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Tonghua Dongbao 2021 results: Net profit attributable to parent up 40.69% YoY
Date：2022-04-20
Author：東寶
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On the evening of April 18, Tonghua Dongbao Pharmaceutical Co., Ltd. (stock code: 600867, hereinafter referred to as "Tonghua Dongbao" or the "Company") released its annual report for 2021.
In 2021, the revenue hit RMB 3.268 billion, up 12.99% YoY, the net profit attributable to owners of the parent company grew 40.69% YoY to RMB 1.308 billion, and the net profit attributable to shareholders of the listed company, excluding non-recurring gains and losses, rose 15.68% YoY to RMB 1.105 billion. The basic earnings per share (EPS) was RMB 0.64, and the weighted average return on net assets increased by 4.36 percentage points to 22.08%.
New products exhibited strong growth with increasing profitability
While further extending its presence both in breadth and depth to county-level and primary hospitals, the Company actively increases sales to tertiary hospitals and enhances its market share in urban hospitals, with the successive launch of insulin glargine and insulin aspart. During the reporting period, the Company achieved rapid growth in sales of insulin products. In particular, the sales of insulin analogs increased by more than 200% YoY. Among these products, insulin glargine is still in its early rollout stage and has been approved for use in more than 3,800 secondary and above hospitals across China. Since it was approved for marketing in October 2021, insulin aspart has been quickly adopted by hospitals nationwide and has started to contribute to sales revenue. In addition, the Company has seen steady growth in revenue from human insulin products and further expansion of market share.
Due to a larger proportion of high-margin products and the scale effect brought by revenue growth, the Company's profitability continues to climb, with the consolidated gross profit margin increasing by 2.73 percent points YoY to 82.38% and the net profit margin increasing by 7.88 percent points to 40.04%.
Increasing investment in innovation and R&D and venturing into more therapeutic areas
The Company has intensified its efforts to strengthen its innovation and R&D capabilities. It has revitalized its stock assets and improved asset utilization in an effort to turn itself into an innovative pharmaceutical company. Over the past year, its R&D spending reached RMB 380 million, up 56.37% YoY. The Company is developing cutting-edge target therapies with an extensive range of indications to treat more diseases. Given the vast unmet medical needs, the Company expands the indications of several of its products beyond diabetes to other diseases such as obesity and non-alcoholic steatohepatitis (NASH). Meanwhile, it expands its therapeutic areas of interest to other endocrine metabolic diseases such as gout/hyperuricemia.
During the reporting period, the Company launched three Class 1 novel drugs for diabetes and two Class 1 novel drugs for gout/hyperuricemia. Among them, the SGLT1/SGLT2/DPP4 triple-target inhibitor and the URAT1 inhibitor (THDBH130/131) have been approved for clinical trials. The first subject has been enrolled in the phase I clinical trial for the former drug, and the first subject for the later drug is expected to be enrolled in the near future. To date, the Company has filed dozens of international & domestic patent applications for Class 1 novel drugs.
While stepping up R&D in the diabetes care segment, the Company has continuously enriched and optimized the portfolio of products under development, making every effort to accelerate the R&D process and make it more efficient. It has made significant headway in the R&D of a number of products. During the reporting period, three products of the Company were approved for marketing, namely, insulin aspart injection, sitagliptin phosphate tablets, and sitagliptin metformin tablets; the NDA applications for insulin aspart 30 and 50 injections, repaglinide tablets, and empagliflozin were accepted; the ultra-rapid-acting insulin lispro injection was approved for parallel phase III and phase I clinical trials; BC Combo (the only co-formulation that combines long-acting insulin glargine and rapid-acting insulin lispro so far) was approved for clinical trials by the Center for Drug Evaluation (CDE) of the China National Medical Products Administration (NMPA) and the Federal Institute for Drugs and Medical Devices (BfArM) in Germany in March and April 2022, respectively.
Improving corporate governance and accelerating the talent pipeline
In 2021, the Company improved its governance structure, laying a firm foundation for high-quality development. The Company has been introducing and cultivating talent to improve the overall strength of its talent team. Now it has a team of young market-oriented professional managers, forming a modern corporate management model with 9 functional/business centers working together. The Company continues to improve the multi-level and multi-modal incentive mechanism that combines long-term and short-term schemes, and reform the performance appraisal and incentive mechanism for middle and senior management. It has also enhanced its adoption of IT to become more digital across the board. It implements a modern management system and continuously improves operational efficiency to ensure steady business growth in the new phase of development.
Distributing dividends of more than RMB 3 billion over the past decade and making multiple share buybacks to reward shareholders
The Company attaches great importance to the interests of shareholders and keeps up with the tradition of rewarding shareholders with high dividends, declaring a cash dividend of RMB 3.00 (including tax) per 10 shares, for a total payment of approximately RMB 600 million in 2021. In the past 10 years, the Company distributed more than RMB 3 billion in dividends in total. The dividend payout ratio has never been lower than 40% since 2011.
In addition, the Company has completed two rounds of share buybacks since the beginning of 2021. In the first round, it bought back approximately RMB 120 million of shares as equity incentives for employees, and in the second round, it bought back about RMB 260 million of shares and canceled them. In March 2022, the Company bought back at most RMB 360 million of shares again to reward shareholders. This demonstrates the management's confidence in future business development and its determination to improve shareholder returns.
Actively fulfilling social responsibility and obtaining many corporate honors
During the reporting period, Tonghua Dongbao, a leading insulin manufacturer in China, implemented green procurement and production policies for energy conservation and emission reduction. It also raised employees' awareness of environmental protection. In terms of social responsibility, the Company carried out a range of public welfare academic activities to help grassroots physicians improve their professional skills. During COVID-19, it donated a load of supplies, called on the employees to actively participate in pandemic prevention and control, and did its utmost to prevent and control the spread of the virus. The Company strengthened corporate governance, protected the rights and interests of employees and built a platform for their growth and development, and improved the corporate governance structure and internal control system. It won a number of honors and awards in 2021 in terms of ESG, R&D strength, technological innovation and investment value, and earned wide recognition from all walks of life.
2022: Staying true to the original aspiration and forging ahead
What's past is prologue. In 2022, the Company will continue investing in innovation and R&D and accelerating the R&D process to turn itself into an innovative pharmaceutical company. Valuing both in-house R&D and external cooperation, it will keep improving the efficiency of innovation, R&D, and corporate governance, and, at the same time, seek cooperation with high-quality partners. It will conduct extensive exchanges with universities, medical institutions, and research institutes to enhance its core competitiveness across the board.
In terms of commercialization, the Company will accelerate the adoption of insulin analogs by and increase their sales to public hospitals nationwide, and step up efforts to tap into retail channels and private hospitals. Relying on its superb product quality, after-sales services, and brand influence, it will expand into incremental markets to further boost product sales and increase its market share. In 2022, Tonghua Dongbao will stay true to its original aspiration and overcome all difficulties to write a new chapter for the Company's future development.
