In the first three quarters of 2023, Menova's revenue and net profit attributable to the parent company decreased year-on-year respectively. 51%, and the consolidated gross margin fell to 3248%
Investment Times researcher Wang Zixi.
Due to the violation of the "Provisions on the Registration and Management System of Insiders of Listed Companies", a few days ago, Ningbo Menova Pharmaceutical Co., Ltd., a manufacturer of characteristic APIs, was hereinafter referred to as Menova, 603538SH) was issued a warning letter by the regulatory authority. The company's regulatory measures may be related to the involvement of the company's chairman's ex-wife in insider trading.
In terms of performance, Menova-related indicators also declined. In the first three quarters of 2023, the company's revenue and net profit attributable to the parent company decreased year-on-year respectively. 51%；Consolidated gross margin declined to 3248%, the second lowest in the same period since listing;Net profit margin fell to 6.246%, a new low for the same period since listing. The above situation may be greatly affected by changes in the CDMO business.
In addition, Menova raised funds through IPO in 2017 and convertible bonds in 2021, but the progress of related fundraising projects was slow, and the IPO fundraising project of "annual output of 3 billion tablets (granules) for export solid preparations" and the "high-end preparation" convertible bond fundraising project have not realized their income so far. In July 2023, the company launched another 6The 5.2 billion yuan fixed increase plan, which was also inquired by the exchange about the necessity of this fundraising project.
A warning letter was issued for violations
On December 9, 2023, Menova announced that the company received the "Decision on Administrative Regulatory Measures" issued by the Ningbo Supervision Bureau of the China Securities Regulatory Commission (hereinafter referred to as the Ningbo Securities Regulatory Bureau), and the Ningbo Securities Regulatory Bureau took administrative supervision measures against the company by issuing a warning letter.
According to the Ningbo Securities Regulatory Bureau, Menova disclosed a major cooperation agreement on April 23, 2021, and in the management of inside information on this major event, the company had problems that the insiders of the inside information did not confirm the list and the registration content of some insiders was not standardized. Due to the above-mentioned behavior in violation of relevant regulations, a warning letter was issued to Menova.
It is not difficult to find that on April 23, 2021, Menova disclosed that the company signed a ten-year strategic cooperation agreement with a subsidiary of Merck & Co., Ltd., mainly to provide Merck with the research and development, registration, production and ** services of product-related APIs. On April 22, 23, and 26, 2021, Menova's stock price pulled three daily limits in a row, showing a positive reaction of the stock price to the news.
It is worth noting that Menova was issued a warning letter by the Ningbo Securities Regulatory Bureau, which may be related to the involvement of the ex-wife of the company's chairman in insider trading.
The researcher of "Investment Times" noticed that just a few days before Menova received the decision on the above-mentioned regulatory measures, the Fujian Securities Regulatory Bureau announced that Zhang Yongji, the ex-wife of the chairman of Menova, was confiscated by the Fujian Regulatory Bureau for using inside information to buy and sell Menova ** for profits in 2021280,000 yuan, and a fine of 2202570,000 yuan, totaling more than 33.03 million yuan.
The information shows that since 2019, Menova has been negotiating cooperation with Merck, and has gone through multiple rounds of negotiations since then. The sensitive period of inside information (i.e., the period from the formation of inside information to the public) is from November 20, 2020 to April 22, 2021. Zhang Yongji**Account one-way concentration of funds**Menova is from January 26 to April 22, 2021, which is the sensitive period of inside information, and **funds are related to the chairman of the company.
As for Zhang Yongji's illegal trading of Menova**, Menova did not announce that he was punished. And it should be noted that with this addition, Menova has been subject to regulatory measures many times since the second half of 2022. The most recent is in October 2022, during the on-site inspection of the Ningbo Securities Regulatory Bureau, it was found that the company had three accounting treatments that did not comply with the company's accounting system, and some directors and supervisors did not attend the shareholders' meeting, so the Ningbo Securities Regulatory Bureau issued a regulatory concern letter to the company.
Menova received the Decision on Administrative Supervision Measures
Source**: Company announcement.
In the first three quarters, revenue and net profit "both declined".
Menova is a comprehensive international pharmaceutical technology manufacturing enterprise specializing in the R&D, production and sales of specialty APIs (including intermediates) and preparations. The company takes the three major businesses of CDMO, characteristic APIs and preparation integration as the main development core, and its services cover mainstream countries and regions around the world, and its core products cover cardiovascular, central nervous system, antiviral, hypoglycemic, gastrointestinal and digestive tract and other fields.
The company went public in 2017, and from 2018 to 2022, Menova's revenue increased year by year, with year-on-year growth rates respectively. 80%；Except for the negative growth in 2021, the net profit attributable to the parent company has been positive in the rest of the years, especially in 2018 and 2022, with a growth rate of more than 1 times.
