Introduction: R&D investment in the first quarter was 231 million, and we continued to increase the number of innovative drugs and inhalation preparations.

Author: Guantao

Edited by Xiaobai

After trading on April 17, Borui Pharmaceutical (688166. SH) officially released its first quarter report for 2025, with a total revenue of 249 million yuan, a year-on-year decrease of 26.81%, and a net profit of 12.9598 million yuan, a year-on-year decrease of 79.77%, and the performance seems to be not as stable as the 2024 annual report just announced.

If you want to objectively and reasonably evaluate the performance of the first quarter, you must start with the reasons behind the data.

Fluctuations in oseltamivir demand dragged down performance, and long-term growth momentum continued unabated

As a biopharmaceutical enterprise that integrates APIs and preparations, and combines high-end generic drugs and innovative drugs, Borui Pharmaceutical's current revenue still mainly comes from APIs and preparation products. Fengyunjun has also mentioned many times that this is the company's ballast business.

The company's first quarter report for 2025 shows:

The revenue of API products was 181 million, a year-on-year decrease of 26.69%. Among them, the revenue of antiviral products decreased by 70.08%, mainly due to the decline in demand and price of oseltamivir APIs; Revenue from immunosuppressive products and other products increased, while revenue from antifungal products declined.

The revenue of preparation products was 42.7762 million yuan, a year-on-year decrease of 24.40%, which was also mainly due to the decline in demand and price of oseltamivir preparations.

The technology income was 373,500 yuan, a year-on-year decrease of 97.67%, which can also be seen in the just-released 2024 annual report, which is caused by the company's initiative to adjust resource allocation and concentrate its own R&D projects; The income from equity sharing was 14.8883 million yuan, a year-on-year increase of 8.96%.

Dismantling the reasons for revenue fluctuations can be found that the decline in demand and prices of oseltamivir APIs and preparations is the main reason for the change in revenue in the first quarter, followed by the fluctuation of antifungal products.

As an anti-influenza "miracle drug", the market demand for oseltamivir is closely related to the trend of influenza. In the post-epidemic era, with the successive outbreaks of influenza A and influenza B, oseltamivir will usher in a peak of drug use in 2023, driving the revenue of Borui Pharmaceutical's antiviral products to increase by 169.97% year-on-year.

(Source: Choice data, chart: Market Cap APP).

This means that the revenue fluctuations of antiviral products in the first quarter are normal. We can't expect the flu virus to be as rampant every year as it was in 2023.

On the other hand, influenza outbreaks are inherently unpredictable. For Borui Pharmaceutical, the most important thing is that it is not only a major supplier of oseltamivir API market in China, but also an important player in the formulation market. The company has also proven its ability to ensure a stable domestic supply in the event of a sudden outbreak of influenza.

As for the revenue fluctuations of antifungal products, Borui Pharmaceutical said that on the one hand, due to the strong temporary demand of customers in the same period last year, and on the other hand, the fluctuations in commercial demand of customers in the first quarter made the revenue decrease compared with the same period last year.

It is difficult for us to speculate on what will happen next based on the performance of a single quarter, judging from the 2024 annual report, the revenue of antifungal products increased by 60.28%.

According to the forecast of the Prospective Industry Research Institute, by 2027, the market size of China's systemic antifungal drugs will exceed 10 billion yuan, with a compound growth rate of about 8.5%. Therefore, not to mention the growth of demand, the return of demand to stability is a high probability event.

(Annual Report 2024

From the perspective of a longer cycle, although there are fluctuations, the trend of stable upward growth of Borui Pharmaceutical APIs and preparation products is as always. In 2024, the revenue scale of API plus preparation products has reached 1.149 billion, a record high.

(Source: Choice data, chart: Market Cap APP).

The stable and continuous rhythm of product declaration and approval is the driving force for the company's APIs and preparations.

In the first quarter of 2025 alone, Borui Pharmaceutical has obtained the approval notice of the marketing application of dopamine hydrochloride API, isaconazole sulfate API, and reganoxen API, and the spray inhalation drug delivery device has obtained the medical device registration certificate; Tiotropium bromide inhalation spray, ferric carboxymaltose injection, and vorcycline soft capsules were declared in China.

In the international market, posaconazole polymorph I API and non-dalmicin API were also submitted to Europe for ASMF in the first quarter.

In addition to the product echelon, the drug pipeline is also continuously enriched, and obstetrics and gynecology carboprost tromethamine injection, dienogest tablets, iron supplements carboxymaltose raw materials and injections have been successively marketed or launched domestic declarations.

Innovative drugs and inhalation preparations support the imagination

Fluctuations in revenue are one of the reasons for the change in net profit. The second reason is the gross profit margin, which was 43.9% in the first quarter, a year-on-year decrease of 13.2 percentage points.

