I. Overview
(1) Review of Industry Development During the Reporting Period
1. Industry Development
According to data from the National Bureau of Statistics (NBS), in the first half of 2020, China's total GDP amounted to 45,661.4 billion yuan RMB. It decreased by 1.6% year-on-year.
From January to June 2020, industrial enterprises above designated size nationwide realized operating revenues of RMB 46,309.33 billion, a year-on-year decrease of 5.2%, and total profits of RMB 2,511.49 billion, a year-on-year decrease of 12.8%.
In terms of the pharmaceutical manufacturing industry, from January to June 2020, China's pharmaceutical manufacturing industry realized operating income of RMB 1,109.39 billion, down 2.3% year-on-year, and realized total profit of RMB 158.6 billion, up 2.1% year-on-year. China's pharmaceutical economy continues to maintain a stable development trend.
The pharmaceutical industry is one of the most important components of the national economy, and plays a very important role in protecting and promoting people's health and improving their quality of life, as well as in family planning, disaster relief and epidemic prevention. In recent years, with the supply-side reform in the field of medicine and health care continued to promote the introduction of various medical policies, the state's supervision of the pharmaceutical industry is also being strengthened. Supply-side reform in the field of medicine and health care is a systematic change, for the stock market will have a far-reaching impact, in the long run, this will certainly bring about the continued optimization of the industrial pattern, the industry concentration continues to improve, accelerating import substitution, accelerating China's pharmaceutical industry to the direction of the generic drug powerhouse and innovative drug country to move forward.
Vaccines are an important area of the pharmaceutical industry and are recognized as a powerful weapon against infectious diseases. At present, the concentration of the domestic vaccine industry is still relatively low compared with foreign countries. According to the China Food and Drug Administration Research Institute data show that China's local vaccine manufacturers total about 32, there are 4 (including) more than 4 kinds of vaccine products approved and issued by only 5 companies, accounting for only 16%, 19 vaccine companies have only 1 vaccine varieties, accounting for 59%. The landing of the Vaccine Management Law will further accelerate the vaccine industry as a whole in the direction of better and safer, and effectively protect the lives and health of the people.
After the outbreak of the new crown pneumonia epidemic in the first half of this year, the world's major pharmaceutical companies and research institutions have been involved in the research and development of the vaccine, according to the World Health Organization, there are more than 200 new crown vaccine research and development around the world, of which more than 20 have entered the clinical stage.
From the history of human response to the epidemic to today's human understanding of the virus, the vaccine is still the fundamental strategy to defeat the new crown virus, countries around the world have put the development of vaccines in an important position. China has set up a scientific research team at the beginning of the epidemic, the first time the vaccine research and development into the key work to be prioritized for support. At present, China has a number of new crown vaccine products in different stages of clinical research.
In the first half of 2020, the State Drug Administration *** approved 13 domestic biological products, 11 of which are approved manufacturers of the product for the first time approved for listing (5 vaccines, monoclonal antibody 2, insulin 2, blood products 1, combined with in vivo diagnostics 1). At the same time, the first half of the State Drug Administration also approved 11 imported biological products, of which 9 for the approved manufacturers of the product for the first time in the domestic market.
2, 2020 January-June related vaccine product approval and issuance
2020 January-June, the national vaccine approval and issuance of a total of about 280 million doses, of which, the total number of non-immunization planning vaccine approval and issuance of about 113 million doses.
