Analysis of Strategic and Financial Impact of MAH Transfer for Livzon Pharmaceutical's Mesalazine Enteric-Coated Tablets

Based on the information obtained, I will provide a detailed analysis of the strategic considerations and financial impact of Livzon Pharmaceutical’s transfer of MAH for Mesalazine Enteric-Coated Tablets.

According to the announcement, Livzon Pharmaceutical signed the “MAH Transfer Contract for Mesalazine Enteric-Coated Tablets” with Sunflower Pharmaceutical Group Jiamusi Luling Pharmaceutical Co., Ltd., intending to transfer the Marketing Authorization Holder (MAH) and related rights of Mesalazine Enteric-Coated Tablets for

[1][2]. This transaction is subject to approval by the National Medical Products Administration. After the transfer is completed, Livzon Pharmaceutical will continue to provide contract manufacturing services for this product to the transferee for the next two years [1].

From Livzon Pharmaceutical’s financial status, the company’s stock price increased by 45.76% cumulatively in 2025, showing strong market performance [0]. However, Mesalazine Enteric-Coated Tablets, as a drug for treating ulcerative colitis, although having a considerable market size (the global market is expected to grow from 10.56 billion USD in 2025 to 13.21 billion USD in 2030, with a CAGR of approximately 4.58%) [6], is facing increasingly fierce competition.

• Non-core Product Divestment
  : Mesalazine Enteric-Coated Tablets may not be Livzon Pharmaceutical’s core competitive product. By transferring the MAH, the company can allocate more resources to more competitive product lines.
• R&D Resource Reallocation
  : The recovered 34 million yuan cash can be used to support the company’s R&D investment in core therapeutic areas or new product development.

Livzon Pharmaceutical’s free cash flow in 2024 was approximately 43.045 million yuan [0]. The 34 million yuan cash inflow from this transaction:

• Equivalent to nearly one year’s free cash flow of the company
  , significantly improving cash flow status.
• Can be used for debt repayment, working capital supplementation, or new project investment.
• Enhancing financial flexibility is crucial in the current pharmaceutical industry context with high R&D investment and long return cycles.

Livzon Pharmaceutical’s retention of two years of contract manufacturing services reflects several strategic considerations:

• Smooth Transition
  : Ensuring stable supply of the product during the transfer transition period.
• Maintenance of Capacity Utilization
  : The company’s existing production capacity can continue to be utilized to generate sustained processing revenue.
• Process Experience Accumulation
  : Through contract manufacturing services, the company can further accumulate production process experience for this product, providing reference for similar products in the future.

From the perspective of gross profit margins in the contract manufacturing industry, CDMO companies typically have gross profit margins between 25-48% (e.g.,凯莱英’s small molecule CDMO gross profit margin reaches 47.79%) [9]. Although the gross profit of contract manufacturing services is lower than that of self-sold products, it can still provide a stable revenue source for the company.

Sunflower Pharmaceutical, as a well-known domestic pharmaceutical commercial company, has advantages in product market promotion and channel management:

• Channel Resource Complementation
  : Sunflower Pharmaceutical may have a more complete channel network in the promotion and sales of digestive system drugs.
• Market Penetration Capability
  : By transferring to a company more focused on this therapeutic area, the product may achieve better market penetration.
• Resource Synergy Effect
  : The transferee may have more professional academic promotion capabilities in this therapeutic area.

The MAH transfer model enables pharmaceutical companies to:

• Dynamically Adjust Product Structure
  : Flexibly adjust product portfolios according to market competition patterns and company strategic priorities.
• Divest Non-core Assets
  : Concentrate resources on developing core therapeutic areas and innovative products.
• Obtain Strategic Funds
  : Provide financial support for new product R&D through product rights transfer.

Challenges facing the Mesalazine Enteric-Coated Tablets market:

• Increased Generic Competition
  : Data from Xuantai Pharmaceutical shows that its Mesalazine Enteric-Coated Tablets in the U.S. market saw a 58.36% decline in sales revenue due to “an increase in approved generic drug manufacturers” [5].
• Volume-Based Procurement Price Reduction Pressure
  : Domestic volume-based procurement has led to significant price reductions for similar products (e.g., Xuantai Pharmaceutical’s posaconazole enteric-coated tablets failed to win the bid in volume-based procurement, leading to price declines and a 28.54 percentage point drop in gross profit margin) [5].
• International Trade Barriers
  : Factors such as rising tariffs affect the profitability of exported products.

