三生制药(01530) - 2018 - 年度财报

Company Overview 3S Bio is a leading Chinese biopharmaceutical company focused on biotech product R&D, manufacturing, and marketing, with market-leading core products and a robust pipeline 2018 Core Product Market Share | Product | Therapeutic Area | 2018 China Market Share (%) | | :--- | :--- | :--- | | TPIAO | Thrombocytopenia | 65.3% | | Yisaipu | TNF-α Inhibitor | 64.0% | | rhEPO products (Epiao/Saibao) | Erythropoietin | 41.0% | - The company boasts a strong R&D pipeline, with 32 pipeline products as of December 31, 2018, including 22 National Class 1 new drugs and 22 biologics[5] - The company maintains an extensive sales network, distributing products to approximately 17,000 hospitals and medical institutions nationwide and employing over 5,000 staff as of late 2018[6] Company Information This section provides essential company details, including registration information, board and committee members, principal place of business, share registrar, auditor, and legal advisors - The company's Board of Directors comprises executive, non-executive, and independent non-executive directors, with an Audit Committee, Remuneration Committee, and Nomination Committee established under it[8] - Ernst & Young is the company's auditor[9] Financial Highlights This section summarizes the company's key financial data from 2014 to 2018, demonstrating continuous growth in revenue, gross profit, EBITDA, net profit, and asset size Five-Year Financial Highlights (RMB thousands) | Metric | 2014 | 2015 | 2016 | 2017 | 2018 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 1,130,854 | 1,673,126 | 2,797,289 | 3,734,334 | 4,583,869 | | Gross Profit | 1,043,373 | 1,431,215 | 2,395,021 | 3,058,099 | 3,706,614 | | EBITDA | 399,528 | 660,705 | 1,144,383 | 1,476,817 | 1,892,824 | | Net Profit | 291,728 | 526,230 | 714,254 | 924,404 | 1,277,246 | | Profit Attributable to Owners of the Parent | 291,728 | 526,280 | 712,564 | 935,389 | 1,277,167 | | Total Assets | 2,306,441 | 6,630,432 | 11,038,802 | 13,752,971 | 13,839,655 | | Total Equity | 943,592 | 5,635,465 | 6,766,342 | 7,629,646 | 8,907,370 | Chairman's Report Chairman and CEO Dr. Lou Jing highlights strong 2018 growth, significant R&D progress, and strategic international partnerships that enrich the product portfolio and support global expansion - In 2018, total sales of the company's core commercial products, TPIAO, Yisaipu, Epiao, and Saibao, increased by approximately 22.7%, with TPIAO sales growing over 71%[12] - Significant R&D advancements include 302H (Septrin) receiving priority review for its new drug application, Yisaipu pre-filled syringe completing Phase III trials, long-acting rhEPO product NuPIAO obtaining Phase II/III clinical approvals, and anti-PD1 antibody 609A receiving US FDA IND approval[12] - The company actively pursued international collaborations with Toray, Refuge, Samsung Bioepis, Verseau, and TLC, enriching its commercial and pipeline product portfolios[13] Management Discussion and Analysis Business Review This section reviews significant business developments in 2018, including new product launches, R&D milestones, strategic collaborations, and industry recognition, while outlining future prospects amidst healthcare reform Significant Events and Post-Reporting Period Events In 2018 and post-reporting period, the company achieved multiple key milestones, including new product approvals, strategic partnerships, and significant R&D advancements - In January 2018, Bydureon, China's first weekly GLP-1 receptor agonist, received NMPA approval and launched in May[14] - The company established strategic collaborations with several international companies, including Toray for anti-pruritic drug TRK-820, Refuge for cell therapy, Samsung Bioepis for biosimilars (e.g., SB8 bevacizumab), Verseau for immuno-oncology antibodies, and TLC for liposomal products[14][15][17][18] - Key R&D pipeline progress includes clinical trial approvals for TPIAO pediatric ITP indication, NuPIAO (long-acting EPO), and new indications for anti-VEGF antibody (601A)[15] - Post-reporting period, anti-PD1 antibody 609A received US FDA IND approval, demonstrating the company's global R&D capabilities[17] Key Products This section details the market performance and growth drivers of the company's four core products and key licensed-in products, highlighting their market leadership and future growth potential - TPIAO (rhTPO), the world's only commercialized recombinant human thrombopoietin, experienced rapid sales growth after its inclusion in the 2017 National Medical Insurance Catalog, with estimated penetration rates of 20% to 24% in China for CIT and ITP indications, indicating significant growth potential[19] - Yisaipu (Etanercept) maintains a dominant position in the Chinese market with a 64.0% market share, and its pre-filled syringe formulation, having