From January to June 2020, the number of Hib vaccines approved and issued nationwide was approximately 4,667,474 doses, representing an increase of 37.20% over the same period of last year; the number of AC conjugate vaccines approved and issued was approximately 3,232,188 doses, representing a decrease of 37.08% over the same period of last year; the number of AC polysaccharide vaccines approved and issued was approximately 21,130,586 doses, representing an increase of 33.59%; the number of approvals and issuances of ACYW135 Polysaccharide Vaccine was approximately 3,720,059 doses, representing an increase of 79.43% over the same period last year; the number of approvals and issuances of PPT vaccine was approximately 31,416,512 doses, representing an increase of 35.92% over the same period last year; and the number of approvals and issuances of 23-valent Pneumonia Vaccine was approximately 5,360,534 doses, representing an increase of 90.08% over the same period last year; The approved and issued quantity of 13-valent Pneumococcal Conjugate Vaccine was approximately 3,347,656 doses, representing an increase of 356.52% as compared with the same period of last year. The approval and issuance of the above products are as follows:
Approval and issuance of Hib vaccine
Approval and issuance of AC Conjugate Vaccine
Approval and issuance of AC Polysaccharide Vaccine
Approval and issuance of ACYW135 Polysaccharide Vaccine
Approval and issuance of Pepsin Vaccine
Approval and issuance of 23-valent Pneumonia Conjugate Vaccine
(B) Overview of the Company's operation
1, the main operating conditions during the reporting period
During the reporting period, under the guidance of the overall development strategy, the Company effectively implemented the annual plan and budget and business objectives, strictly controlled product quality, gave full play to the advantages of product brand and product quality, and increased market development efforts. During the reporting period, the sales revenue of the Company's self-produced vaccine products realized a large growth. in the first half of 2020, the Company achieved a total operating income of 573,455,400 yuan, an increase of 14.57% year-on-year, and realized net profit attributable to shareholders of the listed company of 61,491,100 yuan, a decrease of 27.60% year-on-year.
In the first half of 2020, Yuxi Watson, a subsidiary of the Company, was granted a total of 22,145,193 doses (bottles) of products, representing an increase of 25.58% over the same period of the previous year, and the number of approved and issued products of Yuxi Watson's seven listed products (nine product specifications) are as follows:
During the reporting period, the Company focused on its advantageous resources, and made every effort to push forward the development of each product under development, which has already been in the key stages of clinical research and industrialization, to the fullest extent possible. During the reporting period, the Company focused on its advantageous resources to push forward the research and industrialization progress of each product under development which was already in the key stage of clinical research and industrialization.
On January 10, 2020, the Company received the Drug Registration Approval for 13-valent Pneumonia Conjugate Vaccine issued by the State Drug Administration (SDA), the first batch of the product received approval and issuance on March 30, and the first injection was achieved on April 22, 2020 The Company's bivalent HPV vaccine completed its Phase III clinical study and obtained the Clinical Trial Report in April 2020, and received the Acceptance Notice for the declaration of production of the bivalent HPV vaccine on June 15, and the relevant assessment work for the declaration of production of the vaccine is currently underway. The nine-valent HPV vaccine is currently undergoing phase I clinical trial. The new coronavirus mRNA vaccine developed by the Company in cooperation with its partner *** Tong received the Drug Clinical Trial Approval Document approved by the State Drug Administration in June 2020, and is currently conducting Phase I clinical trials.
The Company's other products in clinical research and preclinical research phase of the research and development of products continue to advance as planned. (For details of the progress of the R&D projects of the Company's products, please refer to the section "Details of the Company's products in the registration and declaration stage" in this section)
During the reporting period, although the impact of the international epidemic brought greater challenges to the Company's international sales business, the Company has actively adopted a variety of ways to continue to strengthen the development of new markets in the international arena. The Company has actively adopted various methods to continuously strengthen the development of new international markets, and carried out online cooperation negotiations with customers in many national markets for its products. At the same time, the company continued to prepare for the WHO pre-certification of the products, continuously consolidated and improved the international registration system, overcame the slow progress of the audit due to the epidemic, postponed the on-site audit and other practical difficulties, and made up for the progress of some of the registered projects. On the other hand, we continued to strengthen communication and exchange with international organizations such as the Gates Foundation to promote the company's pre-export business and products. Following its subsidiary Yuxi Watson's purchase order of AC polysaccharide vaccine from the Egyptian Ministry of Health in 2018, the Company has been steadily supplying the Egyptian Ministry of Health's vaccine products for its national Expanded Program on Immunization (EPI) for three consecutive years. Meanwhile, the Brain Flux Tetravalent Polysaccharide Vaccine has been awarded a purchase order by the Ministry of Health of Indonesia for the fourth consecutive year for the vaccination of the pilgrimage population in Mecca. As of the end of the reporting period, the company's products have been exported to 13 countries.
