2025 Will Pharmaceutical Research Report

2025 Will Pharmaceutical Research Report: Pharmaceutical excipients and lubricant base oils go hand in hand, and the company has entered a new stage of development Will Pharmaceutical focuses on the development and production of pharmaceutical excipients and synthetic lubricating base oil products, and the company has formed core technologies such as precise polymerization of ethers, directional synthesis of esters, and efficient separation and purification, providing pharmaceutical excipients with high safety and versatility for pharmaceutical preparation companies, and synthetic lubricating base oils with excellent performance for lubricating oil companies. 1.1 Development history: Listed on the Shanghai Stock Exchange in 2019 Will Pharmaceutical was established in February 2000 and was jointly funded by six people: Wu Renrong, Gao Zhengsong, Chen Xinguo, Tang Qunsong, Shen Jiusi and Zhou Guohua. Since 2017, Will Pharmaceutical has successively established 6 wholly-owned subsidiaries such as Meidong Weihan, Will Pharmaceutical Technology, and Will Materials Research Institute, as well as 2 holding subsidiaries and 2 (indirect) shareholding subsidiaries such as Xingwei Biotechnology, focusing on the company's main business, and successively expanding multi-dimensional businesses such as product research and development, production and sales, as well as application consulting and technical services. In January 2019, Will Pharmaceutical was successfully listed on the Shanghai Stock Exchange. 1.2 Shareholding structure: The three senior executives hold a total of 40.4% of the shares Wu Renrong, Gao Zhengsong and Chen Xinguo signed a concerted action agreement on October 12, 2017 and are the controlling shareholders and actual controllers of the Company. Wu Renrong directly holds 13.7% of the shares of Will Pharmaceutical, and indirectly holds 5.8% of the company's shares through Shuntai Zonghua, holding a total of 19.48% of the company's shares; Gao Zhengsong directly holds 10.42% of the shares of Will Pharmaceutical, and indirectly holds 0.02% of the shares through Shuntai Zonghua, holding a total of 10.44% of the shares; Chen Xinguo directly holds 10.42% of the shares of Will Pharmaceutical, and indirectly holds 0.02% of the shares through Shuntai Zonghua, for a total of 10.44% of the shares. Together, the three hold 40.4% of the company's shares. Since its establishment, the shareholding structure of Will Pharmaceutical has been stable and the control is relatively centralized. 1.3 Management team: The long-term team structure is stable Will Pharmaceutical has a first-class management team and technical experts, chairman and general manager Mr. Wu Renrong, has rich management experience and technical experience, master's degree, Zhenggao engineer. Mr. Chen Xinguo, vice president, is an engineer and a senior marketer. Mr. Gao Zhengsong, Executive Vice President, is also the chief engineer, with a master's degree and a senior engineer. With its solid educational background and rich industry experience, the senior management team of Will Pharmaceutical provides solid intellectual support and leadership for the company's steady development and strategic decision-making. 1.4 Operating Performance: Strong growth in 2024 and continued rate optimization is expected 24Q1-3 revenue and net profit growth momentum is strong. In 2023, the company achieved operating income of 1.156 billion yuan, an increase of 4.0% year-on-year, and net profit attributable to the parent company of 112 million yuan, a year-on-year increase of 18.1%. In the first three quarters of 2024, the company achieved revenue of 1 billion yuan, a year-on-year increase of 20.72%, and a net profit attributable to the parent company of 113 million yuan, a year-on-year increase of 44%. In recent years, the company's gross profit margin has declined, from a peak of 34% in 2019 to 27% in 2023. During the period, the decline in gross profit margin was mainly affected by the commissioning of new production capacity of pharmaceutical excipients and the increase in depreciation of fixed equipment. However, since 2024, the company's apparent operating situation has ushered in a significant improvement, the sales volume of the company's main products has increased steadily, and all business segments have maintained stable development. During the period, the net profit margin attributable to the parent company maintained an upward trend. In terms of R&D and rate, the company adheres to scientific innovation, continues to increase R&D investment, and has developed more than 300 new products and applied for more than 30 patents. Since 2020, R&D expenses have basically remained at about 5% of