completed Phase III trials, is expected to be submitted for production approval in the first half of 2019, enhancing patient convenience[20][21] - Epiao and Saibao (rhEPO) product portfolio continues to lead the Chinese market, with future growth driven by increased dialysis penetration and expanded applications in CIA and perioperative surgery[22] - The diabetes product line has been strengthened by the introduction of GLP-1 receptor agonist Byetta and the long-acting weekly formulation Bydureon, offering more treatment options for Type 2 diabetes patients[23] Pipeline Products and R&D Platform The company operates a comprehensive R&D platform from drug discovery to clinical trials and registration, with 32 pipeline products as of late 2018, including 22 National Class 1 new drugs, covering oncology, autoimmune, and nephrology Pipeline Products Overview (As of Dec 31, 2018) | Therapeutic Area | Number of Pipeline Products | | :--- | :--- | | Oncology | 11 | | Autoimmune and Others | 12 | | Nephrology | 6 | | Metabolic | 2 | | Dermatology | 1 | | Total | 32 | - The company's R&D platform boasts strong comprehensive capabilities, covering the entire process from antibody discovery to clinical trials and registration, supported by an R&D team of over 330 scientists[27][31] - Key pipeline product progress: - 302H (Septrin): New drug application for HER2-positive metastatic breast cancer received priority review from the NMPA - NuPIAO (SSS06): Second-generation long-acting rhEPO, obtained Phase II/III clinical trial approvals - 602 (Anti-EGFR Antibody): Completed Phase I trials, with plans for late-stage clinical trials in colorectal cancer - 601A (Anti-VEGF Antibody): New clinical approvals for three ophthalmic indications, with patient enrollment ongoing for neovascular AMD trials[28][31] Sales, Marketing, Distribution, and Outlook The company possesses an extensive sales network covering over 16,000 hospitals nationwide, and anticipates benefiting from healthcare reforms by enhancing market penetration, advancing R&D, and pursuing strategic collaborations for long-term growth - As of late 2018, the sales network covered over 2,000 tertiary hospitals and more than 14,000 secondary or lower-tier hospitals and medical institutions[32] - The company anticipates benefiting from medical reform policies supporting innovative drugs and plans to sustain long-term growth by enhancing product penetration, advancing R&D, leveraging its approximately 38,000-liter antibody production capacity, and seeking strategic collaborations[33][34] Financial Review In fiscal year 2018, the company demonstrated strong financial performance with total revenue increasing by 22.7% to RMB 4.58 billion, driven by core product sales, particularly TPIAO, leading to a 36.5% rise in profit attributable to owners of the parent and improved financial stability Revenue, Cost, and Gross Profit In 2018, the company's total revenue reached RMB 4.584 billion, a 22.7% year-over-year increase, primarily driven by strong sales of core products, resulting in a gross profit of RMB 3.707 billion with an 80.9% gross margin 2018 Key Product Sales and Growth (RMB millions) | Product | 2018 Sales (RMB millions) | Year-over-Year Growth Rate (%) | | :--- | :--- | :--- | | TPIAO | 1,669.5 | 71.3% | | Yisaipu | 1,111.4 | 9.7% | | Epiao and Saibao | 896.6 | 4.8% | | Total Revenue | 4,583.9 | 22.7% | - Gross margin slightly decreased from 81.9% in 2017 to 80.9%, primarily due to the consolidation of lower-margin Humulin promotion service revenue[39] Operating Expenses and Profitability In 2018, the company's sales and distribution expenses increased by 26.9% to RMB 1.691 billion, while administrative expenses remained stable, and R&D expenses significantly rose, contributing to a 36.5% increase in profit attributable to owners of the parent - R&D expenses significantly increased by approximately 41%, from RMB 257 million in 2017 to RMB 363 million in 2018[43] 2018 Profitability Metrics (RMB millions) | Metric | 2018 | 2017 | Year-over-Year Growth (%) | | :--- | :--- | :--- | :--- | | EBITDA | 1,892.8 | 1,476.8 | 28.2% | | Normalized EBITDA | 1,781.8 | 1,445.5 | 23.3% | | Profit Attributable to Owners of the Parent | 1,277.2 | 935.4 | 36.5% | | Normalized Net Profit | 1,166.1 | 904.0 | 29.0% | Liquidity and Capital Resources The company maintained strong liquidity with RMB 1.15 billion in net cash generated from operating activities in 2018, significantly reducing its leverage ratio to 11.2% through loan repayments, and anticipates RMB 1.2-1.4 billion in capital expenditures over the next three years for capacity expansion - Net cash inflow from operating activities was approximately RMB 1.15 billion[49] - The leverage ratio (total borrowings/total equity, excluding convertible bonds) significantly decreased from 28.0% at the end of 2017 to 11.2% at the end of 