In addition to the decline in the gross profit margin of oseltamivir APIs and preparations, the sharp decline in high-gross margin technical service revenue and the periodic fluctuation of gross profit margin of major products have also affected the overall gross profit margin.

(Source: Q1 2025

The above reasons, coupled with the rigid expense items, Borui Pharmaceutical's profit fluctuations in the first quarter are indeed relatively large.

However, Fengyunjun also found that in the first quarter of 2025, Borui Pharmaceutical's R&D investment will be 231 million, a year-on-year increase of 255.09%, and the intensity of R&D investment is still increasing.

As we all know, R&D is the foundation of a pharmaceutical company, especially an innovative pharmaceutical company.

As of the end of March 2025, Borui Pharmaceutical has applied for a total of 522 patents, including 462 invention patents; It has a total of 272 valid patents, including 226 invention patents, covering the United States, Japan, Canada, Europe, South Korea and other countries and regions.

In the first quarter of the past year, the company filed 7 new domestic patent applications, 2 new domestic patent authorizations, 9 new foreign patent applications, and 1 new foreign patent authorization.

When it comes to R&D, we have to reintroduce the two major new product lines that Borui Pharmaceutical has focused on in recent years, innovative drugs and inhalation preparations, including Borui Pharmaceutical's technical service business that actively contracted its gross profit margin of more than 80%, which is also to tilt more resources to these two areas.

"To develop innovative drugs with global independent intellectual property rights in the field of metabolic diseases, and to build an internationally competitive product line in the field of respiratory inhalation-based drug-device combinations" are the two key R&D goals of the company.

In 2024, the total R&D investment of innovative drugs and inhalation preparations accounted for 62.78% of the total investment, a year-on-year increase of 77.37%, of which innovative drugs increased by 97.30% year-on-year, and inhalants increased by 52.27% year-on-year. The increase in R&D investment in the first quarter of this year was also mainly invested in these two areas.

(Source: Q1 2025

In the field of innovative drugs, Borui Pharmaceutical's current R&D products include innovative drugs for the treatment of type 2 diabetes and weight loss BGM0504 injections, oral BGM0504 tablets, and multi-target innovative drug BGM1812 based on amylin and GIP/GLP-1.

At this stage, the fastest progress is BGM0504 injection, as a dual agonist of GLP-1 and GIP receptors independently developed by the company, it has shown potential for multi-disease treatment in the fields of glucose control, weight loss and treatment of non-alcoholic steatohepatitis.

As of the end of March, the domestic phase III clinical trial of BGM0504 injection for the treatment of type 2 diabetes mellitus and weight loss is in the enrollment and follow-up stage, and the domestic phase III clinical study will be completed and can be produced and marketed in China after being reviewed and approved by the State Food and Drug Administration.

The indication for weight loss of BGM0504 injection has been approved for IND in the United States, and the clinical study of US bridging currently carried out in the United States has been basically completed and the clinical summary report is underway. The hypoglycemic indication of the product has been submitted by the partner to the Indonesian official IND application and is currently under review.

The progress of inhalers is faster, and it is expected that the volume will be increased in 1-2 years.

Budesonide suspension for inhalation, tiotropium bromide olodaterol inhalation spray, and tiotropium bromide inhalation spray have been declared in China in 2024; Tiotropium bromide inhalation powder aerosol and salmeterol ticasone inhalation powder aerosol (50μg/250μg specification) have completed BE trials, and the latter is in phase III clinical trials.

The

production capacity related to BGM0504 injections and inhalers is also in full swing. Of course, before the concentrated release of production capacity, the depreciation of these orderly completed assets will also have an impact on profit fluctuations to a certain extent.

Diabetes is the world's largest chronic disease, and GLP-1RA is the hottest R&D target at this stage, which is currently mainly used for the treatment of type 2 diabetes mellitus (T2DM) and weight loss. China's T2DM drug market is expected to grow from 53.4 billion in 2022 to 109.8 billion in 2032, with a compound annual growth rate of 7.5%.

According to data from CIC Consulting, the number of overweight and obese people in China has increased from 213 million in 2018 to 259 million in 2022, and is expected to reach 330 million by 2032.

Chronic obstructive pulmonary disease (COPD) is the third leading cause of death in the world and one of the major chronic diseases, with 500 million patients worldwide being able to benchmark diabetes, and the number of COPD patients in China will also exceed 100 million in 2021.

Inhalation preparations are the mainstream therapy for the treatment of respiratory diseases, and data from Minenet show that the sales scale of inhalants in the hospital market has exceeded 20 billion in recent years, and budesonide suspension is leading the way with sales of more than 2 billion, and the domestic inhaler market demand has great potential.

Whether it is in the field of metabolic diseases or inhalers, Borui Pharmaceutical has not generated specific revenue at present, but as the company has invested heavily in R&D, layout and good progress in recent years, it has left enough imagination and attention space for the market in addition to the original basic plate of APIs and preparations.