By transferring the MAH, Livzon Pharmaceutical can exit before the product faces significant market pressure, lock in investment returns, and reduce future risks.

The arrangement of Livzon Pharmaceutical retaining contract manufacturing services has important strategic value:

• Technical Capability Retention
  : Continue to maintain production technical capabilities for this product.
• Customer Relationship Maintenance
  : Establish business cooperation with Sunflower Pharmaceutical, laying the foundation for future cooperation.
• Capacity Release
  : Release capacity space for other products of the company or newly received contract manufacturing orders.

Based on Livzon Pharmaceutical’s financial data (ROE 9.18%, net profit margin 10.94%, operating profit margin 12.63%) [0]:

• Equivalent to a Significant Proportion of 2024 Net Profit
  : The company’s revenue in the first three quarters of 2025 was approximately 1.086 billion yuan (average quarterly revenue of approximately 360 million yuan) [0]. Based on a 10.94% net profit margin, quarterly net profit is approximately 39.38 million yuan. 34 million yuan is close to the company’s quarterly net profit level.

• Significant Cash Flow Improvement
  : Compared to the company’s annual free cash flow of 43.045 million yuan [0], this transfer will bring an increase of approximately 79% in free cash flow.

• Net Asset Return Enhancement
  : Assuming the company’s net assets are approximately 750 million yuan (reverse-calculated based on ROE), 34 million yuan can increase net assets by approximately 4.5%.

Assuming a gross profit margin of 30% for contract manufacturing services (between self-sales and pure OEM), and processing fees accounting for 15-20% of product sales:

• If the annual sales revenue of Mesalazine Enteric-Coated Tablets is 50 million yuan.
• Contract processing fee revenue is approximately 7.5-10 million yuan (calculated at 15-20%).
• Gross profit is approximately 2.25-3 million yuan (calculated at 30% gross profit margin).
• Total gross profit for two years is approximately 4.5-6 million yuan.

• Self-sales: 50 million yuan revenue × 12.63% operating profit margin = 6.315 million yuan operating profit.
• Contract manufacturing: 7.5-10 million yuan processing revenue × 30% gross profit margin = 2.25-3 million yuan gross profit.

It can be seen that although the profit from contract manufacturing is lower than that from self-sales, the company obtains a one-time cash inflow of 34 million yuan, which is equivalent to the present value of the product’s profits in the next few years.

Consider the following risk factors:

• Volume-Based Procurement Risk
  : Once the product is included in volume-based procurement, prices may drop by 50-80%, leading to a significant shrinkage in sales revenue.
• Competition Risk
  : An increase in generic drug manufacturers erodes market share.
• Sales Expenses
  : Self-sales require bearing market promotion expenses (sales expense ratio in the pharmaceutical industry is usually between 20-40%).

Treating the 34 million yuan as risk-adjusted discounted revenue is reasonable from a risk management perspective.

Livzon Pharmaceutical’s 45.76% stock price increase in 2025 [0] shows market recognition of the company’s strategic transformation. This MAH transfer may reflect the company’s:

• Strategic Orientation from Generic Drugs to Innovative Drugs
  .
• Product Strategy from Diversification to Professional Focus
  .
• Exploration from Heavy Asset to Light Asset Operation Model
  .

The released 34 million yuan can be used for:

• R&D Investment
  : Support new drug R&D projects to improve the company’s long-term competitiveness.
• Capacity Upgrade
  : Invest in production lines for high-value-added products.
• M&A Integration
  : Acquire technologies or products consistent with the company’s strategy.
• Debt Optimization
  : Reduce financial expenses and improve financial structure.

The implementation of the MAH system separates drug marketing authorization from production authorization, promoting professional division of labor and optimal resource allocation in the pharmaceutical industry [4]:

• R&D-Oriented Enterprises
  : Can focus on product R&D and realize revenue through MAH transfer.
• Production Enterprises
  : Can focus on improving production efficiency and quality, and obtain revenue through contract manufacturing.
• Commercial Enterprises
  : Can focus on market promotion and channel management, and enrich product lines through MAH acquisition.

