70% of the company's revenue growth, the CRO under the capital winter is really prosperous?

With the arrival of the last day of August, the semi-annual report of the last CRO company "Zhaoyan New Drug" was also released, and at this point, the 2022 semi-annual report of all CRO companies has been fully disclosed
.

All along, the CRO industry as the most noteworthy area in the subdivision of the pharmaceutical industry, because of its water sellers " drought and flood protection" industry characteristics, in recent years in the capital market status has even surpassed most of the traditional pharmaceutical companies, widely sought after
.
During the annual and quarterly financial reports of related enterprises, it is also the most explosive stage
for industry followers.

According to statistical data, the performance of the CRO industry in the first half of 2022 is particularly eye-catching, of which 70% (19) companies achieved revenue growth, and Boteng shares, which had the largest year-on-year increase in revenue, achieved revenue of 3.
914 billion yuan in the first half of the year, an increase of 211.
67% year-on-year; WuXi AppTec, which is recognized as the leader, has earned 17.
756 billion yuan in only half a year, which is infinitely closer to the 23.
3 billion yuan
of last year's annual revenue.

The remaining enterprises such as Kailaiying, Tigermed, WuXi AppTec, Medici, Kanglong Chemical and other enterprises have basically all achieved different degrees of performance growth
.
Only a few companies have turned greener, and most of them are entities
with lower income levels.

But it is also such excellent performance growth, but it is not so normal
in 2022, when the pharmaceutical market is generally sluggish.

According to the average revenue of the head enterprises in the sub-industry from 2018 to the first half of 2022, the growth rate of the CRO industry is significantly higher than that of other sub-industries, and even while the revenue of other sub-industries has dropped significantly, it can still maintain a high increase
.

Is it that even if the financing amount of the biomedical industry continues to decline, a large number of biotech companies lay off employees, cut pipelines, and sell core assets, as a companion enterprise of biotech, CRO companies can really achieve "drought and flood protection"?

From the revenue situation of the CRO industry in the first half of the year, what kind of scene is shown, and does it contain a different essence under the scene?

The head effect is obvious, and the concentration is further improved

If the CRO industry in the early stage of domestic development as a whole still shows a pattern of many, small and scattered, and the industry concentration is low, then with the development of head enterprises in recent years, it has shown a completely different look
from before.

According to the revenue of 26 CRO companies in the first half of 2022, whether it is revenue or revenue year-on-year growth rate, the top is almost a few well-known domestic head enterprises, if the overall revenue of CRO listed pharmaceutical companies as a market share body, then WuXi AppTec a company occupies nearly 38% of the market share
.

Moreover, the same method of statistics on the revenue proportion of wuXi AppTec, Kanglong Chemical and Tigermed so far in 2018 can see its obvious growth trend, which means that with the development of the CRO industry, the market head effect is becoming more and more obvious, and the industry concentration is further improved
.

In terms of feedback to the market, the reason why the concentration has risen year by year is that the high barriers brought about by the non-replicability of the head CRO enterprise management experience and the docking record of the first and the cooperation, and the larger the enterprise, the more likely it is to rely on a one-stop large number of links to attract and bind customer groups
.

Essence: Prosperity is only an illusion, and performance lag is the key

For the CRO industry, people have always had the impression of being a "water seller", who can still achieve objective operating income without taking the risks brought by innovative drugs, which may not be obvious in the strong period of medicine, but it is vividly
reflected in today's increasingly severe "biological significance winter".

According to relevant media reports, in 2022, there are already many Biotech cash reserves that cannot support 1 year of research and development investment, in addition, there are 22 Biotech cash reserves that will be "burned out"
within 5 years.

In the cold winter of capital, enterprises that rely on capital feeding must not continue to survive, supplying limited "blood" to "key parts", laying off employees, cutting pipelines, selling core assets and even selling large pharmaceutical companies has long been
commonplace.

Watson Bio terminated the development of recombinant EV71 vaccines

Clover suspended the investment of three products

Green Valley Pharmaceuticals terminated the Ganlutner International Multi-Center Phase 3 clinical study ahead of schedule

Zhuhai Zhifan was acquired by Stone Medicine

Fuhong Henlin two monoclonal licenseout

Bluebird Bio plans to cut 30% of its workforce to delay cash flow

As one of the most important income groups in croism, why can biotech maintain such a high revenue growth ratio in such a difficult situation? This is clearly grossly
unreasonable.

In fact, as part of the new drug industry chain, the CRO industry may be completely separated from the biomedical industry, don't look at the current CRO industry, whether it is revenue or the number of backlog orders are on the rise, but these two data have obvious lags, and the financial data and orders shown in the financial report now are often only the reflection
of the first few quarters, or even last year' first-line situation.

If you want to discuss whether the current difficult days of biotech companies have an impact on CRO performance, you may only ask the front-line sales staff of the relevant enterprises and find ways to calculate the "preliminary order quantity"
.

In the previous Medpace second-quarter earnings call, the "preliminary order number" revealed by the period has shown a 45% year-on-year decline and a 42% month-on-month decline is the best proof that the weakness of downstream demand may gradually begin to appear
at the end of the year.

In addition, there is also a point that can also reflect the above situation, compared with the increasingly high growth of the CRO industry revenue and stock price fluctuations, perhaps there are indeed reasons for the valuation to be clear, but it may also be that the clear-eyed people have seen the risks under the CRO boom
.

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