ScinoPharm Taiwan, Ltd (TWSE: 1789), an active pharmaceutical ingredient (API) and formulation specialty company, announced unaudited financial results for its fiscal year 2017. The consolidated revenue was NT$3.516 billion (US$120 million), after-tax net profits were NT$ 422 million (US$14.4 million). The after-tax earnings per share was NT$0.53 (US$0.018).
Subject to the intensified competition in the generic drug industry, and the drop in drug prices in the regulated market, coupled with the lowering of prices through joint procurement by U.S. drug distributors whose market share has become increasingly concentrated after mergers, the operations of the company are still being dragged down by the generic drug industry chain. In addition, the strong appreciation of the New Taiwan Dollar in the previous year affected the entire year’s revenue and profit of ScinoPharm which is mainly export-oriented, and total revenue was reduced by nearly 6% due to the effects of exchange rate fluctuations.
From the overall performance of the previous year, shipments of Paclitaxel which is used for ovarian cancer and breast cancer, declined because of an inventory reduction by clients. Shipments of other major generic drugs were delayed due to the replacement and integration of product lines and factories by clients after mergers, and this has also affected revenue. However, the production of new drug agents has increased significantly mainly owing to a client’s new antibiotic drug, Baxdela™, being approved for sale by the U.S. FDA at the end of last year. It was also designated as an approved drug for infectious diseases and was entitled to exclusive rights, with optimistic outlook. The commissioned production of another new drug, antibiotic Vibativ®, also contributed significantly to revenue thanks to the periodic stock demand of our client. In addition, the increase in shipment of APIs and intermediates for other four CRO projects that are in Phase III clinical trials has offset part of the effect of the decline in demand for APIs for generic drugs.
In terms of partnerships on formulation business, the five cooperative projects on generic oncology injections with the major international manufacturer, Baxter International Inc., in the previous year has accelerated ScinoPharm’s foray into the field of drug products, and a long-term risk-spreading, profit-sharing partnership has also been established. A sales authorization agreement was also signed with an international Indian drug manufacturer for another self-developed anticoagulant, Fondaparinux. The royalties for the two cooperative projects increased significantly in last year, and this shows the emerging results of the company’s strategy of vertical integration of formulation business.
Although the Changshu plant is now gradually contributing to revenue, the increase in its operating speed is still not as fast as expected. Moreover, due to increased necessary expenditure and risks resulting from the rapidly changing environmental safety and health-related laws in the Chinese market, the company has been speeding up the operations of the Changshu plant by proactively implementing aggressive internal cost control measures and accelerating responses to changes in the macro environment.
Yung-Fa Chen, the CEO of ScinoPharm, said that in the face of changes in the external environment, ScinoPharm will continue with its strategy of integrating niche APIs and venturing into formulation, and increase its existing market share of APIs. In terms of product selection, it will prioritize the distribution of vertically integrated injectables, including small molecule injections and peptide APIs. With regard to CRAM business, orphan drugs and target drugs with a short development period will be selected. Focus will be placed on precise execution and enhancement of lean production, as well as adherence to high quality control, so as to accelerate the pace of corporate transformation.
The macro environment will still be filled with challenges and variables in 2018. The company will continue to improve management efficiency and speed up product development through optimized processes and cost control, and it will take initiatives to cooperate with global strategic partners to accelerate its transformation into a full-scope pharma company. In the meantime, it will also strive to expand its CMO business and improve capacity utilization. The potential for future growth of the self-established injectable business is also growing with the use of quality-oriented diversified production methods to produce the registered batch of four different dosage forms of liquid solution, lyophilized powder, pre-filled syringe and pen device. The injectable plant is being positioned to prepare its registration batch this year, file ANDA submission in Taiwan, and expect a Taiwan FDA on-site inspection subsequently.
ScinoPharm Taiwan, Ltd. is a leading process R&D and API manufacturing service provider to the global pharmaceutical industry. With research and manufacturing facilities in both Taiwan and China, ScinoPharm offers a wide portfolio of services ranging from custom synthesis for early phase pharmaceutical activities for brand companies as well as APIs for the generic industry. The Company also is aggressively pursuing a vertically integrated, one-stop-shopping service for drug product customers by expanding into the field of sterile oncology injectable formulations. For more information, please visit the Company's website at http://www.scinopharm.com
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