Zhitong Finance App learned that on August 14, Dongyao Pharmaceutical-B (01875) announced its 2023 interim results. Total revenue for the first half of the year was RMB 328 million, up 80% year on year. Excluding the impact of license revenue for the first half of 2022, revenue growth rate reached 147%; profitability continued to improve, adjusted EBITDA was 13.5 million yuan, up 13% year on year; net cash from operating activities continued to improve; net cash flow from operating activities for the first half of the year was RMB 62.41 million Yuan, up 116% year on year.

According to data, since 2021, Dongyao Pharmaceutical has completely transformed its CDMO business, focusing on biopharmaceutical CDMO business fields such as monoclonal antibodies and ADC. Currently, it has formed an antibody production capacity of 20,000 litres and has built a “centralized and end-to-end” commercial production platform integrating monoclonal antibodies and ADC. At the same time, the company is the only biopharmaceutical CDMO company in the Yangtze River Delta region that has the ability to provide centralized and end-to-end services throughout the ADC R&D process and production coverage. In the first half of the year, Dongyao Pharmaceutical's product sales revenue was about 278 million yuan, an increase of 167% over the previous year. It mainly came from the core product, bevacizumab injection, Park XintingSales volume continues to rise; CDMO/CMO business revenue reached RMB 46.54 million, an increase of 105% over the previous year. New projects are expected to contribute more revenue to the group in the second half of the year.

In terms of CDMO business, Dongyao Pharmaceutical's business development strategy has achieved remarkable results.In the first half of the year, the number of customers of the company doubled year on year, 20 new projects were added, 15 were ADC projects, and 45 projects were in progress by the end of the period, an increase of 96% over the previous year, of which 28 were ADCs, accounting for 62%.

Furthermore,Unfulfilled orders also continue to drive the company's future revenue.As of June 30, 2023, Dongyao Pharmaceutical's total uncompleted orders had increased to 1.21 billion yuan, and its performance was growing strongly. The differentiated advantages of the ADC CDMO industry platform have been highly recognized by customers. As of June 30, 2023, uncompleted orders had grown to 480 million yuan within three years, strengthening recent revenue expectations. It is worth mentioning that unlike other ADC CDMO companies, Dongyao Pharmaceutical's uncompleted potential milestone payment orders are all pre-BLA (pre-marketing clinical declaration) projects. The probability of order conversion revenue is high, providing a strong guarantee for future business scale.

In the first half of the year, Dongyao Pharmaceutical achieved several long-term ADC CDMO projectsprojectspartneredIt has successively reached all-round cooperation in the fields of ADC drugs, radionuclide-coupled drugs (RDC), and other broader bio-conjugated drugs with strategic partners such as Shijian Biotech, Lepu Biotech, Zhikaryotic Biology, and vRui Biotech.In terms of production lines, Dongyao Pharmaceutical has built the largest commercial ADC production line in China.In the first half of the year, Dongyao Pharmaceutical's largest commercial ADC formulation production line in China was built and put into use. It can produce 2R-50R standard ADC freeze-dried products, with a maximum operating speed of 200 bottles/minute. At the same time, the second and third ADC stock solution commercial production lines were completed, with a single line size of up to 5 kg/batch.

According to information, Dongyao Pharmaceutical and Sugar Ridge Biotech have reached a cooperation to jointly develop the DisacLinkTmADC sugar fixed-point coupling technology platform, create the fixed-point coupling technology with the most application value in the world, and enable ADC innovative drugs to accelerate development. Not only Dongyao, but foreign CDMO giant Lonza is also targeting ADC coupling technology. On June 1, 2023, CDMO giant Lonza announced the acquisition of Synaffix for 160 million euros. According to statistics, the total number of external licenses for the Synaffix core fixed-point coupling technology platform reached 4.75 billion US dollars to further enhance service capabilities in the ADC field.

Currently, domestic and foreign pharmaceutical companies are generally facing difficulties and challenges at different stages when financing, which has also prompted major pharmaceutical companies to use their money to the full. Many companies have stopped investing in CMC construction and capital, and have focused their resources on project development itself, so they have chosen to outsource the CMC part. Unlike small molecule drugs and monoclonal antibodies, the production process of ADC drugs has higher technical barriers and requires strict compliance with technical, process and site compliance requirements in all aspects. To mitigate the challenges associated with ADC production, 70%-80% of development companies prefer to outsource ADC production to CDMO companies. It can be seen from this that the ADC CDMO market has huge potential.

Domestic pharmaceutical companies, such as Maiberry and Pharmaceutical Union, have also keenly discovered this market opportunity, and have spun off their ADC CDMO companies one after another to further expand their influence in the capital market. As one of the early ADC drug development companies, Dongyao Pharmaceutical was listed on the main board of the Hong Kong Stock Exchange as early as 2019, and successfully transformed into an ADC CDMO with impressive results and continued growth.

Currently, there are only a few companies that can successfully develop ADC CDMO business in China, such as Dongyao Pharmaceutical-B (01875), and Pharmaceutical-B (01875), a joint venture of Pharmaceutical Biology (02269), and Maiberry, a subsidiary of Rongchang Biotech B (09995). Judging from the performance of these three companies in the capital market, the market value of Dongyao Pharmaceutical is lower than the current valuations of Pharmaceutical Union and Maiberry, and there is huge potential room for growth.

Looking ahead to the second half of the year, Dongyao Pharmaceutical will continue to focus on ADC CDMO, continue to expand the number of customers and project reserve pool; actively explore more innovative XDC, AXC and other broader fields of conjugated drugs; and finally, actively expand overseas business to gain an in-depth understanding of international market demand, with a view to opening up the international market.