nanofiltration systems and preparation filling lines, among which the domestic production of disposable bioreactors is relatively low. Biopharmaceuticals also involves a variety of consumables in large-scale production, mainly including culture medium (for cell culture), disposable reaction bags (for cell culture, antibody expression), chromatography filler (for antibody separation and purification), ultrafiltration membrane packs (for concentration and ultrafiltration), etc. We expect that the total market size of domestic biopharmaceutical production-related consumables is nearly 10 billion yuan, and as biopharmaceuticals enter the commercialization stage one after another and the demand for R&D will continue to grow rapidly. At present, the market share of domestic products such as disposable reaction bags is still relatively low. In the future, driven by factors such as reducing costs and improving supply chain security are expected to have a large room for import substitution.
Judging from the " direct material " disclosed in the prospectus of each company, there are significant differences in the consumables used in the production process of various biological products. Monoantibacterium is mainly culture medium, filler, etc., while vaccines are more diverse according to the product. Insulin-based raw materials include chemical raw materials such as urea , acetonitrile . Therefore, we can calculate the market size of consumables required in the production stage by the proportion of "direct materials" to operating income in the company's operating costs.
We calculated the production costs of three biological drugs: Junshi Biologic , Biotech Adalimumab and Sansheng Guojian Yisaipu. It can be seen that their full cost is between 2400-2800 yuan/g, and the direct material cost is between 400-700 yuan/g. Through the review of academic literature, we can also see that the actual value is basically consistent with the theoretical value under the same yield. The production cost of
monoclonal antibody can be divided into equipment-related costs, raw material costs, consumable costs, labor costs and other costs. Among them, equipment-related costs include fixed asset depreciation fees, equipment maintenance fees, etc.; raw materials mainly include serum-free culture medium, , buffer, , for injection, etc.; consumables mainly include cell culture bottles, chromatography media, filter membranes, etc.; labor costs mainly include employee salaries, etc.; other costs include experimental costs for testing and analysis and quality control, energy consumption, and waste treatment costs.With the expansion of production scale, unit production costs have shown a downward trend, among which the proportion of equipment-related costs and labor-related costs has decreased, mainly due to the reflection of scale effects. However, the proportion of raw materials and consumables costs has increased significantly, and as the reaction volume expands, the marginal decrease is not significant. We believe that with the increase in demand for biopharmaceuticals, enterprises have the motivation to import and replace domestic consumables with more cost advantages, and reduce costs.
At present, the single-use system (SUS) and consumables cover almost all unit operations of the entire biopharmaceutical process engineering, including cell culture, cell purification, biological reactions, stock solution storage, drug solution transportation and aliquots. Disposable technology utilizes membrane materials with excellent performance. Combined with customer use scenarios, a series of disposable sterile bags can be developed, including: disposable bioreaction bags (SUB), disposable stir bags (SUM), disposable 2D/3D liquid storage bags (2DB/3DB), disposable cell culture bags (XPD), disposable sterile sampling bags, feeding bags and other products to meet the needs of the entire process of the customer. Disposable products/systems have fixed asset investment; no CIP/SIP is required, and the risk of cross-contamination is low; high flexibility, and multi-product collinear production can be achieved through equipment mobilization. Sedolis' analysis shows that disposable technology can reduce construction costs by about 25%-35%, save 30%-50% in product launch time, 55%-65% in energy costs, and 65%-75% in water consumption.
Compared with disposable systems, stainless steel system equipment has the advantages of high maturity, convenient production expansion, high degree of automation, and easy quality monitoring. From the perspective of the demand and cost of various biological products, insulin and monoclonal antibodies have a long-term demand and low cost, while some varieties with shorter market time, such as ADC drugs, eight-factors, etc., have relatively small demand but high cost. We believe that as the reactor volume expands, the production cost of biopharmaceuticals has dropped significantly. For biological products with long-term market time and high demand in commercialization stage (such as PD-1 monoclonal antibody, biosimilar, etc.), large-scale stainless steel reaction systems can better meet their production needs; for biological products in clinical research stage, low demand, and insensitive to costs, disposable systems can better meet their needs. In the future, disposable systems and stainless steel systems will occupy a place in biopharmaceutical production in the future.
We use the market size data of various types of biopharmaceuticals in my country in 2020 and assume that consumables account for different proportions of revenue to calculate the market size of biopharmaceuticals. The market size in 2020 was 3.75 billion yuan. The calculated market size is smaller than the current actual value. We believe that it is because biopharmaceutical consumables are not only used in the production stage, but also in R&D. The terminal uses cannot be accurately counted, so the calculated value is smaller than the actual market size. In addition, considering that imported brands still occupy most of the market share in disposable reaction bags, ultrafiltration membrane bags and other products, it is expected that domestic consumables will continue to grow rapidly in the future.
3.3 Biopharmaceutical companies are in the stage of capacity expansion, providing new performance increments for the industry; CGT equipment is expected to become the next hot spot for demand
According to bioplan statistics, as of April 2021, the global biopharmaceutical production capacity was 17.4 million liters, of which 5.5 million liters (31.7%) are in the United States and Canada, 5.46 million liters (31.4%) are in Western Europe, 2.2 million liters (12.5%) are in Japan and other Asia-Pacific regions, China has 1.8 million liters and India has 1.1 million liters. Among them, China's biopharmaceutical production capacity was 870,000 liters in 2018, and the new production capacity was nearly 1 million liters from 2018 to 2021.
From the perspective of capacity type, mammalian cell lines still account for more than 2/3, but gene therapy drug production capacity is gradually increasing. The growth rate of enterprises with active production capacity exceeds the growth rate of production capacity, which reflects that enterprises are adopting smaller one-time reaction technologies and platforms.
We selected the production capacity of 17 representative leading biopharmaceutical companies for analysis. As of the end of 2021, the total capacity was about 362,000 liters, the target capacity was 965,000 liters, the increment was 603,000 liters, and the incremental capacity was 1.67 times that of the end of 2021; assuming that the construction and production cycle is 3-4 years, it is expected that the relevant capacity will be completed around 2025. China's biopharmaceutical production capacity in 2021 is 1.8 million liters. Since the main expansion of production is mainly the industry's leading enterprises, and the new production capacity is mainly used for the production of biopharmaceuticals with faster growth rates such as monoclonal antibodies and ADC drugs, it is expected that the overall biopharmaceutical production capacity will expand slowly than that of sample companies. Based on the conservative calculation of the incremental production capacity of 1-1.3 times the original production capacity, it is estimated that by 2025, China's biopharmaceutical production capacity will reach 3.6-4.14 million liters, and the new production capacity will be 1.8-2.34 million liters. Grassroots research data shows that 10,000 liters of biopharmaceutical production capacity is usually added, and the supporting equipment cost is about 100 million to 120 million yuan; in addition, the data in the "Announcement on the Third Phase Investment of the Phase I of the "Fuhong Hanlin Biopharmaceutical Industrialization Base (II)" issued by Fosun Pharma in November 2021 shows that the investment amount of biopharmaceutical factories with a production capacity of 60,000 liters is 584 million yuan, which is basically consistent with the above data. Based on this, the investment of 100 million yuan for pharmaceutical equipment per 10,000 liters of production capacity is expected to bring an incremental market of 18-23.4 billion yuan (median is 20.7 billion yuan).
gene therapy, also known as cell and gene therapy (Cell and Gene Therapy, does not include generalized cell therapies such as ungenerated stem cells). It is a method that uses gene therapy vectors to transduce exogenous therapeutic genes into cells, and then changes the original gene expression of cells to treat diseases through the transcription and translation of exogenous genes. Its mode of action generally includes: ① Replace the pathogenic gene with normal genes; ② Inactivate the pathogenic gene; ③ Introduce new or modified genes. According to ASGCT statistics, as of May 2021, there were 1,745 CGT therapy drugs worldwide in the research stage, of which nearly 70% were in the preclinical stage.
data published in the "Evolution of innovative drug R&D in China" magazine by Nature Reviews Drug Discovery shows that as of July 2021, there were 2,251 domestically produced innovative drugs under development in all therapeutic areas, of which 1,077 were small molecule drugs. Among the remaining 1174 drugs, there were 264 monoclonal antibodies, 138 recombinant fusion proteins, 89 vaccines, and 605 new generation drugs (Next-gen). Among the next generation of drugs, cell therapy, double/multi-anti-anti-anti-anti-ADC drugs and gene therapy occupies the top 4. Based on the proportion of the above-mentioned types of drugs in the current R&D pipeline, we believe that CGT drugs will occupy an important position in the domestic biopharmaceutical market in the future, and it is expected that the demand for CGT pharmaceutical equipment, instruments and consumables will increase significantly.
gene therapy drugs mainly include gene therapy vector products, genetically modified cell products, and oncolytic virus products with specific functions.
gene therapy drug production process is complex, involving process development and quality control method development in multiple links such as plasmid transfection and purification, large-scale culture of production cells, plasmid transfection, and virus purification. The process control of
gene therapy vector process development and GMP production is extremely strict. The required key production equipment and key reagents and consumables are currently mainly supplied by developed countries such as Europe and the United States, and the domestic production rate of core links is relatively low. Compared with other drugs, CGT drugs are costly to produce higher costs. WuXi Jupo disclosed that the revenue of Ricci Orentse injection in 2021 exceeded 30 million yuan, with a gross profit margin of only 29%.
and Yuan Biological's prospectus discloses its main production equipment and raw materials. The core products include stirred bioreactors, ultrafiltration systems, chromatography systems, liquid dispensing tanks, etc.; key consumables include cell culture medium, purified fillers, filter membranes, serum and nucleases. We believe that CGT drug manufacturers and CDMO companies have a more urgent need to reduce costs and ensure the safety of the supply chain. In the future, as domestic CGT drugs enter the clinical and even commercialization stages one after another, the demand for CGT drug equipment and consumables will continue to increase in the future, and the momentum of import substitution will be stronger.
