Tasly Reports 2017 Net Profit of RMB 1.377 Billion, Up 17.01%, and Files IPO Prospectus for Shanghai Tasly’s Hong Kong Listing

VCBeat (WeChat ID: vcbeat) reported on March 26 that Tasly (600535), a leading listed pharmaceutical company, released its 2017 annual report on the evening of the 26th. The report showed that both its revenue and profit maintained double-digit growth in 2017.

Among them, the operating revenue was RMB 16.094 billion, a year-on-year increase of 15.41%; the net profit attributable to shareholders of the listed company was RMB 1.376 billion, a year-on-year increase of 17.01%. Meanwhile, Tasly announced its dividend distribution plan, distributing a cash dividend of RMB 4 for every 10 shares and issuing 4 additional shares for every 10 shares held.

Notably, Tasly has vigorously expanded its biologics portfolio, with its flagship product Puyouke experiencing rapid volume growth. The product generated nearly RMB 100 million in sales revenue, representing a year-on-year increase of 161.52%. It is poised to reshape the landscape of comparable thrombolytic agents and is expected to become another blockbuster product in Tasly’s cardiovascular and cerebrovascular therapeutic area. The financial report also disclosed that the company plans to spin off its biologics segment, Shanghai Tasly, for a listing on the Main Board of the Hong Kong Stock Exchange.

The annual report shows that Tasly's R&D expenses have increased significantly compared to 2016, reaching a new historical high. The annual report disclosed that the company invested 616 million yuan in independent research and development, accounting for 9.04% of its pharmaceutical industry revenue; other R&D methods achieved an investment of 577 million yuan, bringing the total R&D investment to 1.193 billion yuan, which accounted for as much as 17.5% of the pharmaceutical industry revenue. This represents a substantial increase of 4.5 percentage points from the 13% R&D expense ratio in 2016.

It is understood that companies in the traditional Chinese medicine (TCM) industry typically allocate 1%-2% of their revenue to R&D investment, with Tasly’s expenditure far surpassing that of other TCM enterprises. Across the entire pharmaceutical industry, the company ranks among the top five in terms of its R&D-to-sales ratio, establishing it as one of the pharmaceutical firms with the strongest R&D capabilities in China.

Benefiting from long-term R&D investment, Tasly’s research and development pipeline has become increasingly robust, with over 70 candidates in development, placing it among the industry’s top tier. Leveraging its “four-in-one” R&D model, the company has achieved comprehensive coverage of its innovative drug pipeline. Currently, there are 74 products under development across traditional Chinese medicine (TCM), biologics, and chemical drugs, including 20 new drugs classified as Class 1.1 chemical drugs and Class 1 biologics. Many blockbuster novel drugs in the chemical and biologic pipelines are progressively entering clinical trial stages.

Tasly’s drug pipeline in development is primarily focused on three therapeutic areas: cardiovascular and cerebrovascular diseases, digestive and metabolic disorders, and oncology, with the value of its innovative drug pipeline exceeding RMB 10 billion.

In the cardiovascular and cerebrovascular sector, PuYouKe, an already marketed product, is expected to launch new indications for stroke and pulmonary embolism in 2019 and 2021, respectively, and is projected to become a blockbuster drug with annual sales exceeding RMB 8 billion.

In the field of digestion and metabolism, the company boasts the most comprehensive product pipeline in China’s diabetes sector. Among these, Jianya Bio’s third-generation insulin is poised to become the first Chinese insulin product to enter the European Union market, a development that will reshape the domestic insulin market landscape.

In the field of tumor immunology, we keep pace with the latest advancements in anti-tumor therapies. Leveraging multiple technology platforms, including Saiyuan Biologics’ fully human antibody platform and GenesisCare’s oncolytic virus platform, we have advanced several product candidates into clinical development.

Overall, Tasly has established an industrialization platform for innovative drugs. It is foreseeable that, under favorable policy conditions and industry environments, Tasly’s continuous R&D investment and its “four-in-one” innovative R&D mechanism will provide long-term driving forces for its sustained growth and value discovery.

