Austar Lifesciences Announces 2022 Interim Results

Benefiting from the Growth in the Business Segment of Liquid and Bioprocess System and the Increased Capability of Comprehensive Integrated Solutions, its Businesses Grew Steadily

Revenue Increased by 29.1% to RMB 1,104 million 

Operation Highlights

HONG KONG, Sept. 15, 2022 /PRNewswire/ -- AUSTAR Group ("AUSTAR" or "Company"), a technology-based pharmaceutical engineering solution provider, together with its subsidiaries (collectively the "Group") (HKEX Stock Code: 6118.HK), announced its unaudited interim results for the six months ended 30 June 2022 ("Period under Review").

BUSINESS REVIEW

For the Period under Review, the Group's total revenue amounted to approximately RMB1,104.0 million, representing a substantial increase of approximately 29.1% from the corresponding period in 2021, all business segments recorded an increase, in particular a significant increase in revenue was recorded from the business segments of each of Liquid and Bioprocess System, Powder and Solid System, GMP Compliance Service and Distribution and Agency of Pharmaceutical Equipment.

During the Period, the Group's order-in-take increased to RMB 1,346.9 million, representing an increase of approximately 10.2% as compared to that of the corresponding period in 2021. The order-in-take of the business segments of Powder and Solid System and Distribution and Agency of Pharmaceutical Equipment experienced a significant increase of 58.8% and 68.4% respectively. The order-in-take of the business segments of Clean Room and Automation Control and Monitoring System and GMP Compliance Service achieved a rapid increase of 17.1% and 19.2% respectively.

RESULTS OF OPERATIONS BY BUSINESS SEGMENT

Liquid and Bioprocess System

In February 2022, the Group successfully acquired certain technology and ancillary business of expertise in sterile liquid and powder filling line, which further enhanced the Group's business portfolio in the integration of the filling line system and freeze-dryer system and also increased the capability of providing integrated solutions for the filling and freeze-drying of aseptic products, thereby strengthening the Group's competitive edges. This acquisition will bring about more opportunities in the long term. During the Period under Review, the Group's revenue from the business segment of Liquid and Bioprocess System increased by 35.2% to approximately RMB497.8 million. The increase was mainly attributable to the increase in the closing amount of backlog by 31 December 2021, and the high project execution efficiency by reducing delivery cycle. The non-wholly owned subsidiary H+E Pharma is also a new growth pole.

Clean Room and Automation Control and Monitoring System

Through being oriented as a turnkey solution provider, and building a unique competence with the integration solutions capability, during the Period under Review, the Group built a complete engineering management team and integrated the technical strength, and is making project executions in emerging countries more convenient by regional and local resource support. This will become the basis of fast growth in the business segment of Clean Room and Automation Control and Monitoring System. During the Period under Review, the order-in-take amount of the business segment of Clean Room and Automation Control and Monitoring System increased rapidly by approximately 17.1% to approximately RMB317.1 million. The Group's revenue from the business segment of Clean Room and Automation Control and Monitoring System increased by 8.8% to approximately RMB240.9 million for the Period under Review. The increase was mainly attributable to the increase in the order-intake in the business segment of Clean Room and Automation Control and Monitoring System and higher project execution efficiency.

Powder and Solid System

During the Period under Review, the business segment of Powder and Solid System achieved rapid growth and the amount of order-in-take increased by 58.8% year-on-year to RMB224.6 million, which is close to the full year of 2021 order-in-take amount. Such increase was contributed by the digitisation of API and OSD production lines, and the technical accumulation of the Group in the area. At the same time, with the international technical team built to support international business development, Automated Guided Vehicle (AGV) and robot partners, the Group will have a strong and core competence in the market. The Group's revenue from the business segment of Powder and Solid System increased significantly by 96.4% to approximately RMB108.8 million for the Period under Review. The increase was mainly attributable to the increase in the order-in-take in the business segment of Powder and Solid System for the Period under Review, a part of which was recognised as revenue and the high project execution efficiency by the improving capacities with digitalisation and robotic technologies.

