Tibet Pharmaceutical: Earnings management helps lift the ban

Behind the sharp rise in Tibet Pharmaceutical’s stock price is the lifting of the restricted shares of the controlling shareholder, as well as the stimulation of “high gift transfers” and good news about the new crown vaccine.

On June 16, Tibet Pharmaceutical (600211.SH) announced that the company and Sri Lanka Microbiology have entered into an exclusive global strategic partnership. Tibet Pharmaceutical has obtained the exclusive global development, registration, production, and production of the above-mentioned products. Usage and commercialization rights. As soon as the news came out, Tibet Pharmaceutical's stock price continued to rise sharply, reaching another daily limit the next day.

Since the end of May, Tibet Pharmaceutical has been sought after by the market, with its stock price rising rapidly from the closing price of 25.92 yuan on May 22 to 67.64 yuan on June 17, with an increase of 156.21% in just 18 trading days. , the total market value expanded rapidly from 6.4 billion yuan to 16.8 billion yuan.

After sorting out, it can be found that the sharp rise in Tibet Pharmaceutical's stock price occurred in the context of the lifting of the ban on restricted stocks. Against this background, on the one hand, Tibet Pharmaceutical launched the "high-delivery and transfer" plan, and on the other hand, it delivered the most brilliant quarterly report in history. The reasons behind the company's series of actions are self-evident.

The company frequently "moves" to lift the ban on restricted shares

On April 28, Tibet Pharmaceutical issued an announcement that the company's non-publicly issued restricted shares in 2017 will be listed and circulated. The number of shares is 47.64 million shares, and the listing and circulation date is May 6, 2020. Specifically, the listed company’s controlling shareholders, Tibet Kangzhe Enterprise Management Co., Ltd., China International Finance Corporation Limited (the company’s actual controller Lin Gang subscribed through the RQFII specific account managed), Ge Weidong, Qu Xiangjun, Zhang Yong, and Shanghai Chaos Daoran Asset Management Co., Ltd. The number of restricted shares is 37.38 million shares, 1.85 million shares, 4.08 million shares, 1.85 million shares, 930,000 shares, and 560,000 shares respectively. The proportion of restricted shares held in the company's total share capital is 15.48%, 0.75%, and 1.64%, 0.75%, 0.37%, 0.22%.

According to rough estimates, based on the closing price of 67.64 yuan on June 17, the values ??of the restricted shares held by the above-mentioned objects are 2.596 billion yuan, 125 million yuan, 276 million yuan, 125 million yuan, respectively. 62.76 million yuan and 37.6 million yuan. Compared with the previous subscription amounts (1 billion yuan, 48.28 million yuan, 106 million yuan, 48.28 million yuan, 24.14 million yuan, and 14.49 million yuan respectively), the income can be 1.596 billion yuan, 77.06 million yuan, 170 million yuan, 77.06 million yuan, 38.53 million yuan, 23.11 million yuan.

Coincidentally, just a few days ago (April 20), Tibet Pharmaceutical had just completed the implementation of annual equity distribution in 2019: the listed company distributed cash of 10.60 yuan (inclusive) to all shareholders for every 10 shares. tax), the capital reserve fund will be converted into 4 shares for every 10 shares. After the implementation is completed, the number of restricted shares for the above-mentioned non-public issuance objects will increase from the original 34.03 million shares to 47.64 million shares.

From a fundamental perspective, Tibet Pharmaceutical's recent performance is also "unusual". In the first quarter of 2020, it achieved operating income of 297 million yuan, attributable net profit of 129 million yuan, and non-net profit of 8,600 yuan. Ten thousand yuan, year-on-year changes of -0.10%, 81.75%, and 21.58% respectively.

While operating income was basically the same as the same period last year, Tibet Pharmaceutical's net profit increased sharply by 81.18% year-on-year. The main reason was the sharp year-on-year increase in the company's other income. The financial report shows that in the first quarter of 2020, listed companies included 48.11 million yuan in government subsidies into current profits and losses, which were non-recurring profits and losses. However, historically, listed companies have never confirmed such a large amount of government subsidies in the first quarter.

