Major active pharmaceutical ingredient (API) manufacturer Chunghwa Chemical Synthesis & Biotech Co. Ltd. continues to face challenges in its operations this year, including ongoing customer hesitation regarding EPAE fish oil and a significant reduction in purchases of the immunosuppressant Tacrolimus due to issues with a major Indian customer's FDA inspection. However, the management remains optimistic about the upward potential of its two major products. Expansion of production capacity for the antifungal agent caspofugin is expected to be completed in the second quarter, with long-term contracts signed with new European customers and potential inquiries from China. Doubling shipment volume is anticipated to be the main driver of growth this year. Additionally, expansion of production for the anticancer drug EVE is expected to be completed by the end of the year, potentially bringing new customers in the existing U.S. market and planning for expansion into Europe.
In 2023, the combined revenue amounted to NT$2.086 billion, a decrease of about 1% compared to the previous year. The gross profit margin decreased from 45% to 36%, and operating profit decreased by 39% to NT$280 million. After-tax net profit was NT$264 million, a 43% decrease from the previous year, with earnings per share of NT$3.42, significantly lower than the NT$6.01 of the previous year. The board of directors has proposed a cash dividend of NT$0.8.
In terms of revenue composition, synthetic and purified products (mainly EPAE) accounted for 62%, immune preparations (mainly Tacrolimus) 16%, and anticancer and other products (mainly EVE) 22%, compared to 49%, 22%, and 29%, respectively, in the previous year. The proportions of Tacrolimus and EVE have both declined.
Management of CCSB indicated that Tacrolimus is mainly shipped to Japan and India. The Japanese market is stable with good margins, while Indian customers mainly sell to the United States. Last year, customer purchases decreased significantly due to issues with the FDA inspection of the plant, and it is expected that orders will continue to decrease this year. Analysts stated that a major customer, Accord, had its bioequivalence rating downgraded by the FDA from AB to BX in September 2023 due to high blood peak concentration (Cmax), which could affect sales. The impact is expected to continue into this year.
Regarding EPAE, a fish oil lipid-lowering drug, the ban on fishing during the Peruvian fishing season in June last year led to a continuous increase in raw material prices. Experts believe that there is little chance of a price rollback in the next six months. CCSB admitted that the company wants to reflect the price increase, but customers are less receptive. Currently, they are adopting a wait-and-see attitude, possibly waiting until inventory levels reach a certain level before negotiating. Shipment volume for this year is viewed conservatively.
However, the management remains bullish on the performance of its two major products this year. The antifungal agent caspofugin is currently undergoing equipment validation for scale-up, with production capacity expected to be expanded by the second quarter, reducing costs. Long-term contracts have been signed with new European customers, and registrations are underway in China or other non-regulatory areas. Shipment volume is expected to grow significantly this year, potentially doubling, and it will be the main driver of growth this year.
Another product, the anticancer drug EVE, is expected to complete its expansion by the end of the year, further reducing costs. In addition to the existing U.S. market, new customers are expected, and plans are underway for expansion into Europe. The benefits are expected to materialize by the end of the year, with expansion opportunities in mainland China or other regions.
Resource (Mandarin):
