Betta Pharmaceuticals Co.,Ltd. (300558) delivered a half-year report on August 20 showing revenue growth without profit improvement. The company's net profit for the first half declined to 140 million yuan, a decrease of 37.53%. Betta Pharmaceuticals attributed the performance decline to increased depreciation and amortization expenses recorded in current profits and losses. During the reporting period, the company's sales expenses, administrative expenses, and financial expenses all increased. Notably, while the three major expense categories climbed, Betta Pharmaceuticals' R&D investment decreased instead of increasing, falling over 20% year-on-year. Additionally, Betta Pharmaceuticals' overdue 180 million yuan milestone payment to Yifang Bio has further exposed its funding pressure. Industry insiders believe this could impact Betta Pharmaceuticals' commercial reputation and future cooperation prospects.
Net Profit Decline Crashes Stock Price
Betta Pharmaceuticals, which achieved net profit growth in the first quarter, saw a significant decline in net profit for the first half, causing the company's stock price to plummet over 10% during trading.
Financial data shows that Betta Pharmaceuticals achieved operating revenue of 1.731 billion yuan in the first half, up 15.37% year-on-year; attributable net profit was 140 million yuan, down 37.53% year-on-year. This marks the first time since 2022 that the company has reported a year-on-year decline in net profit in its half-year report.
Betta Pharmaceuticals listed on November 7, 2016, and is known as the "first innovative drug stock." Its core product, Icotinib Hydrochloride Tablets (brand name: Conmana), is China's first independently developed small-molecule targeted anti-cancer drug.
Currently, Betta Pharmaceuticals has 8 drugs on the market for sale. In addition to Conmana, Ensartinib Hydrochloride Capsules (brand name: Benmana) and Bevacizumab Injection showed significant revenue contribution growth. Befotertinib Mesylate Capsules (brand name: Saimena) and Vorolanib Tablets accelerated volume growth after being included in medical insurance. Trilaciclib Tartrate Capsules received marketing approval, and strategic cooperation products Trastuzumab for Injection and Recombinant Human Serum Albumin Injection (rice) began sales.
Revenue growth during the reporting period benefited from increased drug sales volume. Betta Pharmaceuticals stated that Conmana, as the first and currently only approved first-generation EGFR-TKI for early-stage lung cancer postoperative adjuvant therapy in China, maintains leadership in this market with advantages in efficacy, safety, economics, and accessibility. Benmana positions itself as the "best choice for Chinese ALK-positive lung cancer patients," with mPFS data of 47.1 months in Asian populations solidifying its differentiated advantages. After inclusion in medical insurance, it rapidly expanded volume through the company's sales network. Saimena's longer PFS achieves a replaceable treatment plan with third-generation drugs. After first-line and second-line indications were included in medical insurance, it accelerated volume growth leveraging commercialization accumulation.
The half-year report shows that during the reporting period, Betta Pharmaceuticals' product gross margin remained above 80%, at a relatively high level in the industry. The company's EBITDA reached 497.8137 million yuan, up 13.1% year-on-year. Due to increased depreciation and amortization expenses recorded in current profits and losses, attributable net profit declined to some extent.
After the half-year report disclosure, Betta Pharmaceuticals fell over 10% during trading on August 20. As of the close, Betta Pharmaceuticals closed at 65.72 yuan per share, down 6.4%, with a total market value of 27.65 billion yuan.
R&D Investment Drops Over 20%
As an innovative drug company, R&D investment is an important indicator of market attention. During the reporting period, Betta Pharmaceuticals' R&D investment declined.
Betta Pharmaceuticals' half-year report shows that in the first half of this year, the company's R&D investment was 299 million yuan, down 21.8% year-on-year. In the first half of 2024, the company's R&D investment also showed a significant decline, down 28.58% year-on-year.
While R&D investment decreased, Betta Pharmaceuticals' sales expenses continued to climb. In the first half of this year, Betta Pharmaceuticals' sales expenses were approximately 594 million yuan, up 13.34% year-on-year. From 2022 to 2024, Betta Pharmaceuticals' half-year sales expenses were 440 million yuan, 458 million yuan, and 524 million yuan, respectively.