revenue every year, reflecting the company's emphasis on scientific and technological innovation and maintaining the core competitiveness of products. On the rate side, the selling expense ratio has maintained a downward trend since 2019 and gradually maintained at the level of 1% after 2022, which has more cost advantages than competitors in the same industry. The finance expense ratio remained stable in the first three quarters of 2024. In 2021, there was a significant increase in administrative expenses, mainly due to the increase in administrative expenses due to the equity incentive plan that the company began to implement during the same period. This charge will be amortized in 2024. From the perspective of revenue structure, the company mainly has two business segments: pharmaceutical excipients and synthetic lubricating base oils. In terms of revenue, synthetic lubricant base oil accounts for the highest proportion of revenue, accounting for about 65%~70% of the overall revenue, and pharmaceutical auxiliaries account for about 25%~30%. On the other hand, the gross profit level of pharmaceutical additives is higher than that of lubricant base oils. In 2023, the revenue of the company's pharmaceutical excipients segment will be 291 million yuan, with a gross profit margin of 47%, compared with 20% of the gross profit margin of lubricant base oil in the same period. It is expected that with the subsequent increase in the volume of high-end pharmaceutical auxiliary varieties and the dilution of unit production costs, the gross profit level and gross profit proportion of the pharmaceutical auxiliary sector still have room for growth. 2. Pharmaceutical excipients Pharmaceutical excipients refer to excipients and additives used in the production of drugs and the preparation of prescriptions. At present, in addition to the basic functions of forming, acting as a carrier and improving stability, pharmaceutical auxiliaries also have important functions such as solubilization, solubilization, and sustained and controlled release, which are important components that affect the quality, safety and effectiveness of drugs. Pharmaceutical preparations are composed of two components, APIs and pharmaceutical excipients, the weight of APIs in the drug is generally 0.1% to 10%, and the weight ratio of pharmaceutical excipients is generally 90% to 99.90%, which is very important for the composition of pharmaceutical preparations. In the State Council's "Biological Industry Development Plan" and the National Development and Reform Commission's "Catalogue for the Guidance of Key Products and Services in Strategic Emerging Industries (2016 Edition)", the pharmaceutical excipient industry is listed as a national strategic emerging industry. 2.1 Pharmaceutical adjuvant market: It is still in its infancy, and the cost of preparations accounts for a low proportion According to the Chinese Pharmacopoeia, pharmaceutical excipients can be classified according to their origin, action, and route of administration. According to the form and use of the preparation, pharmaceutical excipients can also be divided into preparation stability excipients, solid preparation excipients, semi-solid preparation excipients, liquid preparation excipients and other pharmaceutical excipients. China's pharmaceutical excipients market is still in its infancy, accounting for a relatively low proportion in the preparation industry. According to the data of the 2019 Economic Operation Report of China's Pharmaceutical Industry, the main business income of China's chemical drug preparation industry was 857.61 billion yuan, the main business income of Chinese patent medicine manufacturing was 458.7 billion yuan, and the sales revenue of biological drug manufacturing was 247.92 billion yuan, totaling 1,564.23 billion yuan. In 2019, the size of China's pharmaceutical excipients market was 67.3 billion yuan, accounting for only 4.3% of the pharmaceutical preparation industry. 2.2 Policy support: consistency evaluation and normalization of centralized procurement to promote the development of the industry In recent years, in China's pharmaceutical industry policies, the consistency evaluation of generic drugs and the related review and approval policies of pharmaceutical excipients have far-reaching significance to the pharmaceutical excipients industry. With the development of generic drug consistency evaluation and associated review, pharmaceutical excipient companies will be transformed into close collaborators of downstream preparation companies, and the current status quo of "heavy raw materials and light excipients" will be improved. In March 2016, the State Council issued the "Opinions on Carrying out the Consistency Evaluation