CSPC Pharmaceutical (CSPC) is a vertically integrated pharmaceutical company in China with a diversified portfolio focusing on cardiovascular diseases and oncology, strong sales team of ~10k sales people in China and a solid research & development (R&D) pipeline to support a future stream of new drug additions. The firm has invested significantly in research & development (~15% of finished drug revenue or CNY3b was spent on R&D in 2021) to increase its focus on innovative drugs. Major product brands include NBP, Duomeisu, Jinyouli and Keaili. For bulk drugs, key products include Vitamin C, caffeine and antibiotics. Over the medium term, we expect organic earnings growth to be supported by the company’s focus on R&D and positive shifts in sales mix. Following deals done in 2018 involving mostly early stage drug candidates, management is open to licensing deals to enhance its portfolio and aims to license new late-stage drugs near to commercial stage. Balance sheet is in net cash position. Potential share price volatility may result from concerns over pricing pressure due to ongoing sector reforms. Further, given the currentweakness in the Chinese economy and the potential of further lockdowns, there may be further downsides to the stock price. While the fundamentals are decent, I am holding off purchases of this stock for now till I see price stability. At the moment, it is too volatilefor me.
DYODD
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