The company has a modernized biotechnology drug production base in Yuxi National High-tech Industrial Development Zone, Yunnan Province, with global advanced production line equipment and plant facilities. The completed HPV vaccine industrialization production workshop is designed and constructed according to WHO pre-certification standards and other prevailing international standards, and its industrialization technology level, equipment engineering technology level and industrialization scale are all at the leading level in China, which lays a solid hardware foundation for the industrialization of the Company's HPV vaccine. During the reporting period, the company's vaccine international preparation center construction project is designed and constructed in accordance with international standards, at present, the construction of the project has been completed, and the validation work is underway, after the completion of the project, it will undertake the production task of exporting the company's products such as rheumatic encephalitis vaccine and pneumonia vaccine to the international market. At the same time, the company will carry out intelligent operation analysis and risk monitoring through the in-depth integration of automated control of equipment and facilities and informatization management of production quality to build a smart factory, which is dedicated to the construction of a monitoring system from the entry of raw and auxiliary materials into the company to the whole process of production and quality management, the whole process of cold-chain logistics, and up to the monitoring system of inoculation to each inoculator, so as to realize the intelligent management and traceability of the whole life cycle of each vaccine and to build a "smart factory". The company's goal is to realize the intelligent management and traceability of the entire life cycle of each vaccine, and to build "Digital Watson, Intelligent Watson, and Smart Watson".
2, work outlook
In sales, the company will actively promote the 13-valent pneumonia conjugate vaccine, 23-valent pneumonia vaccine, Hib vaccine, represented by the company's own production of vaccines, marketing and sales business, and at the same time, the use of professional academic promotion, brand marketing and other ways to explore the market potential of the product. We will continue to strengthen international cooperation, intensify cooperation and communication with international organizations such as the Gates Foundation, strive to expand the international market, and actively promote the registration and exportation of products in overseas markets, so as to continuously promote the implementation of the company's comprehensive internationalization strategy.
In production, we pay close attention to product production and quality management, improve production efficiency through refined management, ensure stable supply of products to the market, and at the same time, accelerate the implementation of WHO pre-certification of the company's products to lay a solid foundation for the bulk export of products.
In terms of new product research and development and new product industrialization, we focus on our advantageous resources to push forward the declaration of production and listing of bivalent HPV vaccine, and at the same time, we further accelerate the progress of clinical research and industrialization of the nine-valent HPV vaccine, recombinant EV71 vaccine, ACYW135 Group Meningococcal Polysaccharide Conjugate Vaccine, and a new type of coronavirus vaccine, etc., so as to ensure seamless integration of clinical research and declaration of production of our products, and the early realization of the clinical research and production of our products. The clinical research and industrialization progress of recombinant EV71 vaccine, ACYW135 group meningococcal conjugate vaccine, new coronavirus vaccine, etc. will ensure the seamless connection between clinical research and production reporting of the products, and the early realization of the product market.
In terms of management, the Company will continue to adjust internal development factors and optimize resources to improve resource utilization. Strengthen team building and talent cultivation, enhance functional specialization, and continue to improve the effective incentive and assessment mechanism. At the same time, the Company will continue to take budget management as the core grip, standardize expenses, cut costs, strengthen internal control and system process construction, and enhance the Company's management level.
Second, the company faces risks and countermeasures 1, the risk of research and development of products in the research and development of drugs have a certain degree of research and development risk, the higher the degree of innovation of the product, the greater the risk of its research and development, and a good balance of the relationship between innovation and risk prevention is very important for the future development of the company. In order to effectively reduce the risk of R&D, the Company will prudently select R&D projects and continue to carry out R&D work in strict compliance with the rules and requirements of drug R&D at all stages of drug R&D, fully balance the relationship between innovation and risk, scientific assessment, early identification, control and reduction of risk. 2、Policy Risk In recent years, the development of the pharmaceutical industry has advanced by leaps and bounds, and the state's supervision of the pharmaceutical industry has also been strengthened. Drugs from research and development to clinical, from production to circulation until after the products are listed in the regulatory requirements are greatly enhanced, the entire industry is also progressing, companies need to quickly meet and adapt to the new requirements, objectively making the policy risk increase. In the face of ever-increasing policy requirements and industry needs, the company is also constantly improving its own standards, take the initiative to change, stand in the forefront of the industry, respond to market demand, in the whole industry chain are to higher standards on their own strict requirements to ensure that the company has always been proactive, to fully reduce the risk caused by policy changes. 