of the Quality and Efficacy of Generic Drugs", which requires that the evaluation of the pharmaceutical equivalence and bioequivalence of generic drugs be strengthened to ensure that the quality and efficacy of generic drugs are consistent with those of original drugs. In the composition of the preparation, in addition to the excipient effect on the preparation, the pharmaceutical excipients can also ensure that the drug is selectively transported to a certain tissue site with a certain procedure, and control the release rate of the drug, which directly affects the quality, safety and effectiveness of the preparation. The difference in excipients is likely to lead to inconsistency between the efficacy of drugs and the original products, and in this context, the indicators of excipients have also become one of the core tasks of consistency evaluation. Before the implementation of the related review and approval system, pharmaceutical excipients were subject to hierarchical approval, that is, new excipients were approved by the national regulatory authorities, and pharmaceutical excipients with existing national standards were approved by the provincial regulatory departments. The standards and requirements of the review process of the provincial regulatory departments are different, resulting in large differences in the quality of pharmaceutical excipients. The related review system requires centralized review by the State Drug Administration, and the standards are unified and the requirements are higher. Driven by the associated review and approval system, the pharmaceutical excipients market will be redistributed, and enterprises with non-standard production, low product quality and backward technical level will gradually lose their market competitiveness and lose market share, while enterprises with high production standards, product quality level, and strong technology and R&D strength will occupy an advantage in market competition and expand rapidly, and the industry concentration is expected to be improved. 2.3 Industrial chain and competitive pattern: upstream docking with chemical industry, agriculture and forestry There are many varieties of pharmaceutical excipients, and the use is different, and there are many kinds of raw materials in the pharmaceutical excipients industry, including oleic acid, sorbitol and other main raw materials for agriculture and forestry and petrochemical raw and auxiliary materials such as ethylene oxide, propylene oxide, propylene glycol, ethylene glycol, etc., so the upstream of the pharmaceutical excipients industry is mainly for the chemical industry and agriculture and forestry. For example, ethylene oxide and propylene oxide are downstream products of the petrochemical industry, and most of the suppliers are petrochemical enterprises. Its price is closely related to the price of oil and is greatly affected by the price of oil. The downstream industries of pharmaceutical excipients are mainly pharmaceutical industry enterprises. With the aging of China, the in-depth implementation of the new medical reform policy, and the improvement of people's income, the demand for pharmaceutical products still has a large space and gradually upgrades, the total market demand for pharmaceutical excipients in the pharmaceutical industry will continue to grow, the quality requirements for pharmaceutical excipients will continue to increase, and the requirements for upgrading and product innovation in the pharmaceutical excipients industry will gradually increase. The competition pattern of the domestic pharmaceutical excipient market is "small, scattered and chaotic". Compared with developed countries in foreign pharmaceutical industries, China's pharmaceutical excipients industry started late, the quality standards are not perfect, and the market is still in the stage of gradual standardization. At present, the participants in China's pharmaceutical excipient market can be divided into three categories: 1) international large-scale pharmaceutical excipient manufacturers, such as Merck KGaA, German Meijule Group, etc., have high brand awareness, strong financial strength and R&D strength, stable product quality, and advanced technical level; 2) Professional pharmaceutical excipient enterprises with a certain scale and standardized operation in China, such as Sunward Pharmaceutical Auxiliary, Huangshan Capsule, and Will Pharmaceutical; 3) A large number of non-specialized enterprises, such enterprises are generally small in scale, single in product, poor in standardization, and can only produce pharmaceutical excipients with simple processes. At present, the degree of specialization of pharmaceutical excipient manufacturers in China is low. According to statistics, only 23% of pharmaceutical excipient manufacturers have drug production licenses. 