4.1 IMA: With equipment business as the core, the product line and sales area continue to expand
IMA was founded in 1961 and is headquartered in Italy. It is a world-leading automation machinery design and manufacturing enterprise. Its products involve multiple fields such as medicines, cosmetics, food, tea, coffee processing and packaging. The company has 46 factories and is located all over the world. As of the end of 2019, the company had 5900 employees, of which 2400 were located outside Italy, with a sales network in 80 countries, with 11 branches and more than 50 agents worldwide.
IMA's core business in the pharmaceutical equipment industry is undertaken by IMA Pharma, with a wide production line and is an integrated and comprehensive pharmaceutical equipment supplier. IMA Pharma has three professional departments, namely IMA Active (Solid Agents Division), IMA Life (Sterile Filling and Freeze-drying Division), and IMA Safe (Packaging Division).
IMALife provides a series of products in the fields of aseptic filling and lyophilization of liquids and powders, including bottle washing, sterilization, sterile environmental filling and plugging equipment; pharmaceutical and cosmetic filling and sealing equipment; sterile powder needle filling equipment; industrial-grade, pilot or laboratory lyophilization machines, which can be used in combination with the smartest automatic loading and unloading systems in the field. At the same time, labeling machines, bottle blowing machines, unpacking machines, pallet collecting machines, etc. are provided. IMA Active can provide equipment and services for all stages of solid preparation production (granulation, tableting, capsule filling, coating, processing and cleaning). IMA Safe can provide manufacturing solutions for the pharmaceutical, cosmetics and food industries with complete front-end and mid-end and end packaging production lines.
In the medium and long term, IMA's performance has always maintained a steady growth trend, with operating income growing from 293 million euros in 2000 to 1.596 billion euros in 2019, with an annual compound growth rate of 9.3%; net profit attributable to shareholders increased from 15 million euros to 170 million euros, with an annual compound growth rate of 13.53%.
The revenue of the company's pharmaceutical equipment sector increased from 247 million euros in 2000 to 700 million euros in 2019, with an annual compound growth rate of 5.6%, which is basically the same as the growth rate of the global pharmaceutical market during the same period. The company's pharmaceutical equipment revenue only declined in 2009 and 2010, with the company's annual report explaining that it was a decrease in orders in the packaging department and a decline in sales. We believe that it is related to the slowdown in the global pharmaceutical market growth from 2009 to 2010 and the contraction of fixed asset investment of pharmaceutical companies. The profitability of the pharmaceutical equipment sector is continuing to improve, and the proportion of EBIT in revenue has steadily increased from below 10% to about 15% in recent years. From this we can see that without policy disturbances and the demand is released smoothly, there is no obvious cyclicality in the demand in the pharmaceutical equipment industry.
In addition to deepening the pharmaceutical equipment industry, IMA company also finds new performance growth points through diversified business development, layout of global markets and providing after-sales services, and reduces performance volatility.
June 2010 and February 2011 IMA entered the packaging field of dairy and convenience food industries through the acquisition of GIMA S.p.A, Naturapack S.r.l and the Sympak Corazza Group, and in 2013, Ilapak Group entered the tobacco machinery production field. From 2010 to 2019, the company's pharmaceutical equipment revenue fell from 72% to 44%.
From the perspective of sales region, the company's local sales in Italy accounted for only about 12% in 2019, and the revenue in EU countries was the largest, but it was only 28%. From the perspective of business form, after-sales service revenue (including spare parts sales) has accounted for 30%, and new product sales revenue accounts for about 70%. In terms of
production capacity, IMA company has always maintained a steady pace of expansion. Over the years, the proportion of capital expenditure to the revenue of that year has remained between 2% and 4.5%. Through comparison, it can be seen that the capital expenditure intensity of domestic pharmaceutical equipment enterprises is higher than that of IMA. We believe that the expansion of production capacity will help improve the delivery capacity of enterprises and expand product types, and is an important factor in enhancing the competitiveness of enterprises. The international competitiveness of Chinese pharmaceutical equipment enterprises is expected to continue to improve.
At present, the international layout of the leading domestic pharmaceutical equipment industry leaders is also actively promoting.Dongfulong has achieved a breakthrough in exporting biopharmaceutical equipment, such as providing liquid distribution systems, filling systems, lamp inspections and rear-channel packaging equipment for the French Recipharm factory (providing OEM services for Moderna's mRNA route COVID-19 vaccine). Through the acquisition of Romaco, Chutian Technology not only enhances the company's product reserve and service capabilities in the field of solid preparation equipment, but also further deepens the company's international strategic layout. During the epidemic, it provides local pharmaceutical companies in the UAE with an overall solution for aseptic preparations for large-scale production of new crown vaccines. At present, the proportion of overseas revenue of domestic leading pharmaceutical equipment enterprises is around 20%, and we believe that there is still a lot of room for improvement in this proportion.
In terms of after-sales service revenue, domestic companies still have a lot of room for improvement compared with IMA. In 2021, Dongfulong's accessories and service revenue accounted for only about 4%, while Chutian Technology (the higher proportion is mainly due to the merger of Romaco. In 2019, the company's accessories products and after-sales service revenue accounted for 32.44%). We believe that as the number of pharmaceutical equipment in leading enterprises continues to increase in the future, the volume and proportion of after-sales service revenue will be gradually increased, and performance stability will be further enhanced.
4.2 Sedolis: The integrated layout of "consumables + equipment" provides an overall upstream and downstream solution for the life science industry chain
Sedolis is an enterprise that operates globally in the fields of biopharmaceutical equipment and consumables. The company owns two exclusive listed entities, Sartorius AG and Sartorius Stedim Biotech S.A., of which Sartorius AG holds a 74% stake in Sartorius Stedim Biotech and 85% of the voting rights. Sartorius Stedim Biotech is mainly engaged in Bioprocess Solutions, while Sartorius Lab Holding GmbH is mainly engaged in laboratory products and services (Lab Products & Services).
Upstream consumables and reagents in life sciences have the characteristics of many categories, limited single product market size, scattered competitive landscape, high technical barriers, and large technical differences between different products. Enterprises through mergers and acquisitions are the inevitable path to become bigger and stronger. Sedolis has carried out many mergers and acquisitions in history, covering the consumables and technologies required for multiple links of biopharmaceutical production and research and development, covering the entire upstream and downstream links including cell line development, culture medium optimization, upstream cell culture, downstream separation and purification filtration to preparation canned products, and can provide customers with the ability to complete end-to-end solutions from biopharmaceutical research and development to commercial production.
Take Sedolis's monoclonal antibody production solution as an example. In the upstream production process, it has mature process solutions covering cell lines, culture substrates, process development to commercial manufacturing; in the downstream production process, protein purification from mg to kg can be achieved and stock solution storage and transportation purification solutions can be achieved.
The Bioprocess Solutions business (Bioprocess Solutions) can provide a diverse product portfolio involving commercial production and process development of biopharmaceuticals, including cell line construction technology, cell culture medium, bioreactors, isolation/purification consumables, storage and transportation solutions. It can provide customers with complete process solutions and assist in preliminary project planning, production process integration and subsequent verification processes. The products and technologies are suitable for vaccines, monoclonal antibodies and viral vector gene therapy. The 2021 company annual report disclosed: In the biological process solutions business, the repeated business of disposable sterile products accounts for about three-quarters of the sales revenue of the department. The company ranks among the top 3 in the world in filtration solutions, fluid management solutions, fermentation, purification, etc.
The company's Lab Products & Services department mainly focuses on research laboratories and academic research institutions in the pharmaceutical and biopharmaceutical industries. The products include cell analysis systems, laboratory water supply systems, experimental balances, filters, and pipettes. In addition, the company can also provide equipment installation, commissioning, regular maintenance/maintenance and other services covering the entire life cycle of laboratory instruments.The company's two business segments cover the entire process from laboratory research and development to commercial production, with high synergy.
Judging from historical data, Satolis' revenue and profits have maintained a steady growth trend, and gross profit margin and net profit margin generally show a steady improvement trend. In 2021, the company's revenue and profit both showed a speeding trend, with revenue reaching 3.449 billion euros (+49.3%), of which the revenue in the business areas related to the epidemic was about 500 million euros. The growth rate of spin-off contributed, the contribution of mergers and acquisitions was about 5%, and the development and production of new coronavirus vaccines and their testing kit products and components contributed about 16%. The company's profitability has been further improved, with EBITDA reaching 1.175 billion euros and the corresponding profit margin reaching 34.1%, mainly due to factors such as scale effect and reduced sales expenses. The company's continuous capital expenditure of a certain intensity is also an important factor driving performance growth. In 2021, the proportion of capital expenditure to sales reached 11.8%, which continued to remain at a high level. The company's guidance for revenue target of 2025 is 5 billion euros (not considering the demand related to COVID-19), and the compound revenue growth rate in 2022-2025 is 16.65%.
points business, the company's bioprocess solution sector's revenue reached 2.727 billion euros (+54.7%) in 2021, of which 20% of the demand related to the epidemic contributed 20%, and 5% of the merger and acquisition contribution; the laboratory service sector's revenue reached 722 million euros (+32%), of which the demand for the new coronavirus detection kit components contributed about 6%, and 6% of the merger and acquisition contribution. The proportion of EBITDA in both businesses to revenue is showing an increase in revenue, and profitability is constantly increasing.
After reviewing the business development and performance of IMA and Sedolis, we believe that: (1) From a long-term perspective, since the demand in the pharmaceutical equipment industry does not have obvious cyclicality, only the pharmaceutical equipment business is considered. Leading companies can still maintain a relatively stable performance growth rate through the expansion and iteration of product lines (such as gradually from stand-alone and system to overall solutions and projects, layout of high-prosperity biopharmaceutical equipment, etc.), strengthen international layout, and increase the proportion of after-sales service revenue. (2) Equipment products have a long service life, and for the same type of products, it is difficult for a specific customer to repurchase in the short term. Consumables products are used in all aspects of biopharmaceutical research and development and commercial production, and demand will continue to exist. Since if the relevant suppliers are replaced with consumables products, the replaced products need to be tested and tested and the relevant change procedures are performed in the drug supervision department, the time and economic costs are high. Therefore, after binding customers, the performance of consumables products is better. Therefore, by increasing the revenue share of consumables products, the performance can be further smoothed.
