Sihuan Pharmaceutical Announces 2020 Interim Results

HONG KONG, Aug 25, 2020 – (ACN Newswire) – Sihuan Pharmaceutical Holdings Group Ltd. (HKEX: 0460 “Sihuan Pharmaceutical” or the “Company”, together with its subsidiaries, the “Group”) is pleased to announce its interim results for the 6 months ended 30 June 2020 (the “Period”).

Financial Summary

Under the influence of pharmaceutical policies and COVID-19 during the Period, the Group recorded a revenue of approximately RMB1,054.5 million, representing a year-on-year decrease of 36.4%. Gross profit amounted to approximately RMB786.1 million, decreased 42.4% year-on-year. Gross profit margin is 74.5%, decreased 7.9 p.p. from the same period last year. The lower gross profit margin was resulted from decreased sales of drugs which had better profit margin but were captured in the Key Monitoring Drug List during the Period. Profit attributable to owners of the Company for the Period amounted to approximately RMB170.5 million.

During the Period, revenue from CCV products recorded approximately RMB609.6 million, decreased 58.0% year-on-year, accounting for 57.8% of the Group’s total revenue. The sales decline was mainly due to the drop in patient flow in hospital during the COVID-19 pandemic and products exclusion from PRDL and NRDL starting from the second half of last year.

Revenue from non-CCV products sharply by 114.6% year-on-year to approximately RMB444.9 million, accounting for 42.2% of the Group’s total revenue. This sales growth was mainly attributable to the group’s strong sales platform, hospital coverage has sharply increased.

The Group maintained strong financial position during the Period, with net cash of approximately RMB4,336.0 million recorded as at 30 June 2020. The Group’s net cash-to-equity ratio is 50.3%, and debt-to-equity ratio is 7.1%.

An interim cash dividend of RMB0.1 cents per share and special cash dividend of RMB3.0 cents per share were declared by the Board.

Strategic planning

The Group values the development of innovative drug R&D center, generic drug R&D center and high-quality production enterprises as its core: During the Period, innovative drug R&D center Xuanzhu Biopharmaceutical spun off and became independent. WIth the support of the Group, it is able to quickly develop innovative drugs that are differentiated, effective and safe, and with global intellectual property rights, therefore achieves the goal of solving the huge and unmet clinical needs in oncology, metabolic diseases and anti-infective field, etc. Jilin Huisheng Biopharmaceuticals, a biopharmaceutical R&D center, is committed to building a full product-line platform in the field of diabetes, covering products from biosimilar insulin products to oral preparations and compound preparations. It is actively introducing other varieties and plans to become an independent spin-off and get listed in the future. Beijing Aohe Research Institute, a generic drug R&D center which has very mature technology, and is looking for varieties with high-tech barriers in APIs, dosage forms, and preparation processes in key therapeutic areas for R&D process. In addition, Beijing Sihuan, Jilin Sihuan, Jilin Jinsheng and other manufacturing companies will rely on their high-efficiency, low-cost, modern production lines for unique formulations and dosage forms and experienced production technical teams. The Group’s superior sales teams will support the above-mentioned companies, and quickly promote product commercialization. As a result, Sihuan Pharmaceutical will thus become a group which integrates production, sales, and research.

Innovation-driven, imitation and creation co-exist

Significant progress has been made in multiple R&D platforms that are carefully incubated by the Group. Xuanzhu Biopharmaceutical is one of the few domestic innovative drug companies that have a complete R&D industry chain, and with more than ten innovative products, mainly covering oncology, diabetes, metabolic diseases, digestive system, male reproduction, anti-infection and other fields for product line R&D layout. Some of the products have already entered their late clinical stage. The key product Birociclib, a CDK4/6 inhibitor for advanced breast cancer, has successfully carried out multiple clinical trials. Another blockbuster product, Janagliflozin, an SGLT-2 inhibitor for the treatment of diabetes, can reduce blood sugar while protecting the heart and kidneys, and has entered clinical phase III and is expected to bring hope to patients in China. Biopharmaceutical R&D platform, Jilin Huisheng Biological Co., Ltd. focuses on the treatment of diabetes and complications, covering biological drugs and chemical drugs, and has a comprehensive product pipeline. Currently, the products under research include insulin and its analogues, GLP-1 analogues and oral solid preparations. In addition, Beijing Aohe Generic Drug R&D Center, a generic drug R&D platform has obtained many product approvals: rivastigmine hydrogen tartrate capsule and levetiracetam tablets have obtained pharmaceutical production approval, midazolam oromucosal solution has been granted drug registration, ibuprofen injection has been granted production approval, and the paediatric compound amino acid injection (18AA-II) also obtained drug registration approval.