2.4 Main products and applications: the main Tween 80, polyethylene glycol series, and gradually expanded to high-end injection drug auxiliaries The company's pharmaceutical excipient products cover various pharmaceutical dosage forms such as injection and oral administration to ensure the safety, effectiveness and quality of pharmaceutical dosage forms. The main varieties include Tween 80 series, polyethylene glycol series and propylene glycol, etc. Polysorbate 80 (i.e., Tween 80) is the company's main medicinal adjunct, which is polyoxyethylene 20 sorbitan oleate formed by polymerization of sorbitan oleate and ethylene oxide. In pharmaceutical products, polysorbate 80 is mainly used as an emulsifier and solubilizer in pharmaceutical dosage forms such as injections, oral liquids, lotions, ointments, suppositories, tablets and capsules. Tween 80 is widely used in traditional Chinese medicine injections. Tween 80 is widely used in injections, especially in traditional Chinese medicine injections (complex composition, low solubility of active ingredients) due to its significant resistance to strong electrolytes and low toxicity and hemolytic effects. Polysorbate 80 is used as a solubilizer for traditional Chinese medicine injections, which can improve the transparency of the preparation, form a stable solution system, and effectively ensure the use of the active ingredients in the preparation. Polyethylene glycol is an important product component of the company. Polyethylene glycol products are made by polymerizing ethylene oxide with ethylene glycol. Polyethylene glycol products are soluble in water, ethanol and some organic solvents, stable to heat, acid and alkali, and do not react chemically with many chemicals, have good hygroscopicity, lubricity, adhesion, non-toxic, non-irritating. According to the different molecular weights and properties, the products range from colorless and odorless viscous liquids to waxy solids. As the molecular weight increases, its moisture absorption capacity decreases accordingly. The company's polyethylene glycol product series include: polyethylene glycol 400, polyethylene glycol 1000, polyethylene glycol 1500, polyethylene glycol 4000, polyethylene glycol 6000, of which injection-grade polyethylene glycol varieties include polyethylene glycol 300, polyethylene glycol 400, etc. In addition to traditional products, the company has continued to develop high-end pharmaceutical adjuvant varieties including phospholipid series, span series and squalene in recent years, mainly as solubilizers, emulsifiers and vaccine adjuvants. At present, the market share of domestic manufacturers of high-end pharmaceutical auxiliaries is still low, in addition to factors such as the relatively limited variety covered by manufacturers, it is still restricted by the inertia of R&D, production and use of domestic related pharmaceutical companies/the small number of related products on the market. 2.5 Operations 24Q1-3 The company's pharmaceutical excipient products contributed revenue of 250 million yuan, of which 100 million yuan was contributed by injection drug additives and 160 million yuan by non-injection, accounting for 25.4% of the total revenue, of which 9.8% was for injection and 15.5% was for non-injection. In recent years, the proportion of injectable drug supplements has continued to decline to 8.5% in 2023 after peaking in 2020 (12.2%), rebounding for the first time this year. In 24Q1-3, the company's injectable drug supplement sales volume was 360 tons (flat year-on-year), and non-injectable drug supplement was 7,696 tons (yoy+26%). In terms of price, the average sales price of 24Q1-3 injectable drugs was 274,000 yuan/ton, and the average price of non-injectable drugs was 20,000 yuan/ton, and the average sales price of injectable drugs was greatly fluctuated by changes in product structure, increasing by 38.7% year-on-year compared with 2023, while the price of non-injectable drugs was 9.3% lower than that in 2023. In 2023, the overall gross profit contribution of pharmaceutical auxiliaries accounted for 43.4%, a decrease of 14.4pct from 2022. From the perspective of change trend, the proportion of injectable drug auxiliaries has decreased, while the proportion of non-injectable drugs has increased slightly, but the proportion of gross profit of drug auxiliaries is still declining due to the growth of overall drug and auxiliary revenue. From the perspective of product gross profit margin, the overall gross profit margin of pharmaceutical auxiliary products in 2023 will be 47.5%, a decrease of 8.1pct from the annual level of 2022, which is expected to be mainly caused by the increase in depreciation of new pharmaceutical auxiliary production capacity. 