2018, primarily due to loan repayments[51] - Capital expenditures are projected to be between RMB 1.2 billion and RMB 1.4 billion over the next three years, primarily for maintaining existing facilities and expanding production capacity[53] Key Risks and Uncertainties The company faces significant risks from intense market competition, potential exclusion from national/provincial medical insurance catalogs, unsuccessful provincial tenders, improper promotional activities, R&D failures, and unfulfilled M&A/collaboration benefits, all of which could adversely impact sales, profitability, and business prospects - The company faces intense competition from domestic and international pharmaceutical companies, some of which may possess greater resources[55] - The company's sales and profitability are highly dependent on its core products being included and retained in national and provincial medical insurance catalogs[56] - New drug development is characterized by long cycles, high costs, and low success rates, with R&D failures potentially adversely affecting the company's long-term competitiveness[58] Directors and Senior Management This section provides detailed backgrounds and résumés of the company's Board of Directors and senior management team, highlighting their extensive expertise in pharmaceuticals, finance, and law, and their leadership in drug development and operations - The executive director team is led by Dr. Lou Jing (Chairman and CEO), a co-founder of the company, and includes Mr. Tan Bo (CFO), Ms. Su Dongmei, and Mr. Huang Bin, all playing pivotal roles in the company's development[61][62][64] - The senior management team includes Dr. Zhu Zhenping, President of Drug R&D and Chief Scientific Officer, who has led the discovery and early development of multiple successfully launched anti-tumor antibodies[72] Board Report This report presents the Board's formal statement on the company's business and financial position for the year ended December 31, 2018, covering statutory disclosures such as principal business, performance, dividend policy, key customers and suppliers, share capital changes, equity-linked agreements, share repurchases, convertible bond issuance, and connected transactions - The Board does not recommend the payment of a final dividend for the year ended December 31, 2018[79] - As of the end of 2018, sales to the top five customers accounted for 18.1% of total revenue, with the largest single customer accounting for 5.7%; the top five suppliers accounted for 38.7% of total purchases[82] - During the reporting period, the company repurchased a total of 4,730,000 shares on the Stock Exchange for a total consideration of approximately HKD 46.27 million, reflecting management's confidence in the business outlook[118][119] - The EUR 300 million zero-coupon convertible bonds issued by the company in 2017 remain outstanding, with net proceeds partially used for loan repayment, M&A, and R&D; approximately RMB 1.183 billion of the bond proceeds remained unutilized as of the end of 2018[121][122] Corporate Governance Report This report details the company's corporate governance practices and compliance with the Corporate Governance Code for 2018, outlining the Board's structure, responsibilities, and operations, including the roles of Chairman and CEO, director appointments and training, and the functions of the Audit, Nomination, and Remuneration Committees - The company's Chairman, Dr. Lou Jing, also serves as Chief Executive Officer, an arrangement the Board believes ensures consistent leadership direction and is subject to periodic review[159] - The Board has established an Audit Committee, Nomination Committee, and Remuneration Committee, all chaired by or predominantly composed of independent non-executive directors to ensure independence and professionalism[171][175][178] 2018 Board and Annual General Meeting Attendance | Director | Board Meetings Attended / Eligible | Annual General Meeting Attended | | :--- | :--- | :--- | | Executive Directors | | | | Dr. Lou Jing | 4/4 | 1/1 | | Mr. Tan Bo | 4/4 | 0/1 | | Ms. Su Dongmei | 4/4 | 1/1 | | Mr. Huang Bin | 4/4 | 1/1 | | Non-Executive Directors | | | | Mr. Liu Dong | 4/4 | 0/1 | | Mr. Wang Dasong | 4/4 | 0/1 | | Independent Non-Executive Directors | | | | Mr. Pu Tianruo | 4/4 | 1/1 | | Mr. David Ross PARKINSON | 4/4 | 1/1 | | Mr. Ma Jun | 4/4 | 1/1 | - The Board confirms its responsibility for the company's risk management and internal control systems, having reviewed their effectiveness for 2018 and deeming them effective and adequate[185][186] Independent Auditor's Report Ernst & Young, as the company's independent auditor, issued an unqualified opinion on the consolidated financial statements for the year ended December 31, 2018, affirming their fair presentation and compliance with IFRS and Hong Kong Companies Ordinance, while highlighting