The growth report in the pharmaceutical winter, the visible and hidden lines in BaiYang Pharmaceutical's financial report

This article is based on publicly available information and is intended for informational exchange purposes only, not as any investment advice.

After experiencing capital cleansing and the bursting of bubbles, China's pharmaceutical industry has returned to rationality and embarked on a journey of steady development.

The successive approval and launch of innovative products have injected new vitality into the market. However, the market performance of these innovative products has shown stark differences. While some have given birth to "blockbuster molecules" worth billions of dollars, others have struggled with poor commercialization and market promotion, even resorting to seeking "sell-offs" as "lagging molecules."

A deep analysis of the reasons behind unmet commercialization expectations reveals two main factors.

First, the products themselves fail to truly optimize medical scenarios and struggle to meet patient needs. Second, companies lack strong commercialization capabilities, preventing them from achieving the returns their products deserve. Building commercialization capabilities is not an overnight task but a complex and lengthy process requiring significant time and resource investment. Therefore, against the backdrop of the pharmaceutical industry's return to rationality, the market is not only focusing on R&D innovation but also increasingly paying attention to companies with robust commercialization capabilities.

As a leading domestic pharmaceutical commercialization company, Baiyang Pharmaceutical has achieved sustained growth during this challenging period, further validating the increasing importance of commercialization in the pharmaceutical industry.

In Baiyang Pharmaceutical's recently released 2023 annual report, the company's total revenue reached 7.564 billion yuan, with net profit attributable to shareholders of 656 million yuan, a year-on-year increase of 29.55%, marking three consecutive years of growth and demonstrating significant profitability. The sustained growth in net profit indicates that Baiyang Pharmaceutical's long-term commercialization capabilities have been validated, with brand effects accelerating.

Figure: Baiyang Pharmaceutical's Net Profit Attributable to Shareholders and Growth Rate

Strong commercialization capabilities are just Baiyang Pharmaceutical's "visible line." Beyond the financials, the company also has an "invisible line" focused on innovation. Only when these two lines converge can the complete ecological value of Baiyang Pharmaceutical be outlined.

01 "Visible Line": Sustained Release of Brand Effects

Pharmaceutical commercialization is not simply about drug sales but involves understanding clinical application scenarios, identifying products that truly meet clinical needs, and conducting long-term brand cultivation based on product lifecycles and resource advantages. Therefore, the core of commercialization lies in "brand" building—a trust-based relationship with consumers that reflects their recognition of a product's efficacy, quality, and safety, making it hard to replace.

However, easier said than done. Successfully launching a new product and realizing its commercial value is no easy feat. It requires not only accurate product positioning but also a clear understanding of its actual application scenarios. Only by integrating the product into these scenarios and defining how it improves and optimizes them can brand building and value release be achieved.

The D-Cal brand, which Baiyang has managed for 20 years, continues to grow at nearly 16%, outperforming the calcium supplement market. This success is rooted in strong brand power. From its launch, D-Cal precisely targeted the maternal and infant calcium supplementation market, gaining recognition from millions of young mothers with its imported quality and effectiveness, establishing itself as a leader in maternal and infant calcium supplementation. Through continuous product and marketing innovation, D-Cal has expanded its product line to cover all age groups, further extending its brand influence. The recent launch of the children's liquid calcium product "Little Yellow Bar," focusing on children's growth scenarios and leveraging new media trends, has propelled the brand forward, creating new growth pathways and reinforcing its leadership position.

In fact, Baiyang Pharmaceutical has repeatedly demonstrated its professional commercialization capabilities. With the success of D-Cal, the company has developed a mature operational model for building out-of-hospital brands. When applied to products like Nutrasumma, Hycosan, and efficacy skincare, this model has shown strong adaptability and growth potential. 2023 data shows that Hycosan and Nutrasumma achieved revenues of 640 million yuan and 83 million yuan, respectively, with year-on-year growth of 49.88% and 44.36%.

Beyond the out-of-hospital market, Baiyang has also succeeded in the in-hospital market. Through deep exploration of medical scenarios and category segmentation, coupled with professional academic education and promotion, the company has built leading prescription drug brands like Bitter and Fuzheng Huayu in their respective segments. This in-hospital expertise lays a solid foundation for Baiyang's operations in innovative medical devices and future innovative drugs.

A closer look at Baiyang Pharmaceutical's financial data reveals that in 2023, the company achieved revenue of 4.4 billion yuan, a year-on-year increase of 18.91%, with a gross margin of 43.17% and gross profit of 1.899 billion yuan, accounting for 83.78% of total profit. The sustained manifestation of brand value has become the company's primary profit driver.

02 "Invisible Line": The Iceberg Beneath the Surface

Over the past two decades, Baiyang Pharmaceutical has developed core commercialization competitiveness: continuously strengthening brand operational capabilities by building successful products. This has created a deep commercialization moat, forming the "visible line" that all investors focus on.