In addition, Tibet Pharmaceutical's non-net profit increased by 21.58% in the first quarter, mainly due to the substantial decrease in expenses of listed companies during the period.

In the first quarter of 2020, Tibet Pharmaceutical’s sales expenses and R&D expenses dropped significantly by 15.85% and 57.49% respectively year-on-year. Tibet Pharmaceutical may be engaged in earnings management behavior of reducing expenses, increasing profits, and confirming more government subsidies.

In this regard, the relevant person in charge of Tibet Pharmaceutical told "Securities Market Weekly" that the main reason for the above changes was the receipt of 47.81 million yuan in industry development support funds, and the sales revenue of products with lower sales expense ratios accounted for The company has been operating strictly in accordance with the requirements of relevant national laws and regulations.

On June 16, Tibet Pharmaceutical once again "sneaked" into the hot spot of the new crown vaccine. Although the company has issued a risk warning that the new coronavirus vaccine products involved in this cooperation are still in the pre-clinical research stage and there are uncertainties, the company chose to disclose it at this time, which inevitably leads to the suspicion of hype.

In the context of the lifting of the ban on restricted shares, whether it is "high transfers", abnormal financial performance or news of COVID-19 vaccine cooperation, it is unusual. The reasons behind the company's series of actions seem obvious. If exposed.

How much is the value of assets acquired at high prices?

In February 2016, Tibet Pharmaceutical announced that it planned to acquire IMDUR? (hereinafter referred to as "IMDUR") products, Brands and related properties (properties worldwide except the United States). Calculated based on the central parity rate of the US dollar to RMB exchange rate on the date of signing of the agreement, the acquisition price is equivalent to RMB 1.241 billion. The acquisition price will be paid entirely with funds raised from the non-public issuance of stocks.

In February 2017, Tibet Pharmaceutical issued a plan for a non-public issuance of shares, intending to issue no more than 35.45 million A shares to specific targets (the non-public issuance targets mentioned above) at an issuance price of no more than Less than RMB 35.02 per share, it plans to raise no more than RMB 1.241 billion, all of which will be used to acquire Imdor products, brands and related assets.

The generic name of Imdor is Isosorbide Mononitrate Sustained Release Tablets, which is one of the important drugs for the anti-ischemic treatment of coronary heart disease.

The plan shows that from 2013 to 2015, Imdor’s global sales revenue (excluding the United States) was US$64.79 million, US$60.58 million, and US$56.67 million respectively, with gross profit margins of 81.90%, 83.20%, 82.03%.

The annual report shows that from 2016 to 2019, Imdor’s sales were 28.41 million boxes, 35.04 million boxes, 28.05 million boxes, and 21.31 million boxes respectively; in 2019, Imodor’s sales revenue was 272 million yuan. It can be seen that Imdor’s sales are not stable, and there was a sharp decline from 2018 to 2019.

Imdor’s sales decline may be related to winning the bid for centralized procurement. In 2019, Imdor won the bid for centralized drug procurement. The total actual purchase volume of medical institutions that year (that is, the total sales volume of Imdor that year) was 21.31 million boxes, a decrease of 24.03% compared with the previous year. It can be seen that Imdor’s bid for centralized procurement did not achieve a significant increase in sales, but product prices and sales revenue dropped significantly.

It should be reminded that the listed company has previously made provision for impairment of intangible assets for Imdor.

The annual report shows that due to the impact of adverse factors such as national pharmaceutical industry policies, global drug sales environment, exchange rate changes, etc., Imdor achieved sales revenue of US$48.61 million and total profit of US$14.56 million in 2018, respectively. 90.60% and 76.65% of the expected goals were completed; based on the recoverable amount confirmed by the assessment, the listed company made an impairment provision for intangible assets of US$8.67 million, equivalent to RMB 57.35 million, for the Yimduo asset group in 2018.