We believe that after pharmaceutical equipment companies enter the consumables field through mergers and acquisitions, independent research and development, on the one hand, they can open up the boundaries between equipment and consumables sales, realize the sharing of sales resources and channels, and use the original customer resources to help consumables products quickly increase in volume; on the other hand, the binding between consumables and equipment is becoming more and more closely connected, and consumables and equipment can be sold in combination to form an integrated solution of "consumables + equipment + engineering", serving the entire process of drug research and development and commercialization, which will further enhance customer stickiness and market penetration. From a medium- and long-term perspective, we believe that leading pharmaceutical equipment companies are expected to become providers of full-process solutions for biopharmaceuticals, opening the second growth curve outside pharmaceutical equipment.
5.1 Dongfulong
Dongfulong was established in 1993 and was listed on the GEM in 2011. The company provides global pharmaceutical companies with overall solutions for pharmaceutical technology, core equipment and system engineering, and is committed to becoming a mainstream supplier of smart pharmaceutical factories and global comprehensive pharmaceutical equipment. Its core business covers three major areas: pharmaceutical equipment, medical technology and technology, and food equipment engineering. Currently, there are more than 10,000 pharmaceutical equipment and drug manufacturing systems serving more than 2,000 well-known pharmaceutical companies in more than 40 countries and regions around the world.
company started with the medical freeze-dryer business. In recent years, it has actively promoted product category expansion and broken the ceiling of a single track space. It can not only provide raw material equipment (chemical drug synthesis, Chinese medicine extraction, biological raw liquid) and preparation equipment (injection, oral solid preparation) for drug manufacturing fields such as biological products, vaccines, blood products, antibiotics, chemical drugs, diagnostic preparations, health products, veterinary drugs, and western Chinese medicine. It can also create a life and science sector, forming a multi-dimensional integrated layout of instruments, equipment, consumables (including consumables, reagents, fillers, filtration, packaging materials, etc.), which can provide overall solutions in the fields of cell therapy, gene therapy and consumables. Form a "M+C+E" (equipment + consumables + engineering) integrated solution.
21 In 2021, the company achieved operating income of 4.192 billion yuan (+54.83%), net profit attributable to shareholders of listed companies was 828 million yuan (+78.59%), and net profit attributable to shareholders of listed companies after deducting non-operating items was 760 million yuan (+92.00%). By product, the revenue of bioengineering stand-alone and system was 907 million yuan (+305%), accounting for 21.63%, an increase of 13.36 percentage points compared with 2020; the revenue of medical equipment and consumables was 499 million yuan (+105%), accounting for 11.91%, an increase of 2.91 percentage points compared with 2020, of which the revenue of consumables products was about 200 million yuan and CGT equipment was about 250 million yuan; considering only bioengineering equipment, CGT equipment and consumables, the total revenue of the above products in 2021 has reached 32%, and biopharmaceutical equipment + consumables have become the main factors driving the company's performance growth. The income of injection single-machine and system was 1.381 billion yuan (+13.1%), accounting for 32.95% and the gross profit margin was 47.43% (+2.23pct); the income of oral solid single-machine and system was 111 million yuan (+112%), reflecting that in addition to the rapid growth in demand for biological drugs, the demand and competitive landscape of traditional drug equipment are still stable.
In 2021, the company's overseas revenue was 1.04 billion yuan (+97.79%), and its proportion increased to 24.8%. In terms of main regions, Europe's revenue was RMB 730 million (+148%), with a gross profit margin of 70.27%; Asia's revenue was RMB 298 million (+61.57%), with a gross profit margin of 59.51%. It is expected that benefiting from the production capacity construction of biological macromolecular drugs such as antibodies and vaccines, the company's biological liquid-related equipment has achieved breakthroughs in overseas markets, and the overall solution capabilities of biological macromolecular equipment have been improved. As of the first quarter of 2022, the company's contract liabilities were RMB 3.92 billion, the highest level in history, reflecting that the company has sufficient number of orders and new orders to be executed and is still in the period of performance release.
has historically introduced technology, completed and expanded product lines through various means such as establishment of subsidiaries, joint ventures and mergers and acquisitions, adapting to the development trend of the pharmaceutical industry and meeting customers' new needs for pharmaceutical equipment. We sorted out the performance of the merger and acquisition targets/newly established subsidiaries. Most of the merger and acquisition targets showed a good growth trend after entering the company system, reflecting that the merger and acquisition has a forward-looking vision and has strong integrated operation capabilities. For example, in 2017, the company increased its capital for Suzhou Vladivostok (now renamed Dongfulong Vladivostok) for RMB 9.6 million, and obtained 60% of its equity (the current shareholding ratio increased to 68%). In 2021, the company's revenue was RMB 283 million and its net profit was approximately RMB 68 million. In 2021, the company's establishment of subsidiaries in Hong Kong, India, Indonesia, Turkey, Australia, Dubai, Vietnam and South Africa reflects that the company continues to strengthen its international market layout and expansion and gradually increases its overseas market penetration.
Company disclosed its plan for a private placement in April 2022, and plans to raise 3.2 billion yuan for 4 projects including the "Biopharmaceutical Equipment Industry Trial Production Center", to enhance the company's production capacity and enhance the company's production capacity in the fields of new equipment and biopharmaceutical consumables. Historically, the company has conducted large-scale capital expenditures in 2011 and 2014 (reflected as a significant increase in the amount of fixed assets in the next year), and the company did not conduct large-scale capital expenditures from 2014 to 2020. At present, the company's production capacity has become saturated, so the company began to enter a new round of capital expenditure cycle in 2021. In 2021, the company's cash paid for projects under construction, fixed assets, intangible assets and other long-term assets all hit record highs. We believe that it will be beneficial to drive the company's new round of performance growth.
Company is expected to reflect more growth rather than cyclical through measures such as setting up biopharmaceutical equipment with higher prosperity, providing integrated solutions for "equipment + consumables + engineering", and increasing international layout. We expect the company's revenue from 2022 to 2024 to be RMB 5.611, RMB 6.900 and RMB 8.105 billion, respectively, with year-on-year growth rates of 33.8%, 23.0% and 17.5%; net profit attributable to shareholders will be RMB 1.111, RMB 1.395 and RMB 1.694 billion, with year-on-year growth rates of 34.2%, 25.5%, and 21.4%, respectively.
5.2 Chutian Technology
Chutian Technology Co., Ltd. was established in 2000 and has now become one of the major enterprises in the pharmaceutical equipment industry. The company adheres to the "one horizontal, one vertical and one platform" strategy in terms of industrial layout. "one horizontal" covers the entire product chain of major pharmaceutical dosage-forming equipment. "one vertical" mainly focuses on the entire industrial chain of injection drug production equipment. "one platform" can provide 4.0 smart factory solutions for pharmaceutical industry production. The company started with the washing, drying, potting and sealing linkage line, gradually expanded to the lyophilized preparation production line, and entered the field of pharmaceutical water equipment and engineering systems through the acquisition of Chutian Huatong, and entered the field of oral solid preparation equipment through the acquisition of Romaco, achieving full coverage of traditional drug production equipment such as liquids, solids (including powders, pastes, etc.).
In the bioengineering sector, the company has deployed disposable bioreactors, disposable liquid dispensing systems, ultrafiltration chromatography purification, stainless steel reactors and fillers. By establishing a holding company Chutian Siyoute Biotechnology Co., Ltd., it is used for the research and development and production of disposable consumables, and its main products include disposable bioreactors, liquid dispensing bags, liquid storage bags and membrane materials. By establishing a holding company Chutian Microsphere Biotechnology Co., Ltd., it is used for the research and development and production of fillers. The main products cover natural polysaccharide microspheres, silica gel microspheres, polymer microspheres and inorganic microspheres. Currently, the products are mainly agarose microspheres, which are mainly used in biomacromolecular pharmaceuticals.
In 2017, the listed company jointly invested with Chutian Asset Management and Hunan Pengpai to establish Chutian Asset Management, completing the acquisition of Romaco. In 2020, the listed company completed the acquisition of Chutian Asset Management equity through the issuance of shares and convertible bonds and realized the consolidation of Romaco. After completing the acquisition of Romaco, the company strengthened the integration of its products and sales areas, strengthened the cost control in management, sales and R&D; and increased its efforts to expand Romaco products in the Chinese market, giving full play to the synergistic effects in channels, customers, brands and technologies. After the merger and acquisition, Romaco's profitability has been greatly improved.
As of the end of the first quarter of 2022, the company's contract liabilities amounted to 2.51 billion yuan, a year-on-year increase of 90.13%, a slight decrease from the previous month, but the month-on-month decrease was mainly due to the structure of contract liabilities, i.e. the proportion of advance payment and withdrawal payment. At the end of last year and the end of the first quarter of this year, the delivery in the first quarter decreased year-on-year, and the client adjusted the test collection increased year-on-year, resulting in a decrease in the proportion of goods issued, and the proportion of withdrawal payments in contract liabilities decreased, resulting in a decrease in the amount of contract liabilities. The company's new orders in the first quarter of 2022 increased year-on-year, and the orders in hand also increased month-on-month. However, due to the company's new orders in the first quarter of 2021, the proportion of new orders related to the new crown was more than 40%, and among the new orders in 2022, the proportion of new orders related to the new crown was Below 5%, we judge that the company's new orders for non-COVID equipment still maintain rapid growth year-on-year.
Chutian Technology has experienced 3 major production capacity expansions in history. The first phase of the project covers an area of about 80 mu, started construction in 2003 and completed in 2004. The second phase of the project covers an area of 100 mu, started construction in 2009 and completed in 2010. The third phase of the project started in 2013 and was completed one after another in 2015. The company launched the fourth phase of the project in 2020, covering an area of 142 mu, including the Chutian Science and Technology Innovation Center Building, Talent Center Building, Central Workshop, Intelligent Backpackage Workshop, Intelligent Traditional Chinese Medicine Workshop and other R&D, manufacturing and management projects. After the fourth phase of the project is completed, the company can reach a production capacity of 10 billion yuan. At present, the company has started the fifth phase of the project construction, and the production capacity is mainly planned for relevant layouts in the field of biopharmaceuticals, including disposable consumables, chromatographic ultrafiltration equipment, liquid distribution systems, other products, etc.We believe that as the company's new production capacity is gradually put into production, it is expected to continue to maintain steady growth in performance.