3. Lubricating oil base oil Lubricating oil generally refers to non-volatile oily lubricants, which are industrial consumable materials, widely used in modern industry and transportation and other fields, and play the roles of lubrication, cooling, heat dissipation, sealing, corrosion resistance, rust prevention, cleaning, stress dispersion buffering, kinetic energy transmission and insulation for all kinds of mechanical equipment and transportation tools. 3.1 Product Classification and Industry Chain Composition: New categories drive revenue growth The type and quality of the base oil determine the basic performance of the lubricating oil, and provide the most basic lubrication, cooling, oxidation resistance, corrosion resistance and other properties of the lubricating oil. Depending on the field of application, lubricants can be divided into two categories: automotive lubricants and industrial lubricants. Industrial lubricants can be subdivided into power and electrical equipment lubricants, construction machinery lubricants, industrial machinery and equipment lubricants and other types of oils according to the application field. From the perspective of the composition of the industrial chain, the upstream of base oil is highly dependent on petrochemical enterprises, and the downstream is widely distributed according to the use scenarios and customers of lubricating oil. 3.2 Policy support: encourage the development of high-end lubricants and industrial scale From the perspective of relevant policy history, China's lubricating oil industry policy continues to increase, and the policy continues to guide the development of the industry, which is mainly based on the development of high-end lubricating oil and large-scale industrial development. During the "Twelfth Five-Year Plan" period, the state focused on the development of synthetic base oil and civil aviation lubricant preparation technology, waste lubricating oil regeneration technology, etc.; During the "13th Five-Year Plan" period, the state encouraged the production of high-value-added products from low-temperature Fischer-Tropsch synthetic oil and the industrialization demonstration of high-temperature Fischer-Tropsch synthesis technology; During the "14th Five-Year Plan" period, the state focused on promoting the high-quality development of the petrochemical industry and accelerating the development of high-end lubricants. 3.3 Related products: widely used in high-tech fields The company is an early company to enter the field of ether and ester synthetic lubricating base oil in the synthetic lubricating base oil industry, and its products have been recognized as Jiangsu Famous Brand Product Certificate, Jiangsu High-tech Product Identification Certificate, Jiangsu New Product and New Technology Appraisal and Acceptance Certificate. The American Petroleum Institute classifies lubricant base stocks into five categories, with the company producing the highest synthetic lubricating base stocks. The company's products are suitable for high temperature, low temperature, high pressure, high humidity and other harsh working conditions, and can be used to manufacture lubricants for aviation, aerospace, navigation, wind power, high-speed rail, robotics and other high-tech fields. 3.4 Operation In 2023, the company's synthetic lubricant base oil sales volume increased by 18.1% year-on-year, and sales revenue increased by 8.5% year-on-year. The increase in sales was mainly due to the increasing urbanization rate in Southeast Asian countries, which drove the demand for air conditioning and refrigeration, as well as the increasing domestic demand for wind power generation, and the corresponding increase in the use of lubricants. Among them, wind turbine gear oil and grease are generally realized by synthetic lubricating base oil, which also brings about the growth of demand for the company's related products. 24Q1-3 Lubricant base oil sales revenue growth continued. In terms of revenue contribution, 24Q1-3 lubricant base oil contributed a total of 700 million yuan, of which the mechanical revenue was 520 million yuan and the non-mechanical revenue was 180 million yuan, accounting for 69.5% of the total revenue (51.6% for machinery and 17.9% for non-machinery). From the perspective of gross profit changes, the proportion of base oil gross profit has continued to increase since 2020, from 36.5% in 2020 to 51.3% in 2023, accounting for more than 50% for the first time in recent years. In addition to maintaining rapid revenue growth, the increase in gross profit ratio was also affected by the continuous improvement of product gross profit margin.