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Yangtze Business Daily News● Yangtze Business Daily reporter Shen Yourong

As the industry recovers, Kanglong Chemical (300759.SZ)'s operating performance continued its growth momentum.

On the evening of July 21, Kanglong Chemical released its performance forecast. In the first half of this year, the company expects to achieve operating income of approximately 5.471 billion yuan to 5.640 billion yuan, a slight increase year-on-year. The company expects to achieve a net profit attributable to shareholders of the listed company (hereinafter referred to as "net profit") of more than 1 billion yuan, a year-on-year increase of more than 30%.

Operating income increased slightly, while net profit increased significantly, which was related to investment income. In June this year, Kanglong Chemical completed the sale of equity in its joint-stock subsidiary and obtained a profit of approximately RMB 560 million.

Kanglong Chemical mainly engages in pharmaceutical R&D outsourcing services. After years of development, it has become a strong competitor in the industry. By the end of 2023, the company will serve more than 2,800 customers worldwide. In terms of R&D personnel, more than 18,200 employees are professionally engaged in R&D, which is close to 90% of the company's total employees, and are distributed in many locations around the world.

Overall, Kanglong Chemical has good profitability. Since its listing in 2018, the company has achieved a cumulative net profit of 6.926 billion yuan.

Profit of RMB 690 million from the sale of a joint-stock company

Kanglong Chemical's investment has brought considerable returns.

According to the latest performance forecast, in the first half of this year, Kanglong Chemical expects to achieve operating income of approximately RMB 5.471 billion to RMB 5.640 billion, a year-on-year increase of 0% to 3%; the net profit is expected to be approximately RMB 1.055 billion to RMB 1.143 billion, an increase of RMB 286 million to RMB 357 million compared with approximately RMB 786 million in the same period last year, a year-on-year increase of 34% to 45%.

However, the company estimates that its net profit after deducting non-recurring gains and losses (hereinafter referred to as "net profit after deducting non-recurring gains and losses") will be approximately RMB 445 million to RMB 483 million, which will be a decrease of RMB 309 million to RMB 271 million compared with RMB 754 million in the same period last year, a year-on-year decrease of 36% to 41%.

The first quarter report of this year showed that the company's operating income in the first three months was 2.671 billion yuan, a year-on-year decrease of 1.95%; the net profit and non-net profit were approximately 231 million yuan and 187 million yuan respectively, a year-on-year decrease of 33.80% and 46.01% respectively.

Kanglong Chemical gave a more specific explanation of the operating performance in the first half of the year. In the first quarter, operating income declined. In the second quarter, with the initial recovery of investment and financing in the global biopharmaceutical industry, the company's operating income is expected to increase from the first quarter on a quarter-on-quarter basis, and to achieve a slight year-on-year increase from the second quarter of 2023. In terms of sectors, laboratory services benefited from the recovery of new orders, with revenue reaching a record high in the second quarter; CMC (small molecule CDMO) service revenue increased from the first quarter on a quarter-on-quarter basis, and more projects are expected to be delivered and revenue recognized in the second half of this year; clinical research service revenue, large molecule and cell and gene therapy service revenue increased both quarter-on-quarter and year-on-year.

Overall, in the first half of the year, the company's operating income is expected to decline slightly year-on-year; the company's global customer inquiries and visits have rebounded compared with the same period in 2023, and the amount of new orders has increased by more than 15% year-on-year. Under the combined influence of a slight year-on-year decline in operating income, personnel growth in the second half of 2023, new syndicated loans, and the commissioning of new production capacity at the end of 2023 and the first half of this year, non-net profit has declined year-on-year.

As for the increase in net profit, it was mainly due to the investment income from the sale of the company's equity-holding company. The company's equity-holding company PROTEOLOGIX was sold to Johnson & Johnson through a merger and acquisition. The company cooperated with PROTEOLOGIX to transfer all its equity in it for a consideration of approximately US$102 million. This matter affected the company's non-recurring gains and losses in the first half of this year by approximately RMB 560 million.

According to a previous announcement, Kanglong Chemical invested in Proteologix in September 2021 and later made additional investments, totaling US$7 million. Kanglong Chemical will make a total profit of 690 million yuan from this sale.

Nearly 90% of employees are engaged in R&D services

Kanglong Chemical, which has made huge profits from investments, is also seeing its main business improve.

According to the above statement by Kanglong Chemical, new orders increased in the second quarter of this year, which is related to its strong market competitiveness.

Kanglong Chemical is a leading full-process integrated pharmaceutical R&D service platform with global operations. It is committed to helping customers accelerate drug innovation and has formed four major business platforms: laboratory services, CMC (small molecule CDMO) services, clinical research services, and large molecule and cell and gene therapy services. The company has 21 R&D centers and production bases in China, the United Kingdom and the United States, providing full-process integrated drug research, development and production services from drug discovery to drug development.

According to the disclosure, the company has focused on improving the synergy of the service platform in both vertical and horizontal directions to meet the needs of the market and customers. Vertically, by strengthening the synergy of the same discipline at different stages of new drug research and development, seamless docking is achieved. Horizontally, by strengthening the collaborative cooperation of different disciplines at the same stage of new drug research and development, the professional level of the disciplines is improved, the service content is enriched, and the mutual transformation between disciplines is promoted. The company has built a multi-therapy, full-process integrated service platform for small molecule drugs, macromolecule drugs, cell and gene therapy, and is committed to becoming a global leader in multi-therapy drug research and development services.

In order to continuously improve and consolidate the competitive advantage of the company's business, Corning Chemicals continues to introduce high-level global talents and continuously improves its global service capabilities.

By the end of 2023, Kanglong Chemical will have a total of 20,295 employees, an increase of 814 from the beginning of the year, of which 18,239 are R&D, production technology and clinical service personnel, accounting for 89.87% of the company's total number of employees. The company has 11 operating entities in the UK and the US, with more than 1,600 employees.

Kanglong Chemical said that the company relies on a full-process integrated service platform and uses advanced R&D and production technologies to give full play to the close collaboration capabilities of China, the United Kingdom and the United States to meet the various needs of global customers at different R&D stages. In 2023, the company served more than 2,800 global customers, of which customers using the company's multiple business segments contributed 8.641 billion yuan in revenue, accounting for 74.89% of the company's operating income.