Every reporter Lin Zichen, every editor Wei Guanhong

Baiji China (688235JungleJackpotJaunt.SHJungleJackpotJaunt, share price 130JungleJackpotJaunt.77 yuan, market value 177.635 billion yuan) cast off Hengrui Pharmaceutical (600276.SH, share price 45.61 yuan, market capitalization 290.946 billion yuan), continue to sit firmly in the domestic innovation drug "number one" position.

After trading on April 26th, Baiji China released its 2023 annual report on A shares. The company achieved an annual operating income of 17.423 billion yuan, an increase of 82.13% over the same period last year; product income of 15.504 billion yuan, an increase of 82.8% over the same period last year; and a net profit of-6.716 billion yuan, compared with-13.642 billion yuan in the same period last year. The loss narrowed by about 51% year-on-year. The deduction of non-net profit was-9.682 billion yuan, compared with-13.824 billion yuan in the same period last year, and the loss narrowed by about 30% compared with the same period last year.

In terms of innovative drugs, the income gap between Baiji Shenzhou and Hengrui Pharmaceuticals has increased from 364 million yuan in 2022 to nearly 5 billion yuan; in terms of varieties, Baiyueze's annual sales have exceeded 10 billion US dollars for the first time to become a "blockbuster" drug, and Baize'an has also won the first domestic PD-1 overseas listing "ticket".

But new challenges also exist. In June 2023, Baiji China filed a patent infringement lawsuit against Baiyueze, its core product, and in July and September 2023, the company's TIGIT inhibitor Ociperlimab (osperizumab) and Baize's overseas rights and interests were "returned" by partner Novartis.

Baiyueze's revenue doubled, becoming the company's first blockbuster drug.

Baiji China said that the increase in operating income in 2023 was mainly due to the increase in sales of products in the core market, while the loss of net profit and deduction of non-net profit decreased compared with the same period last year. it is mainly due to the improvement of operating efficiency driven by the growth of product revenue and expense management.

From the product point of view, the company has a total of three independent research and development and approved for the market of drugs, respectively, for the treatment of a variety of blood tumors BTK inhibitor "Baiyueze" (Zebuteni capsule), for the treatment of a variety of solid tumors and blood tumors anti-PD-1 antibody "Baize" (tirelizumab), selective PARP1 and PARP2 small molecule inhibitor "Parkway" (Palmipari). Among them, Baiyueze and Baize an contributed 83.49% of the company's revenue in 2023.

Specifically, Baiyueze's operating income was 9.138 billion yuan, up 138.7% from the same period last year; Baize'an 's operating income was 3.806 billion yuan, up 33.1% from the same period last year; and Baihui Ze's operating income was 47.056 million yuan, up 32.14% from the same period last year.

Composition of Baiji's operating income in China in 2023

Photo Source: company's 2023 Annual report

According to the company's previous US stock performance report, Baiyueze's global sales in 2023 was $1.29 billion, an increase of 128.5% over the same period last year, officially joining the ranks of "blockbuster" drugs (drugs with annual sales of more than $1 billion). This is also the first "billion dollar molecule" independently developed by Baiji China.

In addition to the income from self-research and development of drugs, the income from Baiji's cooperation arrangement in 2023 was 1.919 billion yuan, an increase of 76.62% over the same period last year. However, the company signed an agreement with Novartis Pharmaceuticals in July 2023 to terminate the cooperation with Ociperlimab, an TIGIT inhibitor under development, and again in September of that year to terminate the cooperation with Bazeam.

Baiji Shenzhou did not explain the reasons for the two major contract changes in the announcement, saying only that the company had regained full global rights to develop, produce and commercialize the two products under development, without the need to refund the down payment previously received. According to the annual report, the termination of the cooperation between Osperizumab and Baze'an will affect the company's revenue by 910 million yuan and 396 million yuan respectively.

It is worth mentioning that although the company has a revenue scale of 10 billion yuan, it is still in a state of loss. In 2023, the company's homing net profit is-6.716 billion yuan, deducting non-net profit is-9.682 billion yuan, and the accumulated uncompensated loss is 57.688 billion yuan, resulting in large cumulative and persistent losses.

As of the end of 2023, Baiji China's cash and cash equivalent balance was 15.038 billion yuan, down 1/4 from 20.111 billion yuan in the same period last year. Based on the current business plan, Baiji China believes that there is sufficient cash and cash equivalents and itsJungleJackpotJauntHe claims to invest to meet the company's projected operational needs for at least the next 12 months, but may not be sufficient to enable the company to complete the global development or commercial launch of all drugs and drug candidates for all currently expected indications, as well as investment in additional projects. As a result, further funding may have to be raised in the future through public or private offerings, debt financing, cooperative and licensing arrangements or other sources.

De-CRO has been basically achieved and a CRO company was spun off in March.

According to the annual report, the sales cost of Baiji China in 2023 was 7.304 billion yuan, an increase of 21.80% over the same period last year, mainly due to continued investment in global commercialization during the reporting period; management expenses were 3.472 billion yuan, an increase of 28.80% over the same period last year, mainly due to the increase in costs brought about by the expansion of business scale and organizational structure. The R & D cost was 12.813 billion yuan, an increase of 14.90% over the same period last year, mainly due to the increase in R & D investment in clinical and preclinical drug candidates with the expansion of global R & D pipelines.

In order to cover preclinical research, global clinical trial operation, independent large-scale drug production and commercialization, Baiji China's expenditure seems to be difficult to brake, which is the main reason for the company's perennial losses. Baiji China has more than 10000 employees worldwide, mainly in the United States, China and Europe. By the end of 2023, Baiji China has developed more than 10 clinical drugs (including 3 commercially available self-developed molecules) and more than 50 preclinical projects on the biological research platform; the company has an international commercialization team of more than 3700 people, of whom more than 500 are located in North America and Europe.

Moreover, Baiji China's R & D investment and sales costs far exceed domestic comparable companies in the same industry. According to the 2023 annual report, the average R & D investment in the same industry is 1.571 billion yuan, and the average sales cost is 1.489 billion yuan. Baiji China's R & D investment and sales expenses are 8 times and 5 times of these two figures, respectively.

It can not be ignored that this may have something to do with the company's unique move to "go to CRO (third-party contract research institution)". Recognizing the importance of clinical trial activities to the industry and the challenges of outsourcing them to CRO, Baiji China has built an internal global clinical team of more than 3000 people, which has basically achieved de-CRO. At present, the company has conducted more than 130 clinical trials and enrolled more than 22000 subjects in about 45 countries and regions.

The reporter noticed that in March this year, Baiji China also dismantled a "CRO". According to the relevant announcement, in order to integrate and optimize the resource allocation and business objectives with the wholly-owned subsidiary Pi Health,Ltd. (referred to as "Pi Health Cayman"), Pi Health Inc. (referred to as "Pi Health") intends to absorb and merge the company's wholly-owned subsidiary Pi Health Cayman at a mutually agreed valuation of $41.7984 million, and the company will directly hold the corresponding equity in Pi Health. At the same time, Pi Health will bring in outside investors to promote its further operations in the development of software, analysis and research solutions in the health care industry.

Cover photo: photo by Liu Guomei, Daily Economic News