Luye Pharma: A Healthy Thirty Percent Annual Growth Rate, with Competitive Product Pipelines across Different Therapeutic Areas

One of China's leading pharmaceutical companies, Luye Pharma (02186. HK), released its annual results on March 26, 2018. The financial report shows that the company enjoyed strong growth last year, both in its domestic and international business, and that the development and launch of its new products in domestic and overseas markets is progressing smoothly.

In 2017, Luye Pharma achieved a total sales revenue of RMB 3.82 billion, an increase of 30.7% y-o-y; normalized EBITDA reached RMB1.49 billion, an increase of 30.6% y-o-y; normalized net profit attributable to shareholders reached RMB 1.06 billion, an increase of 19% y-o-y. In addition, the company improved its operation efficiency through effective control of its accounts receivable. Accounts receivable turnover decreased from 98 days in 2016 to 80 days in 2017, and the days' sale in inventory (DSI) decreased from 251 days to 150 days.

"2017 is an exciting year. With the combined efforts of our employees around the world, Luye Pharma has achieved outstanding performance and exceeded market expectations. Not only do the existing products continue to exhibit strong vitality, future pipelines are also welcoming policy opportunities and being constructed in an accelerated manner, in terms of registration and R&D. We believe that this high-speed growth momentum will continue with all business segments going hand in hand, especially with some of the breakthrough progress we expect from our overseas pipeline development", the management of Luye Pharma stated.

Highlights of 2017 Results 

1. Key Products

Domestic market- Rated within China's Top 20 Pharmaceutical Companies, the company has significantly outperformed the industry average in terms of growth.

According to IQVIA (formerly known as IMS) data, Luye Pharma's growth rate in 2017 reached 10.4%, significantly higher than the industry average of 3.3%. Luye Pharma has become one of China's top 20 pharmaceutical companies by sales revenue. Sales revenue is expected to be further boosted under the 2017 versions of China's National Basic Medical Insurance, Work-Related Injury Insurance and Maternity Insurance Catalogue (the ''Insurance Catalogue''), particularly for products like Beixi, Xuezhikang, and Oukai.

In 2018, the company will continue to implement a "channel deepening" strategy to further increase hospital coverage of Lipusu, expand sales networks for Beixi and Xuezhikang at the primary care level, and make the most of the "Insurance Catalogue update" opportunity to drive the annual sales revenue of its key products to over RMB 100 million each.

International Market-Leading position continues

Rivastigmine Patches continue to maintain their leading sales position in the United States and the European Union.

The company will actively seek further expansion in the European transdermal patch market, and strive for new market access by strengthening its cooperation with partners.

2. R&D Innovation - Significantly increase R&D investment and reduce time-to-market

Over the past one year, Luye has been actively responding to state policies which stimulate drug innovation. A large number of R&D projects have got underway with approximately RMB 100 million net increase in R&D expenses. At the same time, the company has been striving to accelerate regulatory reviews for its new drug candidates, while significant progress has been made in the field of new chemical entities (NCE), new drug delivery system (NDDS), and biological antibodies.

In terms of new chemical entities, Phase II clinical trials for the new anti-depressant Ansofaxine Hydrochloride Extended Release Tablets ('LY03005') have achieved positive results in China. Meanwhile, the clinical trial application for IDO/TDO dual-target inhibitors, the second application of such kind in China thus far, (LY01013) has been officially accepted by the CFDA. With respect to innovative drugs and formulations, Risperidone Extended Release Microspheres for Injection (LY03004) has been exempted from US pediatric clinical trials, and key clinical trials for Rivastigmine Multi-Day Transdermal Patches have been initiated in Europe. In terms of biological antibodies, Recombinant anti-VEGF humanized monoclonal antibody injection (LY01008) has entered into phase III clinical trials and Recombinant anti-RANKL whole human monoclonal antibody injection (LY06006) has entered into phase I clinical trials. In addition, the company has launched a series of R&D projects on the subject of biological antibodies, in collaboration with domestic and foreign partners.

3. Synergy Effect Achieved Through Overseas M&A

At the end of 2016, the company completed the acquisition of Acino's transdermal patch and implants business, and established a company in Europe. After more than one year of integration, the synergy effect of the business has taken shape.

In 2017, multiple patch products such as Buprenorphine patches and Rivastigmine patches were introduced into China, while the company started their local production and import registration applications. At the same time, the company is closely tracking other mergers and acquisitions opportunities at home and abroad, with the expectation of new asset injections and momentum for the company's business in 2018.

When asked about the business outlook for 2018, the management of the Group responded in full confidence, "We will reshape Luye Pharma's global strategy and implement strategic planning for our future pipelines. We will seek in-depth, scaled expansions for our already highly competitive new formulation technology platform, while accelerating the launch of existing products and investigational drugs in global markets. We will also work on technological transformation and upgrades, in particular, product pipeline building in a number of innovation areas, such as target antibodies, protein drugs, tumor immunotherapy, cellular therapy, and smart & precision drug delivery systems. We will strengthen our competitive advantage in the international market through M&As and partnerships, achieving overall leapfrog development."

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