key audit matters related to impairment of indefinite-lived intangible assets and goodwill - The auditor issued an unqualified audit opinion on the company's consolidated financial statements for the year 2018[199] - Key audit matters include: 1. Impairment of other intangible assets with indefinite useful lives: Involves significant judgments and estimates regarding growth rates, royalty rates, and discount rates 2. Goodwill impairment: Involves assessing complex assumptions related to future cash flow forecasts, profit margins, and discount rates for cash-generating units[201][203][204] Consolidated Financial Statements Consolidated Statement of Profit or Loss For the year 2018, the company achieved revenue of RMB 4.584 billion, a 22.7% year-over-year increase, with gross profit reaching RMB 3.707 billion, leading to a 38.2% increase in profit for the year to RMB 1.277 billion, of which RMB 1.277 billion was attributable to owners of the parent 2018 Consolidated Statement of Profit or Loss Key Data (RMB thousands) | Item | 2018 | 2017 | | :--- | :--- | :--- | | Revenue | 4,583,869 | 3,734,334 | | Gross Profit | 3,706,614 | 3,058,099 | | Profit Before Tax | 1,495,511 | 1,102,017 | | Profit for the Year | 1,277,246 | 924,404 | | Profit Attributable to Owners of the Parent | 1,277,167 | 935,389 | | Basic Earnings Per Share (RMB) | 0.50 | 0.37 | Consolidated Statement of Financial Position As of December 31, 2018, the company's total assets were RMB 13.84 billion, largely stable year-over-year, with non-current assets increasing and total liabilities decreasing due to loan repayments, resulting in an optimized asset-liability structure and increased total equity 2018 Consolidated Statement of Financial Position Key Data (RMB thousands) | Item | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | Assets | | | | Total Non-current Assets | 9,402,122 | 8,476,755 | | Total Current Assets | 4,437,533 | 5,276,216 | | Total Assets | 13,839,655 | 13,752,971 | | Liabilities and Equity | | | | Total Current Liabilities | 1,655,541 | 2,195,809 | | Total Non-current Liabilities | 3,276,744 | 3,927,516 | | Total Liabilities | 4,932,285 | 6,123,325 | | Total Equity | 8,907,370 | 7,629,646 | Consolidated Statement of Cash Flows In 2018, the company generated a robust RMB 1.15 billion in net cash from operating activities, while investing activities resulted in a net outflow of RMB 406 million, and financing activities saw a net outflow of RMB 1.39 billion primarily due to significant loan repayments, leading to a year-end cash and cash equivalents balance of RMB 1.79 billion 2018 Consolidated Statement of Cash Flows (RMB thousands) | Item | 2018 | 2017 | | :--- | :--- | :--- | | Net Cash Flows from Operating Activities | 1,150,251 | 1,074,098 | | Net Cash Flows Used in Investing Activities | (405,912) | (643,215) | | Net Cash Flows (Used in) / From Financing Activities | (1,389,678) | 1,317,732 | | Net (Decrease) / Increase in Cash and Cash Equivalents | (645,339) | 1,748,615 | | Cash and Cash Equivalents at Year-End | 1,792,605 | 2,398,621 | Environmental, Social and Governance Report Corporate Social Responsibility Management This section outlines the company's social responsibility philosophy, governance structure, and stakeholder engagement, emphasizing its mission to benefit human health, its ESG working group, and its recognition for social contributions in 2018 - The company established an Environmental, Social, and Governance (ESG) working group, led by the Board Office and Public Relations Department, to enhance ESG management performance[502] - Through stakeholder engagement, high-priority issues were identified, including product and service quality, compliance operations, anti-corruption, innovative operations, employee health and safety, and employee rights and benefits[505][510] Compliance Operations The company prioritizes compliance as a fundamental safeguard for development, establishing a robust risk management system, compliance management policies, and employee codes of conduct, reinforced by training, integrity programs, and a whistleblowing system to ensure ethical and transparent operations - The company integrates compliance management into employee performance evaluations through a Compliance Integrated Performance Card (IPCA) and continuously promotes a culture of integrity via its "Integrity Ambassador Program"[516][518] - In 2018, 184 offline compliance training sessions were conducted, reaching 7,487 participants, primarily focusing on sales center employees[518] - The company has established a whistleblowing system with public hotlines and email addresses, committing to protect whistleblowers[522] Environmental Protection Responsibility The company is committed to environmentally sustainable operations, implementing a GMP-compliant environmental management system, and employing measures such as