Tasly issued a formal response in its annual report to rumors regarding a spin-off listing, confirming that it will spin off its subsidiary, Shanghai Tasly, for an IPO in Hong Kong. According to multiple media reports, Shanghai Tasly’s valuation is the highest among recent companies planning to list in Hong Kong, such as Henlius and Hua Medicine.

Analysts believe that the biggest difference between Shanghai Tasly and other biopharmaceutical companies planning to go public is that it has a mature product, Puyouke. This drug achieved rapid growth in 2017, aligning with the conservative style of Hong Kong investors. According to an analysis by CITIC Securities, thanks to its outstanding clinical performance and the company’s strong commercialization capabilities, Puyouke will ensure high-speed growth for the company in the future as new indications are approved.

From a market performance perspective, biotechnology companies listed in Hong Kong have indeed enjoyed higher valuations than their A-share counterparts. According to statistics, the average price-to-earnings (P/E) ratio of profitable companies in the Hong Kong healthcare sector stands at 115x, whereas that of profitable firms in the A-share pharmaceutical and biological sector is only 80x, indicating a significant valuation disparity between the two markets.

Through the spin-off listing, the Company will reverse the long-standing undervaluation of its biologics segment and create greater shareholder value and investor returns by leveraging a more mature capital market valuation mechanism. Meanwhile, Tasly is actively coordinating internal and external resources to make every effort to secure a listing in Hong Kong.

With lenient listing requirements, higher valuations, and a predictable timeline, Shanghai Tasly’s planned IPO in Hong Kong may be “just around the corner.” Its listing will also generate a resource-aggregation effect for Tasly’s entire innovative drug segment, helping to build an internationally leading big biopharmaceutical platform.

According to the board resolution announced by Tasly (600535) on March 26, Mr. Yan Xijun voluntarily resigned from his position as a director of the listed company’s board of directors and assumed the role of Honorary Chairman of the company’s board of directors.

After 24 years of rapid growth, Tasly has evolved from a single technological achievement to a standalone product, and further into an entire industrial chain; starting with modern traditional Chinese medicine (TCM), it has developed into a coordinated synergy of modern TCM, biologics, and chemical drugs; transitioning from a previously singular business model, it has now established an integrated four-dimensional management model encompassing R&D, manufacturing, marketing, and investment. These achievements are the result of Tasly’s long-term internationalization strategy. As the strategy advances, Tasly is entering a new era of comprehensive globalization, with conditions for generational succession now mature.

For Tasly, which aims for comprehensive internationalization, a corporate governance structure that meets international standards is indispensable. Therefore, the number of directors with overlapping positions in the listed company from the controlling group has been reduced to create a more rational board composition. From an industrial perspective, a board with professional backgrounds is more conducive to formulating correct strategies. Consequently, directors specializing in marketing and investment were appointed during this term change, enabling the new board to feature a professional framework integrating four dimensions: R&D, production, sales, and investment.

Tasly’s new leadership has embraced the company’s development philosophy and possesses the capability to drive leapfrog growth. Centered on Mr. Yan Kaijing, the new generation of leaders aligns with the outstanding corporate values of the founding team, upholds the same corporate philosophy and culture, and steadily advances the strategic layout of Tasly’s broad biopharmaceutical sector in accordance with the established strategy. The Hong Kong listing of Shanghai Tasly serves as a testament to Chairman Yan Kaijing’s forward-looking strategic vision. Therefore, this transition from the old to the new leadership will create greater room for the company’s growth and facilitate the achievement of new leapfrog development.

Mr. Yan Xijun has been appointed as the Honorary Chairman of the Company, enabling him to continue contributing to the Company’s development from a shareholder perspective. He will focus on enhancing and developing Tasly Group’s big health industry chain, effectively managing Tasly Group’s major shareholders, Dishili and Guotai Liquor, ensuring comprehensive welfare benefits for Tasly’s founding contributors, and thereby empowering Tasly while alleviating its burdens. Additionally, in his capacity as a shareholder, he will continue to oversee and inspect the implementation and execution of the Board of Directors’ strategic plans, conduct evaluations, and serve as a driving force to encourage the management team to strive for more effective corporate governance and operations.