Livzon Pharmaceutical’s MAH transfer also reflects the lifecycle management strategy for mature products:

• Exit before increased product competition
  : Lock in investment returns.
• Maintain certain revenue through contract manufacturing
  .
• Allocate resources to new products in the growth or introduction phase
  .

This transaction is subject to approval by the National Medical Products Administration, with uncertain approval outcomes. It is recommended to pay attention to:

• Approval progress.
• Approval conditions.
• Possible approval obstacles.

The two-year contract manufacturing service faces:

• Quality Risk
  : Product quality issues may lead to liability disputes.
• Performance Risk
  : The transferee may terminate the contract manufacturing agreement early.
• Price Risk
  : Contract manufacturing fees may face negotiation pressure.

It is recommended that Livzon Pharmaceutical:

• Clarify the use of transfer funds
  : Ensure funds are used to enhance the company’s long-term value.
• Strengthen core product line construction
  : Avoid business hollowing due to product divestment.
• Establish a sound risk management system
  : Respond to market changes.

Livzon Pharmaceutical’s transfer of MAH for Mesalazine Enteric-Coated Tablets for 34 million yuan is reasonable from both strategic and financial perspectives:

• Conducive to the company’s product line focus and optimal resource allocation.
• Aligns with the industry’s professional division of labor trend under the MAH system.
• Maintains certain business continuity and technical capabilities through contract manufacturing.

• Obtains one-time cash inflow equivalent to nearly one quarter of the company’s net profit.
• Significantly improves cash flow status and enhances financial flexibility.
• Locks in investment returns before the product faces volume-based procurement and competition pressure.

• The MAH transfer model will become an important tool for pharmaceutical companies to optimize product lines and allocate resources.
• The model of separating marketing authorization from production authorization will promote professional division of labor in the industry.
• Product lifecycle management capability will become an important component of pharmaceutical companies’ core competitiveness.

This transaction reflects Livzon Pharmaceutical’s strategic adjustment capability in the transformation of the pharmaceutical industry. By flexibly using the MAH system, it achieves optimal product line allocation and value maximization.

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[1] Eastmoney.com - “Intends to transfer MAH and related rights of Mesalazine Enteric-Coated Tablets for 34 million yuan” (https://finance.eastmoney.com/a/202512303605874510.html)

[2] Sina Finance - “Intends to transfer MAH and related rights of Mesalazine Enteric-Coated Tablets for 34 million yuan” (https://finance.sina.com.cn/jjxw/2025-12-30/doc-inheqqfk9605693.shtml)

[3] Jiemian News - Livzon Pharmaceutical Announcement on December 30 (https://finance.eastmoney.com/a/202512303605874510.html)

[4] CSC Financial - Public Transfer说明书 of Shandong Bainuo Pharmaceutical Co., Ltd. (https://pdf.dfcfw.com/pdf/H2_AN202506031684107797_1.pdf)

[5] Shanghai Xuantai Pharmaceutical Technology Co., Ltd. 2025 Semi-Annual Report (https://stockmc.xueqiu.com/202508/688247_20250823_U0AU.pdf)

[6] Mordor Intelligence - Ulcerative Colitis Market Size Analysis (https://s3.mordorintelligence.com/ulcerative-colitis-market/ulcerative-colitis-market-size-image-1750505940101.webp)

[7] Chindex Pharmaceuticals Holdings Limited 2025 Semi-Annual Report (https://stockn.xueqiu.com/00867/20250818495375.pdf)

[8] Industry Research Report - “Accelerated Integration of API and Formulation Layout, CDMO Expected to Enter a New Inflation Era” (https://pdf.dfcfw.com/pdf/H3_AP202503171644434971_1.pdf)

[9] Asymchem Laboratories 2025 Semi-Annual Report (http://static.cninfo.com.cn/finalpage/2025-08-26/1224565238.PDF)

[10] InnoCare Pharma Limited 2025 Semi-Annual Report (https://www.innocarepharma.com/uploads/2025-08-20/2025-Interim-Report-A.pdf)

[0] Jinling API Data - Financial and Market Data of Livzon Pharmaceutical (003020.SZ)