5.3 Xinhua Medical
The company's main business is divided into four major business segments: medical devices, pharmaceutical equipment, medical services and medical trade. The medical device sector infection control product line, radiation diagnosis and treatment and imaging product line, in vitro diagnostic reagents and instrument product line, operating room equipment and surgical equipment product line, oral equipment and consumable product line, experimental animal product line, dialysis equipment and consumable product line, and medical environmental protection product line. The domestic market share of infection control product line is more than 70%, ranking first in the country in scale; the domestic product variety of radiation therapy equipment is the most complete, with more than 400 installed units in China, ranking first in the country in scale. The pharmaceutical equipment sector mainly focuses on four pharmaceutical engineering sectors: sterile preparations, solid preparations, traditional Chinese medicine preparations, and biopharmaceuticals. The main business is to provide pharmaceutical engineering and design, overall solutions, stand-alone equipment and process research and technical services in the pharmaceutical field for sterile injections, solid preparations, traditional Chinese medicine preparations, and biopharmaceuticals. The product structure expands from pharmaceutical equipment to the field of life sciences, focusing on the development of traditional Chinese medicine preparation and life science-related process equipment.
In 2021, the company achieved operating income of 9.482 billion yuan (+3.62%), net profit attributable to shareholders of RMB 556 million (+132.26%), and net profit attributable to shareholders of RMB 384 million (+97.07%) after deducting non-operating items. By business, the medical device manufacturing sector achieved operating income of 3.534 billion yuan (+20.07%); the pharmaceutical equipment sector achieved operating income of 1.249 billion yuan (+16.83%), and the gross profit margin was 26.68%, an increase of 4.66 percentage points compared with 2020. The subsidiary Chengdu Yingde achieved operating income of 353 million yuan (-9%) and net profit attributable to shareholders of 1.47 million yuan, successfully turning losses into profits; the medical product trade sector achieved operating income of 3.824 billion yuan (-10.90%), mainly due to the impact of centralized volume procurement of high-value medical consumables, taking into account factors such as operating risks and gross profit margin levels in the medical trade sector, Shanghai Taimei terminated its business agency cooperation with Johnson & Johnson (Shanghai) Medical Equipment Co., Ltd. on June 30, 2021. In the first quarter of 2022, the company achieved operating income of 2.113 billion yuan (-16.05%), net profit attributable to shareholders of 128 million yuan (-12.84%), and net profit attributable to shareholders of 148 million yuan (+21.46%) after deducting non-operating items, mainly benefiting from the steady growth of operating income in the medical device and pharmaceutical equipment sectors.
Company implemented an equity incentive plan in February 2022, granting 5.5468 million restricted shares to 344 incentive targets, with a grant price of 11.26 yuan per share. The implementation of equity incentive plans will help stimulate the enthusiasm of the management team, improve operational efficiency, and reduce agent costs. During the 14th Five-Year Plan period, the company will focus on sorting out its business segments, focusing on the two core businesses of medical devices and pharmaceutical equipment, and make every effort to break through the fields of hemodialysis, radiation diagnosis and treatment, in vitro diagnosis, biopharmaceuticals and preparation equipment; select the opportunity to lay out new production lines in the oral and surgical equipment fields, and carefully cultivate sensor control equipment, experimental equipment, medical environmental protection equipment, surgical instruments, orthopedics, general pharmaceutical equipment and hemodialysis centers; gradually withdraw from the non-performing assets in the fields of medical services, medical commerce, traditional Chinese medicine and chemical pharmaceutical equipment in an orderly manner. We believe that the company's performance is expected to continue to be released.
5.4 Morimatsu International
Company's main business is core process equipment, process systems and overall solutions for chemical reactions, biological reactions and polymerization reactions. Its downstream industries and fields serve include oil and gas, daily chemicals, new chemicals, pharmaceuticals (including biopharmaceuticals and chemical synthetic drugs), power battery raw materials (including metal ore, lithium battery raw materials) and electronic chemicals (including photovoltaic raw materials and high-purity chemical reagents production). The company has two modern manufacturing bases in Nantong and Shanghai, and also a coastal manufacturing base in Malaysia.
In the field of biopharmaceuticals, the Group provides diversified products for the iteration of technical products from laboratories, clinical phases I, II, III to industrial production, covering its upstream and downstream products and renovation needs, including bioreactor/fermentation tank systems, culture medium preparation systems, harvesting systems, purification systems, formulation liquid dispensing systems, buffer liquid dispensing systems and storage systems, online liquid dispensing systems, inactivation and CIP workstation systems, isolators, disposable magnetic mixing systems, disposable liquid dispensing systems, modular factories & clean decorations, etc.
In 2021, the company successfully delivered China's first mRNA COVID-19 vaccine production device. This device uses the world's advanced nucleic acid drug platform production technology and has an annual production capacity of 200 million doses. We continue to cooperate with leading domestic HPV vaccine manufacturers to provide them with core equipment and process systems such as fermentation tanks, purification/formulation liquid dispensing systems, adjuvant liquid dispensing systems, and continuously help them quickly achieve industrialization in the vaccine field. The company also provides large-scale bioreactors to many domestic and foreign antibody manufacturers. Among them, multiple sets of 20KL bioreactor projects for antibody production provided by a Swiss giant CDMO are one of the largest bioreactor projects in the world. In the field of insulin, large fermentation tanks and process systems are provided for the production of third generation long-acting insulin. In 2021, the largest recombinant human albumin fermentation tank system orders in China and multiple downstream purification system orders were signed, achieving a new technological leap. The amount of new orders in the biopharmaceuticals and chemical synthetic drugs showed rapid and stable growth, reaching 2.402 billion yuan in 2021, a year-on-year increase of 37%.
In 2021, the company hit a record high, with sales revenue of approximately RMB 4.279 billion, a year-on-year increase of approximately 43.7%; gross profit of approximately RMB 1.176 billion, a year-on-year increase of approximately 39.4%; pure profit of approximately RMB 381 million, a year-on-year increase of approximately 31.5%; new orders amount was approximately RMB 6.654 billion, a year-on-year increase of approximately 88.7%; orders in hand were approximately RMB 5.72 billion, a year-on-year increase of approximately 72.5%. At present, the company has sufficient orders in hand and new customers are developing smoothly. We believe that the company's performance will continue to grow rapidly.
5.5 Tailin Bio
Tailin Bio is a pioneer in the implementation and product development of modern microbial detection technology in China. Based on the accumulation of technology in the field of original microbial detection and control, the company actively deploys the research and development of life science instruments and equipment and new biomedical equipment, and has developed cell therapy-related equipment earlier in China.
The microbial detection system independently developed by the company mainly includes sterile detection systems, microbial limit detection systems, etc.; in the field of environmental biological pollution control equipment, the main products include isolators, sterile delivery chambers, hydrogen peroxide disinfection machines and supporting equipment. At the same time, the company has independently developed integrated equipment for cell and gene therapy drug production using isolator technology as a platform technology, mainly including multifunctional cell processing workstations, nested cell culture systems and sterile assembly workstations. The company has successfully developed NC membranes independently. In addition to being used for infectious disease detection (new coronavirus, AIDS, hepatitis B, etc.), it can also be used in early pregnancy testing, food quality monitoring, environmental monitoring, agriculture and animal husbandry, entry and exit inspection and quarantine, forensic filing and other fields. Common applications include drug testing, HCG testing, etc. In 2021, the company achieved operating income of RMB 283 million (+41.46%) and its net profit attributable to shareholders was RMB 283 million (+41.46%). In the first quarter of 2022, the company continued to maintain rapid growth above a relatively high performance base, achieving operating income of RMB 71.53 million (+48.90%) and net profit attributable to shareholders of RMB 13.93 million (+45.08%). Against the backdrop of the booming GCT drugs, it is optimistic that the company's cell processing workstations will achieve rapid growth in the medium and long term.
We believe that the new version of the "Drug Registration Management Measures" has abolished the GMP certification and instead strengthened the dynamic supervision of the entire drug production process and the entire life cycle of the drug. It is expected that the demand for pharmaceutical equipment will be released smoothly in the future, and the industry is expected to transform from short-term explosive growth to long-term steady growth, and the cyclicality will weaken to a certain extent.Pharmaceutical equipment companies are expected to reflect more growth rather than cyclical through measures such as expanding their product lines, laying out biopharmaceutical equipment with higher prosperity, providing integrated "equipment + consumables" solutions and international layout.
(This article is for reference only and does not represent any of our investment advice. If you need to use relevant information, please refer to the original text of the report.)
selected report source: [Future Think Tank]. Future Think Tank - Official Website Sadolis expects that the size of China's biological products market will grow to US$67 billion by 2024, with an annual compound growth rate of 15% (not considering the new crown vaccine). During the same period, the global biologics market size increased from US$250 billion to US$365 billion, with a 5-year compound growth rate of 7.9%, and the domestic market growth rate far exceeds the global average.
Since 2015, driven by the reform of the drug review and approval system, traditional pharmaceutical companies have actively transformed into innovative drugs and the innovation of capital market system has greatly improved the financing environment for innovative drugs. The national innovative drugs IND, NDA and approved markets have all shown a rapid upward trend. In 2020, the number of INDs in China's production of drug products began to increase significantly. In 2021, the number of INDs in China's production of drug products reached 228, with a year-on-year growth rate of more than 70%. According to the time of phase I clinical, it takes 1 year, phase II clinical, phase III clinical, phase III clinical, 1.5-2 years, data analysis and statistics, and NDA, it takes about 1-1.5 years to calculate that the total time from entering the clinical stage to being launched is about 5-7 years. It is expected that the innovative drugs in China will usher in the concentrated marketing period around 2025. The increase in the volume of biopharmaceuticals and the increase in the R&D popularity of bioinnovative drugs will continue to drive the continuous growth of demand for related equipment and consumables.
