The 2021 interim report results meet our expectations.
The company announced its 2021 interim results, with revenue of 239 million yuan, an increase of 134.5% over the same period last year, and a net loss of 113 million yuan, an increase of 160% over the same period last year, corresponding to a loss of 0.26 yuan per share, which is in line with our expectations.
Trend of development
TAVR implantation maintains a high growth rate, and the second generation of products are beginning to emerge. According to the company, in the first half of 2021, the company completed about 1900 implants of its first-and second-generation TAVR (transcatheter aortic valve replacement) products, covering about 300 terminal hospitals. Among them, the second-generation product VeusA-Plus has been admitted to nearly 100 hospitals, accounting for about 20% of the total implants. In the first half of 2021, the two TAVR products contributed a total of 235 million yuan, an increase of 131% over the same period last year. The company aims to reach 350 hospitalizations by the end of the year. The company released six-year follow-up data for the first generation of TAVR products in May 2021, with an all-cause mortality rate of about 36.4% and a cardiac mortality rate of only 11.4%. The company expressed confidence that it will continue to maintain rapid growth in the second half of the year and achieve the target of more than 4000 units for the whole year.
The expense rate control is getting better and better, and the operation is becoming mature. In the first half of this year, the company's sales expense rate decreased to 41.4% from 46.3% in the same period last year, and the management expense rate decreased to 18.7% from 38.4% in the same period last year. According to the company, after deducting the investment in overseas subsidiaries and R & D, the profit from its business activities in China is about 25 million yuan for the first time. The company's R & D investment continued to maintain high growth, with 1H21 reaching 104 million yuan, an increase of 43.6% over the same period last year. We believe that the company's operation and expense rates will continue to stabilize and are expected to start making a profit next year.
Research and development and acquisition go hand in hand to speed up the process of internationalization. The company expects the two third-generation TAVR products under development, Vitae (ball expansion) and PowerX (self-expansion), to enter clinical trials in the second half of this year and the first half of next year, respectively; TPVR (transcatheter pulmonary valve replacement) product VenusP-valve was granted a special license in the UK in March this year, the company is expected to be listed in Europe this year and is setting up a sales team, we expect good growth in Europe in the second half of the year. In addition, the company will also submit an application for VenusP-valve listing in China in the near future. In August, the company announced the acquisition of Nuocheng Medical (core product Liwen RF), a subsidiary of Denuo Medical, to enter the field of hypertrophic cardiomyopathy. In addition, the company also has a layout in the field of mitral / tricuspid valve and renal artery de-sympathetic ablation (RDN) and invests in mitral valve repair Dejin Medical. We believe that the company's integration of Deno assets, acquisitions of targets at home and abroad and the rapid promotion of pipelines will provide impetus for the company's future revenue growth.
Profit forecast and valuation
As the impact of the global epidemic has not been eliminated and market competition intensifies, we have lowered the company's 2021-22 income by 8% to 6.0 / 1.06 billion yuan, and adjusted its 2021 net loss forecast from 50 million yuan to 132 million yuan, and lowered its 2022 net profit forecast by 15% to 143 million yuan. Lower the target price (based on the DCF model) by 17.6 per cent to HK $70, which is 81.6 per cent higher than the current share price.
Risk.
The situation of market competition deteriorated, the progress of research and development was lower than expected, and the policy suppressed the price more than expected.