Additionally, in the first half of this year, Betta Pharmaceuticals' administrative expenses and financial expenses both increased. The company's administrative expenses during the reporting period were 261 million yuan, up 23.47% year-on-year; financial expenses were 39.5305 million yuan, up 118.06% year-on-year.
Zhang Xinyuan, research director at Kefangde Think Tank, stated that the continuous decline in R&D investment while sales expenses increase for innovative drug companies requires comprehensive analysis combining industry background and enterprise development stage. From a rationality perspective, the core competitiveness of innovative drug companies lies in R&D, and long-term insufficient R&D investment may weaken the enterprise's future product pipeline and technological advantages. However, short-term increases in sales expenses for market expansion or new drug promotion may belong to phased strategic adjustments, such as promoting volume growth of newly listed drugs or responding to market competition.
Deng Yong, director of the Health and Healthcare Rule of Law Research and Innovation Transformation Center at Beijing University of Chinese Medicine, believes that the core barrier for innovative drug companies is the R&D pipeline, and R&D investment is the lifeline for maintaining their "innovative attributes." Continuous decline in R&D investment will directly lead to slower new drug development progress and insufficient pipeline reserves, facing long-term risks of "old drug patents expiring while new drugs cannot keep up," losing core competitiveness. Additionally, Deng Yong mentioned that if R&D cannot keep up and lacks new drug support, long-term sales expense investment will lose significance.
180 Million Yuan Milestone Payment Still Unpaid
In its half-year report, Betta Pharmaceuticals disclosed an important accounts payable with an aging over one year or overdue.
The half-year report shows that Betta Pharmaceuticals' important accounts payable with aging over one year or overdue amounts to 180 million yuan, representing debt to Yifang Bio, with the reason for non-repayment or carry-forward shown as unsettled.
It's worth noting that this matter was not disclosed in Betta Pharmaceuticals' 2024 annual report, and was only revealed when Yifang Bio disclosed this debt situation in its 2024 annual report inquiry response.
According to the "Cooperation Agreement" signed between Yifang Bio and Betta Pharmaceuticals, when Befotertinib's first-line treatment indication for non-small cell lung cancer marketing application receives regulatory approval, Betta Pharmaceuticals should pay Yifang Bio 100 million yuan; when Befotertinib's second-line treatment indication for non-small cell lung cancer marketing application receives regulatory approval, Betta Pharmaceuticals should pay Yifang Bio 80 million yuan.
According to Yifang Bio's 2024 annual report inquiry response, Yifang Bio has overdue receivables, specifically milestone payments of 180 million yuan receivable from Betta Pharmaceuticals. Yifang Bio stated that based on Betta Pharmaceuticals' own capital usage arrangements, it delayed payment of the 180 million yuan milestone payment to the company, expressing that it would subsequently fulfill payment obligations according to the agreement.
"Regarding the above accounts receivable overdue situation, the company actively communicated with Betta Pharmaceuticals about collection matters, repeatedly communicating through emails, phone calls, offline visits and other methods to collect the above accounts receivable from Betta Pharmaceuticals, and sent a 'Company Letter - Regarding Immediate Payment of Outstanding Debts' to Betta Pharmaceuticals at the end of 2024, requiring Betta Pharmaceuticals to pay the above amounts as soon as possible," Yifang Bio stated. As of December 31, 2024, Yifang Bio had made bad debt provisions of 18 million yuan for the above 180 million yuan milestone payment.
Betta Pharmaceuticals once replied to investors on the Shenzhen Stock Exchange's interactive platform that the company has always valued cooperative relationships with partners, and both parties have conducted relevant communication and exchanges regarding milestone payments. For such routine business matters, both parties maintain smooth communication and processing channels and will properly resolve them. However, as of the end of the first half, Betta Pharmaceuticals still had not paid this amount.
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