Recently, the CXO sector has been doing very badly, just because of the so-called overseas proposal, WuXi Biologics and WuXi AppTec, as industry leaders, have joined hands to **60%, and then led the entire CXO industry to dive. In the final analysis, it is because most of the business of these companies is overseas, and it is easy to be manipulated. Today, we will introduce a CXO subdivision industry that is not handled overseas - generic CXO.
1. Generic CXO
A generic drug is a drug that has the same active ingredient, dosage form, route of administration and ** effect as the original drug. Generic drug CRO belongs to the subdivision of CRO, which mainly provides preclinical research, clinical trials, production and other services related to generic drugs for pharmaceutical companies and biotechnology companies. Nearly a trillion generic drug basic disk
Domestic drugs have always been generic drugs and innovative drugs are weak, and this pattern will continue for a long time in the future, that is to say, generic drugs will still be the basic plate of the domestic drug market for a long time.
According to the report information released by the China Pharmaceutical Industry Information Center, the scale of China's generic drug market in 2021 will be 906.9 billion, a year-on-year increase of 74%, even in the context of several years of centralized procurement + new crown epidemic, the market size of generic drugs still exceeds 900 billion; In 2022, the number of CDE generic drug registration applications will continue to grow, reaching 2,315, a year-on-year growth rate of 29%.
According to CICC data, the market size of China's generic CXO industry in 2022 will reach 20.6 billion yuan (including CRO and CDMO), a year-on-year increase of 205%。
The patent cliff of innovative drugs
Based on the huge and stable domestic fundamentals, with the arrival of the original drug patent cliff, domestic generic drug and CRO companies will also get new opportunities.
The patent protection period of innovative drugs is generally 20 years, and when the protection period expires, generic drugs will enter and seize the market at a lower level, that is, usher in the patent cliff. From the data point of view, the global blockbuster new drugs have been approved at an accelerated pace since 2000, and correspondingly, they will enter the patent cliff in 2020, and the number of new drugs with patent protection expiring will increase from 20 to 4 50 from 2024.
According to Evaluate Pharma, the global market size for patented drug expiration is expected to be around $63 billion in 2023.
Moreover, after the R&D capabilities of generic drug CXO companies have accumulated to a certain extent, they can also cut into the innovative drug track. For example, the number of innovative drug bioanalysis projects under development by Sunshine Novo exceeds 60. In the long run, the leading generic drug CXO companies have both stable business and certain growth.
Industry landscape
From the perspective of gross profit margin, the gross profit margin of generic CRO companies is at a high level, and in terms of overall sales gross profit margin in 2023Q1-3, Baicheng Pharmaceutical is 67%, Sunshine Novo is 56%, and Wanbang Pharmaceutical is 51%, and the gross profit level is at the forefront of the industry.
From the comparison of R&D expense ratios, Baicheng Pharmaceutical, Sunshine Novo and Wanbang Pharmaceutical are also in a leading position.
One
1. Baicheng Pharmaceutical
The company was listed in 2021, and judging from the announced results, the historical performance continued to grow steadily, with an increase of 38 in the first three quarters of 202374%。
From a risk perspective, the sum of cash flow from operating activities for three years: 8628%, excellent performance. Moreover, there is no pledge by major shareholders, no changes in the shareholding of senior management shareholders, no goodwill, and the overall performance is excellent.
From an operational point of view, the three-year average growth rate of operating income is 7999%；The three-year average growth rate of non-net profit after deduction: 7651%；Three-year average of return on equity: 1413%。The overall performance of the company's operating indicators is excellent.
One last look at the valuation, which is currently valued at 2705x PE-TTM, and the current P/E ratio is in the historically low average area.
2. Sunshine Promise
Sunshine Novo was also listed in 2021, and the historical performance announced was also sustained and stable growth, with an increase of 32 in the first three quarters of 202372%.
From a risk perspective, the three-year sum of cash flow from operating activities: 4180% with excellent performance; There is no pledge by major shareholders; Changes in executive shareholding in recent years: -201%；Goodwill value 291% is relatively small. The overall performance is good, and there is no major risk.
From an operational point of view, the three-year average growth rate of operating income is 5730%, deducting the three-year average growth rate of non-net profit: 6471%, excellent growth. Three-year average of return on equity: 1700% to meet the standard of excellent enterprise. The company's operating indicators are generally good.
Finally, looking at the valuation, the current valuation is 3731x PE-TTM, and the P/E ratio is in the historically low average area.
3. Wanbang Pharmaceutical
Wanbang Pharma is listed in 2023, and its historical performance is also sustained and stable growth, with an increase of 1217%。
From a risk perspective, the sum of cash flow from operating activities for three years: 8925%, excellent performance. Moreover, there is no pledge by major shareholders, no changes in the shareholding of senior management shareholders, no goodwill, and the overall performance of risk indicators is excellent.
Looking at the company's operation, the three-year average growth rate of operating income: 4634%, deducting the three-year average growth rate of non-net profit: 5970%, very good growth. Three-year average of return on equity: 2338%, reaching the level of excellent companies.
Finally, looking at valuations, the current rolling P/E ratio is 3475 times, in the historical average low area.
Fourth, summary
Based on the domestic trillion-dollar generic drug market, the generic drug CXO has a stable growth in historical performance and is not affected by overseas markets, and is facing the industry growth opportunities brought about by the patent cliff of innovative drugs.
However, it should be noted that most of the generic CXO companies are sub-IPOs that have only been listed in recent years, and the historical performance and valuation data announced are limited, and the authenticity and reference are weaker than those of other companies in the CXO industry.