Huahai Pharmaceutical Invests $110 Million to Establish Subsidiary for Biologics R&D and Manufacturing

VCBeat (WeChat: vcbeat), April 25 – Huahai Pharmaceutical (600521.SH) announced this morning that it plans to invest RMB 800 million of its own funds to establish a wholly-owned subsidiary, entering the production and research and development of biologics.

Huahai Pharmaceutical isTop 10 Pharmaceutical Industrial Enterprises in Zhejiang Province, primarily engaged in the research and development, production, and sales of multi-dosage formulations, biologics, innovative drugs, and specialized active pharmaceutical ingredients (APIs).

Huahai Pharmaceutical

Huahai Pharmaceutical’s core product portfolio includes series for cardiovascular and cerebrovascular diseases, nervous system disorders, and antiviral treatments. Its main products include Losartan Potassium Tablets, Paroxetine Hydrochloride Tablets, Donepezil Tablets, Ropinirole Tablets, Lamotrigine Extended-Release Tablets, and Bupropion Extended-Release Tablets.The company’s main products hold leading market shares in their respective niche industries.

Huahai Pharmaceutical isOne of the Leading Enterprises in the Production of Active Pharmaceutical Ingredients (APIs) with Chinese Characteristics, its technical strengths in product R&D, patent expertise, and international registration, as well as its capabilities in international market development and sales, are all at the forefront domestically. The company’s API exports now cover 198 countries across five continents, serving over 430 clients, with a market share exceeding 60% in regulated markets.

Huahai Pharmaceutical's main active pharmaceutical ingredient (API) products cover cardiovascular and cerebrovascular, antidepressant, and antiviral categories, among which its production volume of "pril" class APIs ranks first globally, enjoying the "Puli Expert” reputation. Sartan active pharmaceutical ingredients (APIs) hold numerous first-supplier positions in regulated markets. The nervous system API business is also growing rapidly, becoming a new growth driver for the company.

Huahai Pharmaceutical leverages its integrated production capabilities spanning intermediates, active pharmaceutical ingredients (APIs), and finished dosage forms to vigorously expand its overseas generic drug business. ThroughAcquisition of Shouke Health(SOLCO), established an independent marketing channel, forming a well-known sales platform in the industry. According to IMS reports,Shouke Health has ranked among the top 10 fastest-growing companies in the U.S. generic drug industry for three consecutive years.Currently, Huahai Pharmaceutical has 22 products marketed in the United States, seven of which hold leading market positions. The company’s U.S. sales network covers more than 95% of generic drug purchasers.

Huahai Pharmaceutical's annual report shows,2016 operating revenue was RMB 4.092 billion, representing a year-on-year increase of 16.93% compared with 2015; in 2016, attributable to shareholders of the listed companyNet profit was 500 million yuan., representing a year-on-year increase of 13.19% compared to 2015. Additionally, historical data indicates that Huahai Pharmaceutical has maintained rapid growth in its operational performance for five consecutive years.

Annual report details indicate that the revenue contributions from Huahai Pharmaceutical's finished drug and active pharmaceutical ingredient (API) businesses are roughly equivalent; however, finished drug sales deliver a higher profit share and gross margin. By product:Revenue from sartan and prile active pharmaceutical ingredients (APIs) accounts for approximately 40% of its total revenue., contributing approximately one-third of the profits; by region, the revenue ratio between domestic and international markets is approximately 2:1, but international operations generate higher profits, accounting for 68%.

Huahai Pharmaceutical 2016 Annual Report: Business Segment Data

The annual report also mentioned that Huahai Pharmaceutical has implemented a high-end entry strategy in recent years, venturing into the biopharmaceutical sector, recruiting top-tier biotechnology talent, and accelerating the development of its biotechnology R&D platform. SuccessivelyEstablished Huabo and Huaoutai Biopharmaceutical Companies, completing the establishment of the bio-fermentation technology platform, the bio-antibody technology platform, and the gene library screening technology platform.

Huahai Pharmaceutical has established a wholly-owned subsidiary, tentatively named Huahai Biopharmaceutical Technology, with a registered capital of RMB 300 million. The subsidiary will primarily engage in businesses such as biotechnology development, technology transfer, and consulting services. Huahai Pharmaceutical stated that it has formed a biopharmaceutical R&D segment through Hua'ao Tai Bio and Huabo Bio.The establishment of Huahai Biology has enabled the company to form a complete industrial chain integrating R&D, production, and sales., laying a solid foundation for improving the product portfolio.

“Adopting a high-end entry strategy to venture into the biopharmaceutical sector; recruiting top-tier technical talent to establish a biotechnology R&D platform; and expanding into innovative biologics or generic drug businesses to achieve a breakthrough from ‘zero’,” stated Huahai Pharmaceutical in its investment announcement.