India Epidemic And Cdmo Business? Decoding The Fluctuation Logic Of Manulife

Recently, India's epidemic situation has been repeated, and the change of API market pattern caused by it has become the focus again.

India is a major supplier of APIs in the world. According to the public data, India and China are the two largest markets of API supply in the world, with the exception of the United States accounting for 35% of the global industrial chain. The two markets together account for about 21% of the global industrial chain, accounting for 12% and 9% respectively. Their position in the global API industry chain is very critical.

Affected by the Indian epidemic, prior to A-share API concept stocks raised the limit tide, among which chemical pharmaceutical, new crown detection and other sub sectors of the rise ranked first. In the past two weeks, the secondary markets of listed companies such as manuva, mutual pharmaceutical and Tonghe pharmaceutical were trading. However, the relevant plate or random fluctuations, recently domestic characteristic raw material drug export leader Novartis closed down for three consecutive trading days. It opened on May 11 and continued to fall.

India's epidemic situation ignites API Market?

Raw material drugs refer to the raw materials used for the production of various preparations. They are the active ingredients in the preparations, and the various powders, crystals and extracts prepared by chemical synthesis, plant extraction or biotechnology, but can not be taken directly by patients.

In March 2020, shortly after the outbreak of the new crown outbreak, India announced restrictions on the export of 26 active pharmaceutical ingredients (API) and related drugs, including many essential raw materials for the manufacture of cold medicines, such as paracetamol, tinidazole, erythromycin, clindamycin, etc.

As one of the world's major raw material drug exporters, India's move has cast a shadow over the global war.

From the perspective of industrial structure, at present, China's export of bulk API accounts for a large proportion, occupying the upstream of the industrial chain, mainly supplying 68% of the bulk API in the Indian market. India is mainly characterized by API, occupying the middle reaches of the industrial chain. In terms of products, Indian raw materials are mainly anti infective, cardiovascular, central nervous and respiratory fields, of which anti infection and cardiovascular accounted for more than 50%.

Under the epidemic situation, from the perspective of India's main export products, the raw material drugs are greatly affected. The epidemic situation has limited the production of API in India. In addition, travel restrictions imposed by other countries on India will lead to a short-term supply gap in the global API market. As a necessary material for pharmaceutical industry, the demand for API is rigid. Under the gap between supply and demand, it is expected that the global price of API will remain high.

Novartis is one of the most outstanding enterprises of characteristic API in China, and also one of the enterprises with the largest number of exports to Europe and the United States. Its core business is the R & D, production and sales of its own intermediates and APIs, the integration of API preparations and cdmo, and is mainly engaged in export business to overseas markets. Due to the quality advantages of API in line with GMP standards of EU, Japan and China, and the large-scale cost advantage supported by six production bases, Manulife has formed a high brand awareness and competitive advantage in the characteristic API segmentation industry, and gradually established its leading market position.

However, some industry analysts told reporters of the 21st century economic report that the rising logic of API represented by minocycline Huawei had been hyped for a round as early as last year. India is not the main producer of API, and its advantages are more in preparations. The aggravation of the epidemic situation in India is logically negative for API. Tonghe Pharmaceutical Co., Ltd. also rose sharply last year. However, its 2020 annual report shows that overseas revenue is 47 million, accounting for 10.00% of the total revenue, with a year-on-year decrease of 22.93%. The domestic revenue was 420 million yuan, accounting for 90.00% of the total revenue, with a year-on-year increase of 6.74%.

According to the research report released by Soochow securities on April 20, the strategic adjustment of the business structure of Novartis will be driven by high value-added cdmo and preparation business in the future; The effect of API preparation integration is obvious, and cdmo business provides the breakout point for the company's performance.

The root cause of this round of hype on Novartis is cdmo. According to the annual report of Novartis in 2020, its main business is characteristic API, API cdmo, pharmaceutical products and trade, accounting for 79.78%, 10.18%, 6.28% and 3.45% of its revenue respectively.

Will cdmo business meet "turning point"?

Novartis announced on April 23 that it has recently signed a 10-year strategic business cooperation agreement with the subsidiary of MSD, intelway International Co., Ltd. The two sides decided to jointly establish a long-term and stable cdmo partnership in the fields of pet medicine, veterinary medicine and animal health care. Relying on a stable and high-quality API quality control system and efficient and reliable R & D technology, Minolta will provide R & D, registration, production and supply services for MSD.

Cdmo is a kind of outsourcing service of drug R & D and production, which is widely used in the production of small molecule drugs and biological drugs. However, before that, the production mode of cdmo has not been started in China's vaccine field.

The cdmo mode of vaccine is firstly vaccine R & D and enterprise's vaccine design and early research and development, which can be self-produced in pre clinical and clinical production stages and commissioned by cdmo enterprises for clinical production, and then the vaccine registration and declaration by the person in charge of vaccine marketing license. After the registration and approval of vaccine production, the marketing licensors can entrust part or all of the production capacity to the vaccine cdmo enterprises.

Menova said that in 2020, the company overcame the impact of the epidemic situation, strengthened the core and advantageous industries, featured API and intermediate business, further expanded and extended the API preparation integration business and cdmo business based on its competitive advantages and customer resources in the field of characteristic API, improved the industrial chain layout and fully expanded the integration advantages, Provide strong power for the follow-up development of the company.

According to the annual report of Novartis in 2020, the company made great efforts to expand the API cdmo business, achieving a revenue of 121.5496 million yuan, an increase of 64.52 million yuan or 113.13% over the same period of last year. The business of characteristic API, API cdmo and preparation business increased significantly, with an increase of 111.71 million yuan or 10.77% year-on-year; As a business supplement module, the role of pharmaceutical circulation business was weakened, and the income decreased significantly. The revenue was 41 million yuan, with a year-on-year decrease of 70.52%. According to the 2020 annual report, the main business gross profit contribution of Minova is mainly the characteristic API business. During the reporting period, the sales revenue of API cdmo business increased by 113.13% over the previous period, forming a new profit growth point of the company.

Zhu Guoguang's team of medical research of Soochow Securities believes that the cdmo business of Novartis will usher in an inflection point in 2021: in 2020, the cdmo revenue of Novartis will reach 122 million yuan, with a year-on-year growth of 113.13%, accounting for about 10% of the company's total revenue. At the same time, according to the company's announcement, by the end of 2020, the number of customers cooperating with cdmo will exceed 100 and the number of service items will reach 175, which will be greatly increased compared with the first half of 2020. At the same time, according to the company's plan, by 2025, the proportion of cdmo business in the revenue structure will increase to 30% - 50%, and the corresponding revenue scale will exceed 1 billion yuan. It is expected that the company's cdmo business will continue to accelerate from 2021.