Beyond the "visible line," there is also an "invisible line"—

Truly clinically valuable drugs must address unmet clinical needs. Leveraging its long-standing experience in pharmaceutical brand commercialization, Baiyang Pharmaceutical has the ability to deeply understand medical scenarios, identify clinically valuable research outcomes or products, and help them achieve rapid commercialization. This is extremely rare in today's pharmaceutical market and has been Baiyang's focus over the past year.

In November last year, Baiyang Pharmaceutical partnered with RadioMedix, whose core product, 99mTc-3PRGD2, is a radiopharmaceutical RDC drug targeting integrins. It is not only China's first Class 1 new drug in nuclear medicine radiodiagnosis but also the world's first broad-spectrum tumor imaging agent for SPECT. Baiyang Pharmaceutical holds exclusive commercialization rights for 99mTc-3PRGD2, which is highly likely to become a future growth driver post-launch.

Chinheart Medical, a company focused on developing internationally leading artificial hearts, has clinically implanted its self-developed fully magnetically levitated artificial heart, Cifu, in over 50 top-tier cardiac hospitals in China, with more than 220 patients using the product. Baiyang Pharmaceutical is also responsible for its commercialization.

Figure: Artificial Heart Cifu

Medis Medical is an innovative company that has broken through the "bottleneck" technology of electromagnetic positioning. Through its self-developed, iteratively updatable electromagnetic navigation system, it has achieved the fusion of electromagnetic navigation and ultrasound imaging, developing China's first and internationally leading ultrasound electromagnetic positioning puncture guidance device. Baiyang Pharmaceutical is also promoting its application in clinical scenarios.

Among these source innovation products, the emergence of heavyweight blockbusters cannot be ruled out. Although these assets are not reflected in Baiyang Pharmaceutical's financial statements, their value—rooted in truly meeting public health needs and having clinical application—will inevitably be realized and should be accounted for in advance.

So, how can Baiyang Pharmaceutical ensure it continues to secure commercialization rights for such innovative products rather than experiencing fleeting success? The healthy innovation ecosystem built by Baiyang Pharmaceutical and its parent company, Baiyang Pharmaceutical Group, provides a clear answer. The innovative products mentioned above were all incubated by the parent company's investments, giving Baiyang Pharmaceutical a natural advantage in securing their commercialization rights. This unique innovation system forms the company's "invisible line," enabling it to continuously access innovative products without bearing the risks of R&D failure.

The convergence of the visible and invisible lines truly outlines the full value of Baiyang Pharmaceutical. The parent group focuses on innovation incubation, while the listed company handles commercialization. As technological innovation accelerates, Baiyang Pharmaceutical, with its priority access to innovative project commercialization rights, may become the biggest beneficiary of innovation dividends.

03 Value Beyond the Financials

Pharmaceutical industry research cannot be superficial. Similarly, studying Baiyang Pharmaceutical should not stop at its financial statements but extend to "seeing the mountain beyond the mountain" by examining the parent company, Baiyang Pharmaceutical Group's, strategic 布局 over the years. This is like an iceberg, with only one-eighth visible above water.

From a macro perspective, Baiyang Pharmaceutical Group's 布局 in recent years has been highly 前瞻性， aligning with the pharmaceutical industry's urgent need for innovation and development.

Focusing on R&D, unlike most pharmaceutical companies adopting Fast-follow or License-in models, Baiyang Pharmaceutical Group has chosen a more challenging but valuable path—source innovation. The group collaborates with national-level research institutions to 筛选优质源头创新项目， leveraging its industrial resources and incubation capabilities to advance innovation 成果转化落地. Partners like Peking University Health Science Center, Capital Medical University, and the National Center for Cardiovascular Diseases (Fuwai Hospital) are long-term collaborators.

Figure: Baiyang's Three Major Investment and Incubation Tracks

Based on this, Baiyang Pharmaceutical Group's innovation 布局 is multi-dimensional, encompassing companies with First-in-Class potential, high-end medical device companies 突破"卡脖子"技术， and basic research platforms. Whether in X-band medical linear accelerators, high-sensitivity SPECT/CT, or innovative fields like anti-tumor immunotherapy drugs and bone regeneration drugs, Baiyang Pharmaceutical Group has a presence.

The nature of these projects shows that the group is not merely investing in 所谓的创新项目 for financial gains but aims to optimize medical scenarios by targeting China's most 稀缺的"真创新": using its strong commercialization team to identify real clinical needs, guiding the 转化落地 of "国家队" innovations through 合理的机制， and ultimately cultivating original pharmaceutical and device products with independent intellectual property and technical barriers.

Thus, Baiyang has established its own innovation logic and system. This system is 本质上 based on industrial collaboration and mutual benefit. From the perspective of 创新项目的资源配置需求， Baiyang acts as an "industrial investor,"配置要素资源 according to different development stages of innovative companies, ensuring truly valuable innovations leave the lab, benefit society, and achieve 落地转化。

Clearly, Baiyang seeks not just 简单的业绩增长 but long-term 生态共赢 for the entire industry. This is not only an exemplary model for exploring pharmaceutical industry innovation but also provides valuable insights for reshaping the industry's value chain—another layer of Baiyang Pharmaceutical's value beyond its financials.$Baheal Medical(301015.SZ)