First-rate Red's Semi-annual Report: Outstanding Profitability, Strong Parent Company Profit Growth of 31.06%, Recent Successful Bid for Multiple New Products in National Procurement, Strong Future Performance Assurance

The company achieved revenue of 905 million yuan in the first half of 2022, which was basically the same as the same period last year. Specifically, the revenue from pharmaceutical manufacturing was 876 million yuan, a year-on-year increase of 5.06%, significantly higher than the industry average (according to data from the National Bureau of Statistics, the production of pharmaceutical manufacturing above designated size increased by 0.6% year-on-year). The pharmaceutical agency business was greatly affected by the COVID-19 pandemic in the first half, resulting in a decline in revenue. However, this business does not account for a high proportion of the company's total revenue, and the company's long-term sustainable profitability has not been affected. The net profit attributable to the parent company was 155 million yuan, a year-on-year increase of 31.06%. Both gross profit margin and net profit margin increased. The company's gross profit margin was 87.28%, a year-on-year increase of 2.22%, and the net profit margin was 15.67%, a year-on-year increase of 27.54%.

The company's R&D investment in the first half of 2022 was 70 million yuan, a year-on-year increase of 33.13%. The R&D results were significant, with 6 new varieties and 8 registration approvals added, as well as 3 new authorized invention patents. Focusing on the layout of 'characteristic pediatric drugs + innovative chronic disease drugs + biogenetic vaccines', the company currently has 22 pediatric drug registration approvals and 17 pediatric drug projects under research; there are 44 chronic disease drug registration approvals, including 24 projects such as the globally innovative AR882 vaccine. Biogenetic vaccines take recombinant protein nanoparticle vaccines as their technological innovation route, with 7 projects under research, including quadrivalent influenza vaccines and RSV vaccines. In addition, the company emphasizes innovation transformation, having signed agreements with Guangzhou Laboratory and Bio Island Laboratory to jointly build an innovation drug technology industrial transformation center and an innovation vaccine technology industrial transformation center in the Guangdong-Hong Kong-Macao Greater Bay Area.

During the reporting period, Yipinhong's investigational innovative drug AR882 for hyperuricemia & gout completed dosing in both 25 mg and 50 mg dose groups and obtained PK/PD study data for the 25 mg dose group. The next step will be to conduct a global multi-center Phase III clinical trial. AR882 is a globally competitive selective urate transporter 1 (URAT1) targeted innovative drug, positioned as a first-line treatment for hyperuricemia and gout. It is currently undergoing Phase IIb clinical trials globally and Phase I clinical trials in China. URAT1 inhibitors work by promoting the excretion of uric acid to lower uric acid levels. Since 90% of hyperuricemia cases are caused by renal uric acid excretion defects, URAT1 inhibitors may be a more effective treatment for patients with hyperuricemia and gout. Currently, the URAT1 inhibitors approved for use globally mainly include benzbromarone, probenecid, and rasburicase, but they generally have drug safety issues.

As a new generation uric acid excretion promoter, AR992 did not exhibit any adverse events of liver or kidney toxicity in clinical Phase I and IIa trials, and its uric acid-lowering effect is superior to that of first-line clinical uric acid-lowering drugs. According to Frost & Sullivan data, in 2020, the number of people suffering from hyperuricemia and gout in China reached as high as 170 million, with a market size of 2.8 billion yuan for gout medications in China. The number of gout patients in China is increasing year by year, especially after the launch of new URAT1 drugs, which is expected to lead to rapid growth in the gout medication market, with the market size expected to increase to 108 billion yuan by 2030.

As a leading domestic pediatric pharmaceutical company, Yipinhong possesses multiple advanced pediatric pharmaceutical technology platforms. Through technological innovations such as drug suspension technology, granule flavor masking technology, and precise dosing, it can overcome clinical challenges such as poor compliance with pediatric medications and numerous safety hazards, providing precise treatment for children's diseases. The pediatric pharmaceutical product portfolio is rich and can meet the clinical diagnosis and treatment needs for common pediatric diseases in the fields of respiratory, anti-infection, anti-allergy, and digestive health, covering all age groups from 0 to 14 years old.