3.2 The domestic market space of biopharmaceutical consumables is nearly 10 billion yuan, there is a strong demand for disposable products, and the prospect of import substitution is broad
The production process of biopharmaceuticals is relatively complex. Taking monoclonal antibody as an example, it can be divided into two parts: stock solution production and preparation production, among which stock solution production can be subdivided into two parts: upstream fermentation and downstream separation and purification. Upstream fermentation includes cell line construction, culture amplification, production and other processes. Downstream isolation and purification include centrifugation and , chromatography , nanofiltration , ultrafiltration , virus removal filtration, etc. The main equipment required for large-scale production of biological drugs include CO 2 shaker, various types of bioreactors, chromatography systems, ultrafiltration, nanofiltration systems and preparation filling lines, among which the domestic production of disposable bioreactors is relatively low. Biopharmaceuticals also involves a variety of consumables in large-scale production, mainly including culture medium (for cell culture), disposable reaction bags (for cell culture, antibody expression), chromatography filler (for antibody separation and purification), ultrafiltration membrane packs (for concentration and ultrafiltration), etc. We expect that the total market size of domestic biopharmaceutical production-related consumables is nearly 10 billion yuan, and as biopharmaceuticals enter the commercialization stage one after another and the demand for R&D will continue to grow rapidly. At present, the market share of domestic products such as disposable reaction bags is still relatively low. In the future, driven by factors such as reducing costs and improving supply chain security are expected to have a large room for import substitution.
Judging from the " direct material " disclosed in the prospectus of each company, there are significant differences in the consumables used in the production process of various biological products. Monoantibacterium is mainly culture medium, filler, etc., while vaccines are more diverse according to the product. Insulin-based raw materials include chemical raw materials such as urea , acetonitrile . Therefore, we can calculate the market size of consumables required in the production stage by the proportion of "direct materials" to operating income in the company's operating costs.
We calculated the production costs of three biological drugs: Junshi Biologic , Biotech Adalimumab and Sansheng Guojian Yisaipu. It can be seen that their full cost is between 2400-2800 yuan/g, and the direct material cost is between 400-700 yuan/g. Through the review of academic literature, we can also see that the actual value is basically consistent with the theoretical value under the same yield. The production cost of
monoclonal antibody can be divided into equipment-related costs, raw material costs, consumable costs, labor costs and other costs. Among them, equipment-related costs include fixed asset depreciation fees, equipment maintenance fees, etc.; raw materials mainly include serum-free culture medium, , buffer, , for injection, etc.; consumables mainly include cell culture bottles, chromatography media, filter membranes, etc.; labor costs mainly include employee salaries, etc.; other costs include experimental costs for testing and analysis and quality control, energy consumption, and waste treatment costs.With the expansion of production scale, unit production costs have shown a downward trend, among which the proportion of equipment-related costs and labor-related costs has decreased, mainly due to the reflection of scale effects. However, the proportion of raw materials and consumables costs has increased significantly, and as the reaction volume expands, the marginal decrease is not significant. We believe that with the increase in demand for biopharmaceuticals, enterprises have the motivation to import and replace domestic consumables with more cost advantages, and reduce costs.
At present, the single-use system (SUS) and consumables cover almost all unit operations of the entire biopharmaceutical process engineering, including cell culture, cell purification, biological reactions, stock solution storage, drug solution transportation and aliquots. Disposable technology utilizes membrane materials with excellent performance. Combined with customer use scenarios, a series of disposable sterile bags can be developed, including: disposable bioreaction bags (SUB), disposable stir bags (SUM), disposable 2D/3D liquid storage bags (2DB/3DB), disposable cell culture bags (XPD), disposable sterile sampling bags, feeding bags and other products to meet the needs of the entire process of the customer. Disposable products/systems have fixed asset investment; no CIP/SIP is required, and the risk of cross-contamination is low; high flexibility, and multi-product collinear production can be achieved through equipment mobilization. Sedolis' analysis shows that disposable technology can reduce construction costs by about 25%-35%, save 30%-50% in product launch time, 55%-65% in energy costs, and 65%-75% in water consumption.
Compared with disposable systems, stainless steel system equipment has the advantages of high maturity, convenient production expansion, high degree of automation, and easy quality monitoring. From the perspective of the demand and cost of various biological products, insulin and monoclonal antibodies have a long-term demand and low cost, while some varieties with shorter market time, such as ADC drugs, eight-factors, etc., have relatively small demand but high cost. We believe that as the reactor volume expands, the production cost of biopharmaceuticals has dropped significantly. For biological products with long-term market time and high demand in commercialization stage (such as PD-1 monoclonal antibody, biosimilar, etc.), large-scale stainless steel reaction systems can better meet their production needs; for biological products in clinical research stage, low demand, and insensitive to costs, disposable systems can better meet their needs. In the future, disposable systems and stainless steel systems will occupy a place in biopharmaceutical production in the future.
We use the market size data of various types of biopharmaceuticals in my country in 2020 and assume that consumables account for different proportions of revenue to calculate the market size of biopharmaceuticals. The market size in 2020 was 3.75 billion yuan. The calculated market size is smaller than the current actual value. We believe that it is because biopharmaceutical consumables are not only used in the production stage, but also in R&D. The terminal uses cannot be accurately counted, so the calculated value is smaller than the actual market size. In addition, considering that imported brands still occupy most of the market share in disposable reaction bags, ultrafiltration membrane bags and other products, it is expected that domestic consumables will continue to grow rapidly in the future.
3.3 Biopharmaceutical companies are in the stage of capacity expansion, providing new performance increments for the industry; CGT equipment is expected to become the next hot spot for demand
According to bioplan statistics, as of April 2021, the global biopharmaceutical production capacity was 17.4 million liters, of which 5.5 million liters (31.7%) are in the United States and Canada, 5.46 million liters (31.4%) are in Western Europe, 2.2 million liters (12.5%) are in Japan and other Asia-Pacific regions, China has 1.8 million liters and India has 1.1 million liters. Among them, China's biopharmaceutical production capacity was 870,000 liters in 2018, and the new production capacity was nearly 1 million liters from 2018 to 2021.
From the perspective of capacity type, mammalian cell lines still account for more than 2/3, but gene therapy drug production capacity is gradually increasing. The growth rate of enterprises with active production capacity exceeds the growth rate of production capacity, which reflects that enterprises are adopting smaller one-time reaction technologies and platforms.
We selected the production capacity of 17 representative leading biopharmaceutical companies for analysis. As of the end of 2021, the total capacity was about 362,000 liters, the target capacity was 965,000 liters, the increment was 603,000 liters, and the incremental capacity was 1.67 times that of the end of 2021; assuming that the construction and production cycle is 3-4 years, it is expected that the relevant capacity will be completed around 2025. China's biopharmaceutical production capacity in 2021 is 1.8 million liters. Since the main expansion of production is mainly the industry's leading enterprises, and the new production capacity is mainly used for the production of biopharmaceuticals with faster growth rates such as monoclonal antibodies and ADC drugs, it is expected that the overall biopharmaceutical production capacity will expand slowly than that of sample companies. Based on the conservative calculation of the incremental production capacity of 1-1.3 times the original production capacity, it is estimated that by 2025, China's biopharmaceutical production capacity will reach 3.6-4.14 million liters, and the new production capacity will be 1.8-2.34 million liters. Grassroots research data shows that 10,000 liters of biopharmaceutical production capacity is usually added, and the supporting equipment cost is about 100 million to 120 million yuan; in addition, the data in the "Announcement on the Third Phase Investment of the Phase I of the "Fuhong Hanlin Biopharmaceutical Industrialization Base (II)" issued by Fosun Pharma in November 2021 shows that the investment amount of biopharmaceutical factories with a production capacity of 60,000 liters is 584 million yuan, which is basically consistent with the above data. Based on this, the investment of 100 million yuan for pharmaceutical equipment per 10,000 liters of production capacity is expected to bring an incremental market of 18-23.4 billion yuan (median is 20.7 billion yuan).
gene therapy, also known as cell and gene therapy (Cell and Gene Therapy, does not include generalized cell therapies such as ungenerated stem cells). It is a method that uses gene therapy vectors to transduce exogenous therapeutic genes into cells, and then changes the original gene expression of cells to treat diseases through the transcription and translation of exogenous genes. Its mode of action generally includes: ① Replace the pathogenic gene with normal genes; ② Inactivate the pathogenic gene; ③ Introduce new or modified genes. According to ASGCT statistics, as of May 2021, there were 1,745 CGT therapy drugs worldwide in the research stage, of which nearly 70% were in the preclinical stage.
data published in the "Evolution of innovative drug R&D in China" magazine by Nature Reviews Drug Discovery shows that as of July 2021, there were 2,251 domestically produced innovative drugs under development in all therapeutic areas, of which 1,077 were small molecule drugs. Among the remaining 1174 drugs, there were 264 monoclonal antibodies, 138 recombinant fusion proteins, 89 vaccines, and 605 new generation drugs (Next-gen). Among the next generation of drugs, cell therapy, double/multi-anti-anti-anti-anti-ADC drugs and gene therapy occupies the top 4. Based on the proportion of the above-mentioned types of drugs in the current R&D pipeline, we believe that CGT drugs will occupy an important position in the domestic biopharmaceutical market in the future, and it is expected that the demand for CGT pharmaceutical equipment, instruments and consumables will increase significantly.
gene therapy drugs mainly include gene therapy vector products, genetically modified cell products, and oncolytic virus products with specific functions.
gene therapy drug production process is complex, involving process development and quality control method development in multiple links such as plasmid transfection and purification, large-scale culture of production cells, plasmid transfection, and virus purification. The process control of
gene therapy vector process development and GMP production is extremely strict. The required key production equipment and key reagents and consumables are currently mainly supplied by developed countries such as Europe and the United States, and the domestic production rate of core links is relatively low. Compared with other drugs, CGT drugs are costly to produce higher costs. WuXi Jupo disclosed that the revenue of Ricci Orentse injection in 2021 exceeded 30 million yuan, with a gross profit margin of only 29%.
and Yuan Biological's prospectus discloses its main production equipment and raw materials. The core products include stirred bioreactors, ultrafiltration systems, chromatography systems, liquid dispensing tanks, etc.; key consumables include cell culture medium, purified fillers, filter membranes, serum and nucleases. We believe that CGT drug manufacturers and CDMO companies have a more urgent need to reduce costs and ensure the safety of the supply chain. In the future, as domestic CGT drugs enter the clinical and even commercialization stages one after another, the demand for CGT drug equipment and consumables will continue to increase in the future, and the momentum of import substitution will be stronger.