3, the challenge of increased market competition The company's current listed products are non-exclusive varieties, each variety has competing manufacturers, followed by new manufacturers to join the traditional vaccine market is becoming increasingly competitive, all of which will adversely affect the company's product market share and sales prices. In order to cope with this challenge, the company will continue to accelerate the progress of new product development and industrialization, take the initiative to achieve product upgrading, strengthen the quality awareness, and increase efforts to build a high-quality brand image of Watson's products, to maintain and enhance the advantages of the company's products in the market competition. 4, the risk of adverse drug reactions There is an objective risk of adverse drug reactions. According to China's "Adverse Drug Reaction Reporting and Monitoring Management Measures" definition: adverse drug reaction, refers to qualified drugs in the normal dosage of harmful reactions unrelated to the purpose of medication. For vaccines, abnormal reaction to preventive vaccination belongs to adverse drug reactions, and the Vaccine Management Law stipulates that: abnormal reaction to preventive vaccination refers to the adverse drug reaction that causes damage to the tissues, organs and functions of the body of the vaccinee in the course of or after the implementation of standardized vaccination of a qualified vaccine, and all parties concerned are not at fault. If adverse reactions (including coupled reactions) occur after the use of medicines, and if they cannot be disposed of in a timely manner in accordance with the law, it may lead to distrust of the Company's products by the media and consumers, which may affect the sales of the products in the slightest case and jeopardize the Company's reputation in the industry in the most serious case. In order to cope with and control the risk of adverse drug reactions, the Company, on the one hand, establishes a perfect quality management system in the whole process of product research and development, production and marketing in strict accordance with the requirements of the Drug Administration Law, Vaccine Administration Law and Chinese Pharmacopoeia, etc., to ensure that qualified, safe and effective medicines are delivered to the end-users; on the other hand, the Company, in accordance with the new national "Regulations on the Administration of Vaccine Circulation and Preventive Inoculation," the Measures for the Administration of Reporting and Monitoring of Adverse Drug Reactions", the company has formulated the system and plan for emergency treatment of adverse drug reactions and improved the organizational mechanism in order to reduce the risk of adverse drug reactions. 5, the risk of drug quality On the one hand, the production process of drugs is complex and wide-ranging, especially for biological products, on the other hand, biological products have higher requirements in circulation than ordinary drugs, even if each link strictly follows the existing standardized guideline documents for the production and circulation of various types of production, objectively there is still the probability of unqualified products. In order to prevent this risk, the company carries out industrialization research at the stage of clinical research of new products, solves the problem of process stability in large-scale production, and minimizes the risk of drug quality. At the same time, the subsidiary has set up a special Risk Management Department, which adopts scientific risk management techniques and methods for risk identification, prevention and control in the process of production management and quality management, and implements risk-based management for the whole production process. 6, accounts receivable risk Vaccine industry end customers are all over the district and county CDC, there are more cost approval process, payment cycle is longer, due to accounts receivable occupies the company's more funds, if not recovered in a timely manner, may affect the company's cash flow, such as the formation of bad debts will cause losses to the company. However, the procurement funds for vaccine products of CDC belong to the government budget, and the risk of recovery of accounts receivable is relatively small. The Company will take active measures to strictly control the amount and recovery period of accounts receivable to reduce the risk of accounts receivable. 7. Risk of the impact of the new coronavirus pneumonia epidemic Since January 2020, the new coronavirus pneumonia epidemic has widely affected most regions and industries at home and abroad, and the recent situation of the new coronavirus pneumonia epidemic outside the country is still severe, and the company's international sales business is facing a greater challenge, which is expected to have an impact on the company's operation in 2020 and the progress of the promotion of the internationalization strategy. If the severe situation of overseas epidemic persists, the Company also has the risk that the procurement of some imported raw and auxiliary materials for production will be affected. The company will closely track and evaluate the new coronavirus pneumonia epidemic outside the country, adjust the operational arrangements in a timely manner, and take a variety of measures to ensure that the production and operation of the work carried out in a safe and orderly manner, in an effort to minimize the adverse impact of the epidemic on the company's production and operation.