In the past two years, the state has issued several policies to encourage the development of children's medications, including the 'Outline for the Development of Children in China (2021-2030)', the 'Implementation Plan for Implementing the Outline for the Development of Women and Children in China (2021-2030)', and the 'Regulations for the Implementation of the Drug Administration Law of the People's Republic of China (Draft for Soliciting Opinions on Revision)', among others. Recently, children's medications have received another favorable policy with the National Health Commission issuing the 'Notice on Further Strengthening Medication Safety Management and Improving Rational Drug Use Levels', emphasizing the protection of medication safety for key populations. Medical institutions can select children's medications without being restricted by the 'one product, two regulations' and the total number of drug varieties, which is extremely beneficial to the sales of one-product red children's medications.

Recently, a clinical study on the treatment of influenza in children with Qinxiang Qingjie Oral Liquid, a pediatric-specific drug developed by Yipin Hong, was published in the international SCI journal Translational Pediatrics. The results confirmed that the use of Qinxiang Qingjie Oral Liquid alone can shorten the clinical recovery time and complete fever subsidence time in children with influenza. Its efficacy is comparable to that of the commonly used anti-influenza drug oseltamivir in clinical practice, and it has better improvements in symptoms such as sore throat and constipation. It also has high safety and good compliance.This is the first clinical study in China to validate the efficacy of a pediatric-specific drug against influenza in children at the highest level of evidence-based practice, by comparing it with oseltamivir.

According to information released by the National Influenza Center, the positive test rate for influenza viruses in southern provinces continued to rise in June, leading to a surge in demand for anti-influenza drugs. Children are susceptible to influenza and also at high risk for severe cases of the disease. Traditional Chinese medicine (TCM) has obvious advantages in the prevention and treatment of childhood influenza, but there is a general lack of high-level evidence-based support. The publication of high-quality evidence this time is beneficial for the clinical promotion of the product.

Currently, Qinxiang Qingjie Oral Liquid has been recommended by authoritative guidelines and COVID-19 prevention and control plans in multiple provinces, including the 'Clinical Diagnosis and Treatment Guidelines for Acute Upper Respiratory Tract Infections in Children with Chinese Patent Medicines (2020)', 'Expert Consensus on the Integrated Traditional Chinese and Western Medicine Prevention and Treatment of Pediatric Influenza (2020)', 'Beijing Municipality's COVID-19 Prevention and Treatment Plan with Traditional Chinese Medicine (Trial Sixth Edition)', 'Guangdong Province's Diagnosis and Treatment Guidelines for Hand, Foot and Mouth Disease (2018 Edition)', etc., which were compiled by experts under the auspices of the National Administration of Traditional Chinese Medicine.

In addition to the national procurement, the company's produced pantoprazole sodium for injection, doxofylline injection, and valsartan and amlodipine tablets (I) have obtained the qualification to be included in the drug alliance procurement in thirteen provinces (regions, municipalities, and military regions) including Henan, Shanxi, Inner Mongolia, Hubei, Hunan, Guangxi, Hainan, Guizhou, Qinghai, Ningxia, Xinjiang, and Yunnan. The company has also obtained the new qualification to be included in the online bidding for 12 exclusive pediatric drugs in 29 provinces and cities.

In addition, Yipin Hong is actively expanding diversified sales channels. In the over-the-counter (OTC) market, the company has covered approximately 16,000 pharmacies, including about 8,300 chain pharmacies; it has also established its own direct-operated Tianmao flagship store and JD.com flagship store. In the hospital terminal market, the company newly developed about 5,310 hospital terminals of various categories in the first half of 2022, including about 1,138 hospitals at the secondary level and above.As the epidemic eases and innovative R&D and consumer healthcare gradually recover, coupled with the incremental growth from new channels, the company's performance in the second half of the year is promising.