equipment upgrades, energy-efficient lighting, waste heat recovery, and wastewater recycling to conserve resources and ensure pollutant emissions meet or exceed standards - The company has established a comprehensive environmental management system, with its subsidiary 3S Bio-Guojian obtaining ISO14001:2015 certification and Zhejiang Wansheng passing clean production audits[525] - Through measures like wastewater treatment and reuse, the company achieved 5,385 cubic meters of recycled water in 2018, used for landscaping and other purposes[528][530] - The company manages waste by classification, with non-hazardous waste handled by sanitation departments or qualified agencies, and hazardous waste regularly processed by qualified institutions[536] Product and Customer Service Responsibility The company prioritizes product quality and patient well-being, maintaining a comprehensive quality control system across all processes, a robust pharmacovigilance system, continuous R&D investment in 32 pipeline products, and a customer service system with recall mechanisms to ensure product safety and customer satisfaction - The company has established a comprehensive quality control system, with all pharmaceutical subsidiaries certified under China's 2010 GMP standards[541] - The company operates a pharmacovigilance center with a robust system for collecting, processing, and reporting adverse drug reactions to ensure drug safety[543] - As of late 2018, the company had 32 pipeline products covering five major therapeutic areas, including 22 National Class 1 new drugs in China[551] - In 2018, the company experienced no product recalls due to quality defects and no confirmed incidents of customer data breaches[557][558] Supply Chain Responsibility The company is committed to building a responsible and sustainable supply chain, managing suppliers from sourcing to delivery through comprehensive policies that emphasize compliance, quality, safety, and environmental protection, and enhancing supplier evaluations in environmental, labor, and ethical aspects - The company categorizes suppliers into four types and requires Type I, II, and III suppliers to sign a "Supplier Compliance Statement," committing to adhere to legal, ethical, social, and environmental standards[566][567] - In 2018, the proportion of suppliers assessed for environmental, labor, and ethical aspects increased from 9.2% to 45%[567] Employee Development Responsibility The company values employees as core resources, ensuring legal employment practices, protecting employee rights in compensation, promotion, leave, and benefits, strictly prohibiting discrimination, child labor, or forced labor, and providing career development opportunities through a comprehensive safety management system and a three-tier training program - The company has established a comprehensive equity incentive mechanism, granting equity to senior management, middle management, and core employees (accounting for 6% of total staff) to align company and employee interests[574] - The company established a Production Safety Management Committee, with all production bases certified as National Production Safety Standardization Level 3 enterprises, and regularly conducts safety training and emergency drills[582] - The company has implemented a comprehensive 3S training system covering all employees and launched internal trainer programs like "Jiangshan Team" to promote continuous learning and development among staff[586][588] Social Contribution Responsibility The company actively fulfills its corporate social responsibility through drug donations, public welfare projects, patient communication platforms, and education, enhancing access to medicines and healthcare services, while also supporting medical research and industry advancement 2018 Key Philanthropic Donation Project Progress | Project Name | Partner Organization | 2018 Progress | | :--- | :--- | :--- | | "Guarding Happiness" Bethune • TPIAO | Beijing Bethune Philanthropic Foundation | Donated drug value RMB 8.86 million, covering 3,758 patients | | "Yi + Hope" Bethune • Yisaipu | Beijing Bethune Philanthropic Foundation | Donated drug value RMB 71.91 million, covering 22,794 patients | | "Love Reaches the Heart" Diabetes Patient Aid | China Primary Health Care Foundation | Newly covered 2,174 individuals, donated drug value RMB 43.38 million | - The company has established multiple doctor-patient communication platforms, such as "Red All Over China" and "Yi You Tong," to provide patients with information management, popular science education, and medical consultation services[594] - The company actively supports industry development, participating in the compilation of various expert consensuses and guidelines, and supporting research projects such as the "Liaoyuan Plan" and the "Chinese Nephrology Young Physician Research Fund"[601][604]