Third, the core competitiveness of the analysis 1, with the world's two major vaccine varieties After years of cultivation and precipitation, the company now has a 13-valent pneumonia conjugate vaccine and HPV vaccine two of the world's largest sales of vaccine reserve varieties of the heavyweight. Among them, 13-valent Pneumonia Conjugate Vaccine has been produced and marketed; Bivalent HPV Vaccine has been declared for production and obtained the Acceptance Notice, and at present, the technical review of the declared production of Bivalent HPV Vaccine is in progress, and Nine-valent HPV Vaccine is now carrying out the Phase I clinical trial. The new coronavirus mRNA vaccine developed by the Company in cooperation with its partner *** Tong received the Drug Clinical Trial Approval Document approved by the State Drug Administration in June 2020, and is currently undergoing Phase I clinical trial. The Company's recombinant EV71 vaccine has received the Notice of Clinical Trial and is now in the clinical research stage. In addition, the Company has a number of vaccine products in different stages of clinical research or preclinical research, such as ACYW135 Group Meningococcal Polysaccharide Conjugate Vaccine and Herpes Zoster mRNA Vaccine developed in cooperation. With the progress of R&D and registration of each product, it will provide stable support for the company's performance when it is listed in the future. 2、Industry-leading R&D technology platform with excellent innovation capability The company has built R&D technology platforms for traditional vaccines and new vaccines, and possesses process/quality research and development facilities covering functions ranging from molecular biology, biochemistry and immunology to pharmacological screening of animals, as well as clinical sample production bases in compliance with GMP standards. The company and its subsidiaries have a number of national technology platforms, including national high-tech enterprises, nationally recognized enterprise technology centers, national innovative pilot enterprises, international science and technology cooperation bases, national demonstration bases for high-tech industrialization, and national engineering practice and education centers, etc. The company has undertaken a number of national "Major New Drug Creation" and national "8.0" science and technology special projects and has also undertaken a number of national "8.0" and "9.0" projects. It has undertaken the research and development work of a number of national "Major New Drug Creation" and national "863 Program" projects, as well as dozens of provincial and municipal scientific research projects. As of the disclosure date of this report, the company and its subsidiary **** have 62 domestic and foreign invention patents authorized, and dozens of patents are still in the application stage. 3, high standards, strict requirements of the production quality management system and industrialization capabilities in line with the international advanced level The company has a number of vaccine products approved for marketing, the vaccine quality indicators reach or higher than the World Health Organization regulations and the European Pharmacopoeia, in a number of key indicators, the company formulated the enterprise registration standards reach or higher than the European Pharmacopoeia of the corresponding provisions. The Company has built a high-standard, large-scale and modernized vaccine production base in Yuxi, Yunnan Province. The completed production bases include the production bases for bacterial vaccines such as Hib vaccine, influenza series vaccine, pneumonia series vaccine, and adsorbed cell-free combined vaccine against DPT. The completed HPV vaccine industrialization production workshop is designed and constructed according to WHO pre-certification standards and other prevailing international standards, and its industrialization technology level, equipment engineering technology level and industrialization scale are all at the leading level in China, which lays a solid hardware foundation for the industrialization of the Company's HPV vaccine. The company's vaccine international preparation center construction project in accordance with international standards for the design and construction, the project has completed the construction, is in the process of validation work, the completion of the project will undertake the company's flu vaccine series and pneumonia vaccine series of products exported to the international market of the production tasks. The company will carry out intelligent operation analysis and risk monitoring through the in-depth integration of automated control of equipment and facilities and information management of production quality to build a smart factory, and is committed to building a complete data chain from the entry of raw and auxiliary materials into the company, to the whole process control of production quality and monitoring of the whole process of cold-chain logistics, and then to the vaccination of each recipient and monitoring, so as to realize the intelligent management and traceability of the whole life cycle of each vaccine and to build a "smart factory". We will realize the intelligent management and traceability of the whole life cycle of each vaccine, and build "Digital Watson, Intelligent Watson, Intelligent Watson". The company has formed a stable product R&D team and has professional teams in preclinical research, drug registration, clinical research management, industrialization, product sales and company management, etc. The company's core team not only has profound knowledge and experience, but also has the ability to develop and develop new products. The core team of the company not only has profound professional foundation and ability, but also has rich experience in the field, which has become a solid talent foundation for the development of the company. The company's core management team consists of entrepreneurial teams from several major national biological research institutes and professional teams with backgrounds in overseas multinational corporations, with excellent innovation capabilities. The company has more than 100 doctoral and master's degree holders, and nearly 10 high-end returnee scientists. Through the establishment of "Watson Academy", the company has intensified its internal talent training efforts, enriched its management cadres, and taken the responsibility of cultivating key talents in various business fields required by the company. Since its establishment, Watson Academy has completed a number of talent training programs, effectively enhancing the business and management capabilities of employees at all levels of the company. Looking into the future, Watson Academy will provide solid support for the company's strategic implementation through its continuous deepening of talent cultivation in the company.