4.1 IMA: With equipment business as the core, the product line and sales area continue to expand
IMA was founded in 1961 and is headquartered in Italy. It is a world-leading automation machinery design and manufacturing enterprise. Its products involve multiple fields such as medicines, cosmetics, food, tea, coffee processing and packaging. The company has 46 factories and is located all over the world. As of the end of 2019, the company had 5900 employees, of which 2400 were located outside Italy, with a sales network in 80 countries, with 11 branches and more than 50 agents worldwide.
IMA's core business in the pharmaceutical equipment industry is undertaken by IMA Pharma, with a wide production line and is an integrated and comprehensive pharmaceutical equipment supplier. IMA Pharma has three professional departments, namely IMA Active (Solid Agents Division), IMA Life (Sterile Filling and Freeze-drying Division), and IMA Safe (Packaging Division).
IMALife provides a series of products in the fields of aseptic filling and lyophilization of liquids and powders, including bottle washing, sterilization, sterile environmental filling and plugging equipment; pharmaceutical and cosmetic filling and sealing equipment; sterile powder needle filling equipment; industrial-grade, pilot or laboratory lyophilization machines, which can be used in combination with the smartest automatic loading and unloading systems in the field. At the same time, labeling machines, bottle blowing machines, unpacking machines, pallet collecting machines, etc. are provided. IMA Active can provide equipment and services for all stages of solid preparation production (granulation, tableting, capsule filling, coating, processing and cleaning). IMA Safe can provide manufacturing solutions for the pharmaceutical, cosmetics and food industries with complete front-end and mid-end and end packaging production lines.
In the medium and long term, IMA's performance has always maintained a steady growth trend, with operating income growing from 293 million euros in 2000 to 1.596 billion euros in 2019, with an annual compound growth rate of 9.3%; net profit attributable to shareholders increased from 15 million euros to 170 million euros, with an annual compound growth rate of 13.53%.
The revenue of the company's pharmaceutical equipment sector increased from 247 million euros in 2000 to 700 million euros in 2019, with an annual compound growth rate of 5.6%, which is basically the same as the growth rate of the global pharmaceutical market during the same period. The company's pharmaceutical equipment revenue only declined in 2009 and 2010, with the company's annual report explaining that it was a decrease in orders in the packaging department and a decline in sales. We believe that it is related to the slowdown in the global pharmaceutical market growth from 2009 to 2010 and the contraction of fixed asset investment of pharmaceutical companies. The profitability of the pharmaceutical equipment sector is continuing to improve, and the proportion of EBIT in revenue has steadily increased from below 10% to about 15% in recent years. From this we can see that without policy disturbances and the demand is released smoothly, there is no obvious cyclicality in the demand in the pharmaceutical equipment industry.
In addition to deepening the pharmaceutical equipment industry, IMA company also finds new performance growth points through diversified business development, layout of global markets and providing after-sales services, and reduces performance volatility.
June 2010 and February 2011 IMA entered the packaging field of dairy and convenience food industries through the acquisition of GIMA S.p.A, Naturapack S.r.l and the Sympak Corazza Group, and in 2013, Ilapak Group entered the tobacco machinery production field. From 2010 to 2019, the company's pharmaceutical equipment revenue fell from 72% to 44%.
From the perspective of sales region, the company's local sales in Italy accounted for only about 12% in 2019, and the revenue in EU countries was the largest, but it was only 28%. From the perspective of business form, after-sales service revenue (including spare parts sales) has accounted for 30%, and new product sales revenue accounts for about 70%. In terms of
production capacity, IMA company has always maintained a steady pace of expansion. Over the years, the proportion of capital expenditure to the revenue of that year has remained between 2% and 4.5%. Through comparison, it can be seen that the capital expenditure intensity of domestic pharmaceutical equipment enterprises is higher than that of IMA. We believe that the expansion of production capacity will help improve the delivery capacity of enterprises and expand product types, and is an important factor in enhancing the competitiveness of enterprises. The international competitiveness of Chinese pharmaceutical equipment enterprises is expected to continue to improve.
At present, the international layout of the leading domestic pharmaceutical equipment industry leaders is also actively promoting.Dongfulong has achieved a breakthrough in exporting biopharmaceutical equipment, such as providing liquid distribution systems, filling systems, lamp inspections and rear-channel packaging equipment for the French Recipharm factory (providing OEM services for Moderna's mRNA route COVID-19 vaccine). Through the acquisition of Romaco, Chutian Technology not only enhances the company's product reserve and service capabilities in the field of solid preparation equipment, but also further deepens the company's international strategic layout. During the epidemic, it provides local pharmaceutical companies in the UAE with an overall solution for aseptic preparations for large-scale production of new crown vaccines. At present, the proportion of overseas revenue of domestic leading pharmaceutical equipment enterprises is around 20%, and we believe that there is still a lot of room for improvement in this proportion.
In terms of after-sales service revenue, domestic companies still have a lot of room for improvement compared with IMA. In 2021, Dongfulong's accessories and service revenue accounted for only about 4%, while Chutian Technology (the higher proportion is mainly due to the merger of Romaco. In 2019, the company's accessories products and after-sales service revenue accounted for 32.44%). We believe that as the number of pharmaceutical equipment in leading enterprises continues to increase in the future, the volume and proportion of after-sales service revenue will be gradually increased, and performance stability will be further enhanced.
4.2 Sedolis: The integrated layout of "consumables + equipment" provides an overall upstream and downstream solution for the life science industry chain
Sedolis is an enterprise that operates globally in the fields of biopharmaceutical equipment and consumables. The company owns two exclusive listed entities, Sartorius AG and Sartorius Stedim Biotech S.A., of which Sartorius AG holds a 74% stake in Sartorius Stedim Biotech and 85% of the voting rights. Sartorius Stedim Biotech is mainly engaged in Bioprocess Solutions, while Sartorius Lab Holding GmbH is mainly engaged in laboratory products and services (Lab Products & Services).
Upstream consumables and reagents in life sciences have the characteristics of many categories, limited single product market size, scattered competitive landscape, high technical barriers, and large technical differences between different products. Enterprises through mergers and acquisitions are the inevitable path to become bigger and stronger. Sedolis has carried out many mergers and acquisitions in history, covering the consumables and technologies required for multiple links of biopharmaceutical production and research and development, covering the entire upstream and downstream links including cell line development, culture medium optimization, upstream cell culture, downstream separation and purification filtration to preparation canned products, and can provide customers with the ability to complete end-to-end solutions from biopharmaceutical research and development to commercial production.
Take Sedolis's monoclonal antibody production solution as an example. In the upstream production process, it has mature process solutions covering cell lines, culture substrates, process development to commercial manufacturing; in the downstream production process, protein purification from mg to kg can be achieved and stock solution storage and transportation purification solutions can be achieved.
The Bioprocess Solutions business (Bioprocess Solutions) can provide a diverse product portfolio involving commercial production and process development of biopharmaceuticals, including cell line construction technology, cell culture medium, bioreactors, isolation/purification consumables, storage and transportation solutions. It can provide customers with complete process solutions and assist in preliminary project planning, production process integration and subsequent verification processes. The products and technologies are suitable for vaccines, monoclonal antibodies and viral vector gene therapy. The 2021 company annual report disclosed: In the biological process solutions business, the repeated business of disposable sterile products accounts for about three-quarters of the sales revenue of the department. The company ranks among the top 3 in the world in filtration solutions, fluid management solutions, fermentation, purification, etc.
The company's Lab Products & Services department mainly focuses on research laboratories and academic research institutions in the pharmaceutical and biopharmaceutical industries. The products include cell analysis systems, laboratory water supply systems, experimental balances, filters, and pipettes. In addition, the company can also provide equipment installation, commissioning, regular maintenance/maintenance and other services covering the entire life cycle of laboratory instruments.The company's two business segments cover the entire process from laboratory research and development to commercial production, with high synergy.
Judging from historical data, Satolis' revenue and profits have maintained a steady growth trend, and gross profit margin and net profit margin generally show a steady improvement trend. In 2021, the company's revenue and profit both showed a speeding trend, with revenue reaching 3.449 billion euros (+49.3%), of which the revenue in the business areas related to the epidemic was about 500 million euros. The growth rate of spin-off contributed, the contribution of mergers and acquisitions was about 5%, and the development and production of new coronavirus vaccines and their testing kit products and components contributed about 16%. The company's profitability has been further improved, with EBITDA reaching 1.175 billion euros and the corresponding profit margin reaching 34.1%, mainly due to factors such as scale effect and reduced sales expenses. The company's continuous capital expenditure of a certain intensity is also an important factor driving performance growth. In 2021, the proportion of capital expenditure to sales reached 11.8%, which continued to remain at a high level. The company's guidance for revenue target of 2025 is 5 billion euros (not considering the demand related to COVID-19), and the compound revenue growth rate in 2022-2025 is 16.65%.
points business, the company's bioprocess solution sector's revenue reached 2.727 billion euros (+54.7%) in 2021, of which 20% of the demand related to the epidemic contributed 20%, and 5% of the merger and acquisition contribution; the laboratory service sector's revenue reached 722 million euros (+32%), of which the demand for the new coronavirus detection kit components contributed about 6%, and 6% of the merger and acquisition contribution. The proportion of EBITDA in both businesses to revenue is showing an increase in revenue, and profitability is constantly increasing.