GMP Compliance Service

Driven by government regulations and globalisation, the business segment of GMP Compliance Service of the Group has enlarged its scope to full life cycle of the pharmaceutical industry. Accompanied by the trend of stricter regulations and standards, there is a huge potential in compliance consultancy service. During the Period under Review, the order-in-take amount of the business segment of GMP Compliance Service increased by 19.2% to approximately RMB58.5 million. The Group will also devote to capturing more business opportunities in compliance services and engineering consulting services by providing high quality service. The Group's revenue from the business segment of GMP Compliance Service increased by 54.4% to approximately RMB44.3 million for the Period under Review. The increase was mainly attributable to the increase in the closing amount of backlog by 31 December 2021 and the increase in the order-in-take in the business segment of GMP Compliance Service, a part of which was recognised as revenue during the Period under Review, and the service brand has been promoted, improved project execution efficiency by the application of software.

Life Science Consumables

The Group's revenue from the business segment of Life Science Consumables increased by 13.0% to approximately RMB195.5 million for the Period under Review, which was mainly attributable to the increase in the closing amount of backlog by 31 December 2021, the increase in the order-in-take in the business segment of Life Science Consumables for the Period under Review, and continuous launching of more diversified life science consumables and services with the latest technology. With the Group's promotion of LAB IT products, and continuous launching of new products and services with the latest technology, including cleanroom contamination control products of disposable sterilised rubber gloves, sterile pre-saturated wipes, disposable sterile masks, these efforts are expected to bring about more rapid business increase in corresponding markets.

Distribution and Agency of Pharmaceutical Equipment

The Group was highly recognised by customers and will continue to engage in the distribution of various types of high-end pharmaceutical equipment together with its joint ventures and overseas business partners. During the Period under Review, the order-in-take amount of the business segment of Distribution and Agency of Pharmaceutical Equipment achieved a significant increase by 68.4% to approximately RMB33.3 million. The Group's revenue from the business segment of Distribution and Agency of Pharmaceutical Equipment increased significantly by approximately 93.5% to approximately RMB16.7 million for the Period under Review which was mainly attributable to the increase in the closing amount of backlog by 31 December 2021, and expansion of business to incorporate a wider scope to meet the after-sales services of imported equipment.

The volume of service business of the Group has been further increasing. A new business brand has been established to cultivate the market awareness of preventive and facility-upgrading services. The service business has been evolving to incorporate a wider scope to meet clients' needs in terms of facility management services, after-sales services of imported equipment etc. Under the strict operation and maintenance requirements set by regulations, together with clients' limited resources, the Group has consolidated technical talents. A dedicated service business growth initiative team was established in the first half of 2022 to adopt a more aggressive approach and action plans to increase the service business revenue. It is believed that the Group's service business is to generate new significant streams of income and higher margin of profits in the coming future. As the ratio of the Group's service business is increasing, the gross margin contributions therefrom would become more significant.

To address the development and trend that emerging countries speed up their pace in digitalisation transformation, the Group has not only spent serious efforts in developing talents and skills in segment of technologies in the last several years, but also created a sophisticated structure of the Research and Manufacture Operation Integrated Information System (REMOIIS) platform to facilitate software vendors and partners to offer solutions to clients, with the Group's capacity to act as system integrator and provide infrastructure including data processing and analytics, by covering the whole product life cycle.

H+E Pharma GmbH ("H+E Pharma"), the Group's majority-controlled subsidiary at Stuttgart, Germany, was able to consolidate the service and spare part businesses, which was carved out from Hager+Elsasser to serve European clients directly. H+E Pharma has been successful in securing relatively good orders on water purification equipment and systems from reputed European clients since 2021 that its wholly-owned subsidiary, a manufacturing arm of H+E Pharma, has been committed to building up its capacity and competence to keep up with the momentum of order-in-take, and large orders are expected to continue this year.

The Group's new production sites under construction in Shijiazhuang and Shanghai are expected to become operational in the third and fourth quarter of 2022 respectively. This expansion strategy is in line with our expected growth in equipment and system sales and it is believed to be able to meet the growth demand in the coming 5 years. Overall upgrading of manufacturing conditions will provide more space for new product research and manufacturing, and offer opportunities for improvement, including production process and quality management, digitalisation tools enhancement, and key production processes optimisation in the new facility.

With regard to research and development, as at the end of June 2022, the Group has obtained 350 patents. During the Period under Review, the Group obtained 39 registered patents, and applications for 82 patents are currently in progress. The Group's stainless steel bioreactor series has entered the stage of large-scale manufacturing and execution. Investment has been made in the R&D of the Alternating Tangential Flow (ATF) equipment-perfusion system, which such equipment can increase the competitiveness of the Group's core equipment of biological systems, drive the preparation and storage system of upstream culture medium, and improve the overall biological solutions of AUSTAR products. Technologies are under serious R&D by the Group such as thin-film evaporation in the field of complex preparations, recovering organic solvents in the complex preparation process, helping clients to improve the stability and reproducibility of their final product yields, and enhancing the chemical dispensing system. The Group has also carried out its plan on the AI vision composite robot, an innovative product integrating platform and replacing contamination control operations so as to allow the Group to maintain a leading position in the intelligent process of pharmaceutical contamination control. AUSTAR UK's first containment Isolator is expected to be completed at the end of this year, demonstrating our flexibility and capability whilst adding to our portfolio of products to support the growth of the Group's business.