However, in the first three quarters of 2023, Menova's performance declined, and its revenue fell by 24% year-on-year55% to 92.9 billion yuan, and the net profit attributable to the parent company decreased by 74 percent year-on-year51% to 05.5 billion yuan, and the net profit attributable to the parent company after deducting non-profits also fell by more than 70%. And as of the end of September 2023, the company's net cash flow from operating activities was 11.6 billion yuan, which is the first net outflow in the same period since listing.
The company explained in the financial report that the revenue in 2023 will fluctuate greatly, mainly due to the decrease in pneumonia-related orders and the fact that the original holding subsidiary, Zhejiang Liaoyuan Pharmaceutical Co., Ltd. (hereinafter referred to as Liaoyuan Pharmaceutical), will no longer be consolidated. In addition, the company's new production capacity began to be released at the end of 2022 and early 2023, and the overall profit margin level was greatly affected by factors such as pipeline transfer and capacity ramp-up.
Researchers from the Investment Times noticed that Menova took all the shares of Liaoyuan Pharmaceutical in November 2022, and from January to October 2020, 2021 and 2022, Liaoyuan Pharmaceutical's revenue was 29.8 billion yuan, 22.6 billion yuan, 19.6 billion yuan, accounting for about % and 13% of the consolidated revenue of Menova in each year, it can be seen that the equity of the subsidiary has a great impact on the consolidated revenue of Menova.
In addition, the researchers of the "Investment Times" also noted that in the first three quarters of 2023, the comprehensive gross profit margin of Menova was 3248%, a decrease of 837 percentage points, and the second lowest level in the same period since listing. The company's net profit margin was 646%, down more than 12 percentage points from the same period in 2022 and a new low for the same period since listing.
The company's gross profit margin has been declining in the first half of the year. According to relevant announcements, from January to June 2021, 2022, and 2023, the gross profit margin of Menova's main business will be in order. 45%。In the first half of 2023, this indicator declined, mainly due to the decline in CDMO business revenue and proportion, while fixed costs remained basically unchanged.
In the first half of 2023, affected by the slowdown in demand for pneumonia drugs, Menova CDMO contributed 10.4 billion yuan, down 7362%, the proportion of revenue is reduced to less than 20%;The gross margin of the business was 200%, well below the nearly 52% profitability level in 2022.
Menova 2023 Q3 Report Key Financial Data(RMB, %)
Data**: Quarterly Company Report.
The progress of the two fundraising projects was slow
The slow progress of Menova's previous fundraising projects is also a cause for concern.
According to public information, in 2017, Menova IPO raised 42.1 billion yuan, which will be used for the "annual output of 3 billion tablets (granules) export solid preparation construction project" and to supplement working capital. In October 2019, the company raised 20.1 billion yuan was repurposed for the "technical transformation project with an annual output of 400 tons of APIs".
However, according to the relevant announcement, as of the beginning of November 2023, the "annual output of 3 billion tablets (granules) export solid preparation project" has only been completed and put into production. In the first phase of the API technical transformation project, a total of two workshops will be built, namely workshop 9 and workshop 10, workshop 9 will be put into production of valsartan products in October 2022, and workshop 10 will be officially put into operation in November 2023. Regarding the delay in the construction progress of the two projects, the company explained that the external environment has changed greatly at the beginning of 2020, the delivery cycle of the project's production equipment has been extended, and the construction progress of the project has been delayed due to objective reasons such as the extension of the logistics cycle at home and abroad and the slowdown in engineering construction.
In addition, in 2021, Menova issued convertible bonds to raise 52 billion yuan for "high-end preparation projects" and replenishment of working capital. The construction progress of the project is also relatively slow. As of the end of June 2023, the construction of the main body of the plant and office building of the high-end preparation project has been completedAt the end of September, the completion acceptance and filing were completed.
And as of the end of June 2023, the cumulative revenue of workshop 9 of the above-mentioned API technical transformation project is 992930,000 yuan, far lower than the promised cumulative income of 1967740,000 yuan, and the cumulative realized income accounted for just over half of the promised income.
In July 2023, Menova released a private placement plan in an attempt to raise funds from the capital market again. In this private placement, the company plans to raise 65.2 billion yuan will be used for the "first-phase project with an annual output of 3,760 tons of APIs and intermediates" and "intelligent transformation and upgrading project of the plant". However, soon after the plan was released, it was inquired by the Shanghai Stock Exchange, which asked the company to explain the necessity of the fundraising project and the current R&D and approval progress of the project.
It is worth noting that among the products of this fundraising project, empagliflozin and contrast agent intermediates are new products not involved in Menova's existing business. At present, the API empagliflozin is under CDE review, and the contrast agent intermediate is still under development. There is still uncertainty as to whether the private placement can be approved by the exchange.