After reviewing the business development and performance of IMA and Sedolis, we believe that: (1) From a long-term perspective, since the demand in the pharmaceutical equipment industry does not have obvious cyclicality, only the pharmaceutical equipment business is considered. Leading companies can still maintain a relatively stable performance growth rate through the expansion and iteration of product lines (such as gradually from stand-alone and system to overall solutions and projects, layout of high-prosperity biopharmaceutical equipment, etc.), strengthen international layout, and increase the proportion of after-sales service revenue. (2) Equipment products have a long service life, and for the same type of products, it is difficult for a specific customer to repurchase in the short term. Consumables products are used in all aspects of biopharmaceutical research and development and commercial production, and demand will continue to exist. Since if the relevant suppliers are replaced with consumables products, the replaced products need to be tested and tested and the relevant change procedures are performed in the drug supervision department, the time and economic costs are high. Therefore, after binding customers, the performance of consumables products is better. Therefore, by increasing the revenue share of consumables products, the performance can be further smoothed.
We believe that after pharmaceutical equipment companies enter the consumables field through mergers and acquisitions, independent research and development, on the one hand, they can open up the boundaries between equipment and consumables sales, realize the sharing of sales resources and channels, and use the original customer resources to help consumables products quickly increase in volume; on the other hand, the binding between consumables and equipment is becoming more and more closely connected, and consumables and equipment can be sold in combination to form an integrated solution of "consumables + equipment + engineering", serving the entire process of drug research and development and commercialization, which will further enhance customer stickiness and market penetration. From a medium- and long-term perspective, we believe that leading pharmaceutical equipment companies are expected to become providers of full-process solutions for biopharmaceuticals, opening the second growth curve outside pharmaceutical equipment.
5.1 Dongfulong
Dongfulong was established in 1993 and was listed on the GEM in 2011. The company provides global pharmaceutical companies with overall solutions for pharmaceutical technology, core equipment and system engineering, and is committed to becoming a mainstream supplier of smart pharmaceutical factories and global comprehensive pharmaceutical equipment. Its core business covers three major areas: pharmaceutical equipment, medical technology and technology, and food equipment engineering. Currently, there are more than 10,000 pharmaceutical equipment and drug manufacturing systems serving more than 2,000 well-known pharmaceutical companies in more than 40 countries and regions around the world.
company started with the medical freeze-dryer business. In recent years, it has actively promoted product category expansion and broken the ceiling of a single track space. It can not only provide raw material equipment (chemical drug synthesis, Chinese medicine extraction, biological raw liquid) and preparation equipment (injection, oral solid preparation) for drug manufacturing fields such as biological products, vaccines, blood products, antibiotics, chemical drugs, diagnostic preparations, health products, veterinary drugs, and western Chinese medicine. It can also create a life and science sector, forming a multi-dimensional integrated layout of instruments, equipment, consumables (including consumables, reagents, fillers, filtration, packaging materials, etc.), which can provide overall solutions in the fields of cell therapy, gene therapy and consumables. Form a "M+C+E" (equipment + consumables + engineering) integrated solution.
21 In 2021, the company achieved operating income of 4.192 billion yuan (+54.83%), net profit attributable to shareholders of listed companies was 828 million yuan (+78.59%), and net profit attributable to shareholders of listed companies after deducting non-operating items was 760 million yuan (+92.00%). By product, the revenue of bioengineering stand-alone and system was 907 million yuan (+305%), accounting for 21.63%, an increase of 13.36 percentage points compared with 2020; the revenue of medical equipment and consumables was 499 million yuan (+105%), accounting for 11.91%, an increase of 2.91 percentage points compared with 2020, of which the revenue of consumables products was about 200 million yuan and CGT equipment was about 250 million yuan; considering only bioengineering equipment, CGT equipment and consumables, the total revenue of the above products in 2021 has reached 32%, and biopharmaceutical equipment + consumables have become the main factors driving the company's performance growth. The income of injection single-machine and system was 1.381 billion yuan (+13.1%), accounting for 32.95% and the gross profit margin was 47.43% (+2.23pct); the income of oral solid single-machine and system was 111 million yuan (+112%), reflecting that in addition to the rapid growth in demand for biological drugs, the demand and competitive landscape of traditional drug equipment are still stable.
In 2021, the company's overseas revenue was 1.04 billion yuan (+97.79%), and its proportion increased to 24.8%. In terms of main regions, Europe's revenue was RMB 730 million (+148%), with a gross profit margin of 70.27%; Asia's revenue was RMB 298 million (+61.57%), with a gross profit margin of 59.51%. It is expected that benefiting from the production capacity construction of biological macromolecular drugs such as antibodies and vaccines, the company's biological liquid-related equipment has achieved breakthroughs in overseas markets, and the overall solution capabilities of biological macromolecular equipment have been improved. As of the first quarter of 2022, the company's contract liabilities were RMB 3.92 billion, the highest level in history, reflecting that the company has sufficient number of orders and new orders to be executed and is still in the period of performance release.
has historically introduced technology, completed and expanded product lines through various means such as establishment of subsidiaries, joint ventures and mergers and acquisitions, adapting to the development trend of the pharmaceutical industry and meeting customers' new needs for pharmaceutical equipment. We sorted out the performance of the merger and acquisition targets/newly established subsidiaries. Most of the merger and acquisition targets showed a good growth trend after entering the company system, reflecting that the merger and acquisition has a forward-looking vision and has strong integrated operation capabilities. For example, in 2017, the company increased its capital for Suzhou Vladivostok (now renamed Dongfulong Vladivostok) for RMB 9.6 million, and obtained 60% of its equity (the current shareholding ratio increased to 68%). In 2021, the company's revenue was RMB 283 million and its net profit was approximately RMB 68 million. In 2021, the company's establishment of subsidiaries in Hong Kong, India, Indonesia, Turkey, Australia, Dubai, Vietnam and South Africa reflects that the company continues to strengthen its international market layout and expansion and gradually increases its overseas market penetration.
Company disclosed its plan for a private placement in April 2022, and plans to raise 3.2 billion yuan for 4 projects including the "Biopharmaceutical Equipment Industry Trial Production Center", to enhance the company's production capacity and enhance the company's production capacity in the fields of new equipment and biopharmaceutical consumables. Historically, the company has conducted large-scale capital expenditures in 2011 and 2014 (reflected as a significant increase in the amount of fixed assets in the next year), and the company did not conduct large-scale capital expenditures from 2014 to 2020. At present, the company's production capacity has become saturated, so the company began to enter a new round of capital expenditure cycle in 2021. In 2021, the company's cash paid for projects under construction, fixed assets, intangible assets and other long-term assets all hit record highs. We believe that it will be beneficial to drive the company's new round of performance growth.
Company is expected to reflect more growth rather than cyclical through measures such as setting up biopharmaceutical equipment with higher prosperity, providing integrated solutions for "equipment + consumables + engineering", and increasing international layout. We expect the company's revenue from 2022 to 2024 to be RMB 5.611, RMB 6.900 and RMB 8.105 billion, respectively, with year-on-year growth rates of 33.8%, 23.0% and 17.5%; net profit attributable to shareholders will be RMB 1.111, RMB 1.395 and RMB 1.694 billion, with year-on-year growth rates of 34.2%, 25.5%, and 21.4%, respectively.
5.2 Chutian Technology
Chutian Technology Co., Ltd. was established in 2000 and has now become one of the major enterprises in the pharmaceutical equipment industry. The company adheres to the "one horizontal, one vertical and one platform" strategy in terms of industrial layout. "one horizontal" covers the entire product chain of major pharmaceutical dosage-forming equipment. "one vertical" mainly focuses on the entire industrial chain of injection drug production equipment. "one platform" can provide 4.0 smart factory solutions for pharmaceutical industry production. The company started with the washing, drying, potting and sealing linkage line, gradually expanded to the lyophilized preparation production line, and entered the field of pharmaceutical water equipment and engineering systems through the acquisition of Chutian Huatong, and entered the field of oral solid preparation equipment through the acquisition of Romaco, achieving full coverage of traditional drug production equipment such as liquids, solids (including powders, pastes, etc.).
In the bioengineering sector, the company has deployed disposable bioreactors, disposable liquid dispensing systems, ultrafiltration chromatography purification, stainless steel reactors and fillers. By establishing a holding company Chutian Siyoute Biotechnology Co., Ltd., it is used for the research and development and production of disposable consumables, and its main products include disposable bioreactors, liquid dispensing bags, liquid storage bags and membrane materials. By establishing a holding company Chutian Microsphere Biotechnology Co., Ltd., it is used for the research and development and production of fillers. The main products cover natural polysaccharide microspheres, silica gel microspheres, polymer microspheres and inorganic microspheres. Currently, the products are mainly agarose microspheres, which are mainly used in biomacromolecular pharmaceuticals.
In 2017, the listed company jointly invested with Chutian Asset Management and Hunan Pengpai to establish Chutian Asset Management, completing the acquisition of Romaco. In 2020, the listed company completed the acquisition of Chutian Asset Management equity through the issuance of shares and convertible bonds and realized the consolidation of Romaco. After completing the acquisition of Romaco, the company strengthened the integration of its products and sales areas, strengthened the cost control in management, sales and R&D; and increased its efforts to expand Romaco products in the Chinese market, giving full play to the synergistic effects in channels, customers, brands and technologies. After the merger and acquisition, Romaco's profitability has been greatly improved.
As of the end of the first quarter of 2022, the company's contract liabilities amounted to 2.51 billion yuan, a year-on-year increase of 90.13%, a slight decrease from the previous month, but the month-on-month decrease was mainly due to the structure of contract liabilities, i.e. the proportion of advance payment and withdrawal payment. At the end of last year and the end of the first quarter of this year, the delivery in the first quarter decreased year-on-year, and the client adjusted the test collection increased year-on-year, resulting in a decrease in the proportion of goods issued, and the proportion of withdrawal payments in contract liabilities decreased, resulting in a decrease in the amount of contract liabilities. The company's new orders in the first quarter of 2022 increased year-on-year, and the orders in hand also increased month-on-month. However, due to the company's new orders in the first quarter of 2021, the proportion of new orders related to the new crown was more than 40%, and among the new orders in 2022, the proportion of new orders related to the new crown was Below 5%, we judge that the company's new orders for non-COVID equipment still maintain rapid growth year-on-year.