At the same time, the Group is actively enhancing international business cooperation through investment and mergers and acquisitions, with businesses covering multiple therapeutic areas with huge clinical needs. In 2020, the Group became equity investment partners with Zhongrui and Chempion to ensure the stable supply of the Group’s related preparations and raw materials and strengthen the Group’s R&D capabilities in high-tech barrier raw materials, continuous flow processes, and enzymatic processes. The Group also reached a cooperation framework agreement with HETETO, India to cooperate in the R&D of high-end generic drugs in the field of cardiovascular and cerebrovascular, central nervous system and anti-infection.

Focus on the rapid developing therapeutic fields, lay out the investment and optimization of APIs

Oncology, diabetes, metabolic, non-alcoholic hepatitis and other diseases have become the fastest growing therapeutic areas in global pharmaceutical market, especially in China pharmaceutical market. The Group focuses on products layout in these areas, including independently developed innovative products, biosimilars and generic drugs with huge clinical demand.

On the premise of ensuring science and quality, the Group will reduce operating and production costs, especially the in investment and optimization of APIs, so as to increase the competitiveness and product profits of future products, and thus to create greater value. The Group also values the unique sales model and marketing network which have rich experience, high performance and extensive hospital coverage, as well as a multi-dimensional international business cooperation platform.

Dr. Che Fengsheng, Chairman and Executive Director of Sihuan Pharmaceutical Holdings Group said, “Sihuan Pharmaceutical values innovative drug R&D center, generic drug R&D center and high-quality manufacturing companies as its core value, supplemented with investment, mergers, incubation, holdings, spin-offs, etc., for a group of independently operating subsidiary companies. The Company will realize the initiative of each sub-enterprise through the introduction of capital, CMO and other independent operations, and to improve the efficiency and competitiveness of Sihuan Pharmaceutical, therefore adapt to MAH and a series of policy changes and industry competition patterns. At the same time, the Company will help the subsidiaries to be able to land in the capital market soon, also add value to the parent company. This dual approach of strategic planning and core values will enable Sihuan Pharmaceutical to focus on global level, focus on the pharmaceutical field, and form the most competitive, international and professional pharmaceutical group enterprise.

Future prospects

With regard to existing products on sale, the Group will continue to improve the evidence-based research system, promote key products to be included in the diagnosis and treatment guidelines, and evaluate the launched exclusive and major products. At the same time, giving full play to the advantages of diversified product structure, actively promote products in the growth period through refined market management, and strengthen the Group’s pipeline layout and market advantages in the fields of cardiovascular, oncology and diabetes, and establish a sustainable drug product line. The group will also increase its resources for drug R&D projects and establish a sustainable drug product line, adjust the product structure through mergers and acquisitions and international cooperation. In order to enrich the project resources and optimize the product portfolio continuously, domestic and overseas mergers and acquisitions will be the Group’s sustainable strategy to provide short-, medium- and long-term growth engines. Several products are expected to be launched on the market in the next year or two, including leading generic drugs, such as midazolam oromucosal solution and rivastigmine hydrogen tartrate capsule, specialty drugs, such as quetiapine fumarate SR tablet, and innovative drugs, such as Janagliflozin and Anaprozole sodium.The Group also conforms to policies and market trends, seizes policy opportunities, studies and judges market development directions, focuses on business synergy and resource integration, accelerates the cultivation of new businesses, and continuously improves the Group’s core competitiveness by adjusting the business structure and encouraging model innovation. Under the assistance of the Group’s experienced, high-performance, and comprehensive hospital coverage professional sales team and marketing network, and under the leadership of an international management team, Sihuan Pharmaceutical will steadily enhance its competitive advantage in the pharmaceutical industry.

About Sihuan Pharmaceutical Holdings Group Ltd.
Founded in 2001, Sihuan Pharmaceutical is a pharmaceutical group with 21 subsidiaries and integrated R&D, production and marketing and sales capabilities. It is one of the China’s largest suppliers of cardiovascular and cerebrovascular prescription drugs. Sihuan Pharmaceutical integrates production, R&D, and marketing. It has an excellent and professional marketing model, a nationwide distribution network, and a diversified product portfolio with great market potential. The Group continues to increase investment in R&D every year. Because of the continuing efforts over the past decade, Sihuan Pharmaceutical has a R&D platform with over 1,000 researchers conducting more than 110 pharmaceutical research projects currently. More than 300 patents on innovative drugs were granted in China and over 80 are PCT patents, covering pipeline projects including important areas of diabetes, oncology, anti-infectives and non-alcoholic steatohepatitis etc.

For more information about Sihuanpharm, please visit the company website https://www.sihuanpharm.com/.

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