Moreover, the Group's integrated solution for the filling and freeze drying of aseptic products has been developed, which further establishes a good foundation for product application in innovative and new modified-release drugs, and the product manager team has been restructured to better prepare for the sales of integrated solutions for aseptic products.

As indicated in AUSTAR's interim report, "since the establishment of the Group, the business focus has been on commercialised facilities in our clients' product life cycle. The Group's success in the research sector of life sciences with more and more project acquisitions is attributed to a strategy of enhancing the capacities to make offerings for more research laboratory products and services. The increase in Contract Research Organization (CRO) and Contract Development and Manufacturing Organization (CDMO) clients has contributed to the Group's revenue. The growth in the biopharmaceutical and pharmaceutical market in China has been giving the Group sufficient project experience for strengthening a concrete foundation for building core competence elements including products, technologies, project execution capability, knowledge and expertise, all of which are able to create value to clients in emerging countries. As research and manufacturing companies in life-sciences in emerging countries including China have gradually realised that they must speed up their pace in digitalisation transformation, the Group has addressed such development and trend in the last several years by spending serious efforts in developing talents and skills in segments of technologies, and thus creating more value. The service business accounts for approximately 8.4% of order-in-take on average over the last 3 years. The service offerings scope of the service business has been gradually increasing to enhance the Group's differentiation from competition. It is not easy for the competitors to copy the service business, which offers reasonable profit margin contributions to the Group.

Cell and gene therapy is believed to be one of the potential drivers for growth in life-sciences. Our business share in this sector has been increasing at a fast pace as evidenced by the order-in-take from service to consumables and equipment to systems engineering projects. The Group's experience and knowledge in decontamination, containment, building, digitalisation, and compliance all can serve the clients of the cell and gene therapy sector and offer competitive solutions to them. Other life-sciences sectors including diagnostics, medical devices, animal health and medical beauty have been covered by the Group for some time, apart from the main sectors of biologics and chemical drugs. There are huge growth opportunities for the Group in these industrial sectors as the Group's existing technologies and product offerings can contribute value to these clients in terms of operation excellence, quality compliance and automation and digitalisation. We believe that with the Group's cross-business-unit professional technical application teams which are engaged in the main sectors of biologics and chemical drugs as well life-sciences sectors including diagnostics, medical devices, animal health and medical beauty, the Group will provide the clients with more up-to-date technology solutions, thereby strengthen our capabilities and position as a high-end life science system engineering integrator and solution provider."

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About AUSTAR Group

Founded in 1991 and headquartered in Shanghai, PRC, AUSTAR is a technology-based pharmaceutical engineering solutions provider with its business covering more than 50 countries and regions, partnering with world-leading pharmaceutical companies to protect and promote human health. The Group employs over 2,000 staff in different regions to deliver technically guaranteed pharmaceutical engineering solutions that assist clients to set up drug production facilities and contribute to the world's drug safety and efficacy.

With the full spectrum of pharmaceutical technology knowledge, the company has leading technical application capabilities and high-quality equipment & systems in the areas of Clean Utilities, Pharmaceutical Automation & Digitalization, Pharmaceutical Formulation Technology, Biopharma Process & Technology, Regulatory Compliance & Operation Excellence, Laboratory Technology & Facilities, Biosafety Technology & Facilities, Cleaning, Sterilization & Disinfection, Clean Room/HVAC/EMS/BMS, Quality/Measurement & Analytics, Filling, Freeze-Drying & Inspection, Containment Technology. The Group has a number of leading business and product brands in its portfolio including H+E Pharma, BIOSYSTEC, STERIS-AUSTAR, ROTA-AUSTAR, Pharma LeanTec, Pharma LeanDigital, AUSMILL, Aunity, and Purvita.

The Company was listed on the Main Board of the Stock Exchange of Hong Kong Limited on 7 November 2014 (Stock code: 6118).

For more information about AUSTAR, please visit www.austar.com.cn