Chutian Technology has experienced 3 major production capacity expansions in history. The first phase of the project covers an area of about 80 mu, started construction in 2003 and completed in 2004. The second phase of the project covers an area of 100 mu, started construction in 2009 and completed in 2010. The third phase of the project started in 2013 and was completed one after another in 2015. The company launched the fourth phase of the project in 2020, covering an area of 142 mu, including the Chutian Science and Technology Innovation Center Building, Talent Center Building, Central Workshop, Intelligent Backpackage Workshop, Intelligent Traditional Chinese Medicine Workshop and other R&D, manufacturing and management projects. After the fourth phase of the project is completed, the company can reach a production capacity of 10 billion yuan. At present, the company has started the fifth phase of the project construction, and the production capacity is mainly planned for relevant layouts in the field of biopharmaceuticals, including disposable consumables, chromatographic ultrafiltration equipment, liquid distribution systems, other products, etc.We believe that as the company's new production capacity is gradually put into production, it is expected to continue to maintain steady growth in performance.
5.3 Xinhua Medical
The company's main business is divided into four major business segments: medical devices, pharmaceutical equipment, medical services and medical trade. The medical device sector infection control product line, radiation diagnosis and treatment and imaging product line, in vitro diagnostic reagents and instrument product line, operating room equipment and surgical equipment product line, oral equipment and consumable product line, experimental animal product line, dialysis equipment and consumable product line, and medical environmental protection product line. The domestic market share of infection control product line is more than 70%, ranking first in the country in scale; the domestic product variety of radiation therapy equipment is the most complete, with more than 400 installed units in China, ranking first in the country in scale. The pharmaceutical equipment sector mainly focuses on four pharmaceutical engineering sectors: sterile preparations, solid preparations, traditional Chinese medicine preparations, and biopharmaceuticals. The main business is to provide pharmaceutical engineering and design, overall solutions, stand-alone equipment and process research and technical services in the pharmaceutical field for sterile injections, solid preparations, traditional Chinese medicine preparations, and biopharmaceuticals. The product structure expands from pharmaceutical equipment to the field of life sciences, focusing on the development of traditional Chinese medicine preparation and life science-related process equipment.
In 2021, the company achieved operating income of 9.482 billion yuan (+3.62%), net profit attributable to shareholders of RMB 556 million (+132.26%), and net profit attributable to shareholders of RMB 384 million (+97.07%) after deducting non-operating items. By business, the medical device manufacturing sector achieved operating income of 3.534 billion yuan (+20.07%); the pharmaceutical equipment sector achieved operating income of 1.249 billion yuan (+16.83%), and the gross profit margin was 26.68%, an increase of 4.66 percentage points compared with 2020. The subsidiary Chengdu Yingde achieved operating income of 353 million yuan (-9%) and net profit attributable to shareholders of 1.47 million yuan, successfully turning losses into profits; the medical product trade sector achieved operating income of 3.824 billion yuan (-10.90%), mainly due to the impact of centralized volume procurement of high-value medical consumables, taking into account factors such as operating risks and gross profit margin levels in the medical trade sector, Shanghai Taimei terminated its business agency cooperation with Johnson & Johnson (Shanghai) Medical Equipment Co., Ltd. on June 30, 2021. In the first quarter of 2022, the company achieved operating income of 2.113 billion yuan (-16.05%), net profit attributable to shareholders of 128 million yuan (-12.84%), and net profit attributable to shareholders of 148 million yuan (+21.46%) after deducting non-operating items, mainly benefiting from the steady growth of operating income in the medical device and pharmaceutical equipment sectors.
Company implemented an equity incentive plan in February 2022, granting 5.5468 million restricted shares to 344 incentive targets, with a grant price of 11.26 yuan per share. The implementation of equity incentive plans will help stimulate the enthusiasm of the management team, improve operational efficiency, and reduce agent costs. During the 14th Five-Year Plan period, the company will focus on sorting out its business segments, focusing on the two core businesses of medical devices and pharmaceutical equipment, and make every effort to break through the fields of hemodialysis, radiation diagnosis and treatment, in vitro diagnosis, biopharmaceuticals and preparation equipment; select the opportunity to lay out new production lines in the oral and surgical equipment fields, and carefully cultivate sensor control equipment, experimental equipment, medical environmental protection equipment, surgical instruments, orthopedics, general pharmaceutical equipment and hemodialysis centers; gradually withdraw from the non-performing assets in the fields of medical services, medical commerce, traditional Chinese medicine and chemical pharmaceutical equipment in an orderly manner. We believe that the company's performance is expected to continue to be released.
5.4 Morimatsu International
Company's main business is core process equipment, process systems and overall solutions for chemical reactions, biological reactions and polymerization reactions. Its downstream industries and fields serve include oil and gas, daily chemicals, new chemicals, pharmaceuticals (including biopharmaceuticals and chemical synthetic drugs), power battery raw materials (including metal ore, lithium battery raw materials) and electronic chemicals (including photovoltaic raw materials and high-purity chemical reagents production). The company has two modern manufacturing bases in Nantong and Shanghai, and also a coastal manufacturing base in Malaysia.
In the field of biopharmaceuticals, the Group provides diversified products for the iteration of technical products from laboratories, clinical phases I, II, III to industrial production, covering its upstream and downstream products and renovation needs, including bioreactor/fermentation tank systems, culture medium preparation systems, harvesting systems, purification systems, formulation liquid dispensing systems, buffer liquid dispensing systems and storage systems, online liquid dispensing systems, inactivation and CIP workstation systems, isolators, disposable magnetic mixing systems, disposable liquid dispensing systems, modular factories & clean decorations, etc.
In 2021, the company successfully delivered China's first mRNA COVID-19 vaccine production device. This device uses the world's advanced nucleic acid drug platform production technology and has an annual production capacity of 200 million doses. We continue to cooperate with leading domestic HPV vaccine manufacturers to provide them with core equipment and process systems such as fermentation tanks, purification/formulation liquid dispensing systems, adjuvant liquid dispensing systems, and continuously help them quickly achieve industrialization in the vaccine field. The company also provides large-scale bioreactors to many domestic and foreign antibody manufacturers. Among them, multiple sets of 20KL bioreactor projects for antibody production provided by a Swiss giant CDMO are one of the largest bioreactor projects in the world. In the field of insulin, large fermentation tanks and process systems are provided for the production of third generation long-acting insulin. In 2021, the largest recombinant human albumin fermentation tank system orders in China and multiple downstream purification system orders were signed, achieving a new technological leap. The amount of new orders in the biopharmaceuticals and chemical synthetic drugs showed rapid and stable growth, reaching 2.402 billion yuan in 2021, a year-on-year increase of 37%.
In 2021, the company hit a record high, with sales revenue of approximately RMB 4.279 billion, a year-on-year increase of approximately 43.7%; gross profit of approximately RMB 1.176 billion, a year-on-year increase of approximately 39.4%; pure profit of approximately RMB 381 million, a year-on-year increase of approximately 31.5%; new orders amount was approximately RMB 6.654 billion, a year-on-year increase of approximately 88.7%; orders in hand were approximately RMB 5.72 billion, a year-on-year increase of approximately 72.5%. At present, the company has sufficient orders in hand and new customers are developing smoothly. We believe that the company's performance will continue to grow rapidly.
5.5 Tailin Bio
Tailin Bio is a pioneer in the implementation and product development of modern microbial detection technology in China. Based on the accumulation of technology in the field of original microbial detection and control, the company actively deploys the research and development of life science instruments and equipment and new biomedical equipment, and has developed cell therapy-related equipment earlier in China.
The microbial detection system independently developed by the company mainly includes sterile detection systems, microbial limit detection systems, etc.; in the field of environmental biological pollution control equipment, the main products include isolators, sterile delivery chambers, hydrogen peroxide disinfection machines and supporting equipment. At the same time, the company has independently developed integrated equipment for cell and gene therapy drug production using isolator technology as a platform technology, mainly including multifunctional cell processing workstations, nested cell culture systems and sterile assembly workstations. The company has successfully developed NC membranes independently. In addition to being used for infectious disease detection (new coronavirus, AIDS, hepatitis B, etc.), it can also be used in early pregnancy testing, food quality monitoring, environmental monitoring, agriculture and animal husbandry, entry and exit inspection and quarantine, forensic filing and other fields. Common applications include drug testing, HCG testing, etc. In 2021, the company achieved operating income of RMB 283 million (+41.46%) and its net profit attributable to shareholders was RMB 283 million (+41.46%). In the first quarter of 2022, the company continued to maintain rapid growth above a relatively high performance base, achieving operating income of RMB 71.53 million (+48.90%) and net profit attributable to shareholders of RMB 13.93 million (+45.08%). Against the backdrop of the booming GCT drugs, it is optimistic that the company's cell processing workstations will achieve rapid growth in the medium and long term.
We believe that the new version of the "Drug Registration Management Measures" has abolished the GMP certification and instead strengthened the dynamic supervision of the entire drug production process and the entire life cycle of the drug. It is expected that the demand for pharmaceutical equipment will be released smoothly in the future, and the industry is expected to transform from short-term explosive growth to long-term steady growth, and the cyclicality will weaken to a certain extent.Pharmaceutical equipment companies are expected to reflect more growth rather than cyclical through measures such as expanding their product lines, laying out biopharmaceutical equipment with higher prosperity, providing integrated "equipment + consumables" solutions and international layout.
(This article is for reference only and does not represent any of our investment advice. If you need to use relevant information, please refer to the original text of the report.)
selected report source: [Future Think Tank]. Future Think Tank - Official Website
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