According to the annual report, Imdor achieved sales revenue of US$39.82 million and total profit of US$10.3 million in 2019, completing 91.16% and 103.04% of the expected targets for 2019 respectively. Compared with the previous year, Imdor's sales revenue and total profits have declined significantly in 2019. Although the company claims to have basically achieved its performance goals, its declining performance requires caution.

On the other hand, compared with before the acquisition, Imdor’s performance declined significantly after the acquisition. As mentioned above, from 2013 to 2015, Imdor's sales revenue was US$64.79 million, US$60.58 million, and US$56.67 million respectively. However, in 2018-2019, it dropped to US$48.61 million and US$39.82 million respectively.

If Imdor fails to complete sales revenue and net profit as estimated by the assessment, the intangible assets may continue to be impaired in the future.

In fact, Imdor has many competing products and the price competition is fierce. According to data from Minai.com, there are 17 manufacturers (domestic) of isosorbide mononitrate sustained-release tablets.

You can check the prices of isosorbide mononitrate sustained-release tablets from various pharmaceutical companies at JD Pharmacy. Upon inquiry, AstraZeneca Pharmaceuticals (currently Tibet Pharmaceuticals’ Imodor is still produced by AstraZeneca), the specifications of the isosorbide mononitrate sustained-release tablets are 60mg 7 tablets/box, the price is 23 yuan/box, and the unit price is 0.0548 Yuan/mg; specification: 30 mg, 7 tablets/box, 14 Yuan/box, unit price 0.0667 Yuan/mg. The specifications of Qilu Pharmaceutical's isosorbide mononitrate sustained-release tablets are 40 mg 20 tablets/box, priced at 20 yuan/box; Lunan Beite Pharmaceutical's 40 mg 24 tablets/box, 54 yuan/box; Lukang Pharmaceutical's 40 mg 20 tablets/box , 23.9 yuan/box; Lepu Pharmaceutical is 40mg, 24 tablets/box, 13 yuan/box; Sandoz (China) is 60mg, 10 tablets/box, 10.5 yuan/box. According to the above data, the unit prices of the above similar products are 0.0208 yuan/mg, 0.0563 yuan/mg, 0.0299 yuan/mg, 0.0135 yuan/mg, and 0.0175 yuan/mg respectively. Overall, Tibet Pharmaceutical's Imodor has a higher unit price and does not have a price advantage.

Regarding the reasons for the acquisition, the above-mentioned person in charge said that the company has few product varieties and needs to continuously enrich its product line and improve its operating performance; Imodor is used for long-term anti-ischemia treatment in cardiology and is still the treatment of coronary heart disease. The most effective first-line drug, recommended by domestic and foreign cardiovascular drug guidelines as first-line drug, occupies an important position in cardiovascular system drugs; at the same time, Imdor is also a mature drug, which will bring stable cash flow and stable cash flow to the company after acquisition. profit.

In addition, the competitive landscape of Xinhuosu, Tibet Pharmaceutical’s main product, may change.

The common name of Xinhuosu is recombinant human brain natriuretic peptide for injection. It is a new national biological product independently developed by the company and is used to treat acute heart failure. Although Tibet Pharmaceutical's Xinhuosu system is exclusively produced in China, the five-year new drug monitoring and protection period for Xinhuosu has expired. It is understood that Buchang Pharmaceutical (603858.SH)'s "Recombinant Human Brain Natriuretic Peptide for Injection" has obtained the implicit permission for clinical trials from the State Food and Drug Administration and obtained the "Clinical Trial Notice".

In this regard, the above-mentioned person in charge said that in the future, the company will focus on the goal of making its main business bigger and stronger to achieve stable growth in operating performance.

In 2019, Tibet Pharmaceutical’s Xinhuosu won the bid in the centralized drug procurement, and the winning bid price was 585 yuan; starting from January 2020, the medical insurance payment price of Xinhuosu continued to decrease to 445 yuan. Compared with In 2016, the average selling price dropped by 55.46% to 999 yuan. However, it remains to be seen whether the sales of Xinhuosu will increase significantly in the future.