Incidents:
On August 31, the company released its 2021 semi-annual report. 2021H1 achieved revenue of 1,907 million yuan, up 80.9% year on year; realized net profit of 611 million yuan, up 307.64% year on year; and realized net profit of 608 million yuan after deducting non-return parents, up 320.60% year on year.
Reviews:
Promoting the four-ring medical, aesthetic and biopharmaceutical two-wheel drive strategy at full speed, the 2021 H1 company continued to increase R&D investment, with R&D expenses reaching 330 million yuan, an increase of 10.9% over the previous year. The company actively promoted the pace of product introduction, continuously improved the industrial layout, improved the business and product structure, and optimized the level of enterprise operation and control. Botox was officially sold in February of this year; various products in the innovative drug and biosimilar drug sector received positive clinical progress breakthroughs. Xuanzhu Biotech, an innovative oncology drug research and development platform, spent 99 million yuan on R&D during the period, and Huisheng Biotech, a diabetes and complication drug research and development platform, spent 105 million yuan on R&D during the period; the generic drug business continued its high efficiency and high-quality R&D pace, continuing to drive the Group's business development into an upward cycle.
Letibao's superior safety quality has won high recognition from the market. The multi-line layout creates a complete medical and aesthetic product matrix. The injectable botulinum toxin type A, was approved for listing in October 2020. Letibao is the fourth type A botulinum toxin approved for marketing in China, and the first of its kind products in Korea. 2021H1 Letibao achieved revenue of 258 million yuan. By the end of July, Letibao had covered more than 1,800 institutions, of which the top 500 institutions had covered close to 400. In addition, the company has introduced exclusive agents into absorbable stitches and tensionless urethral suspensions owned by Korea Oriental Medical Company. Both products have been approved domestically; obtained exclusive agency rights for the Genesis Biosystems fat collection system LiPiVage in Greater China and South Korea; and self-developed products such as children's facial needles, girls' needles, collagen, and lipolysis are expected to be marketed within the next 3-4 years.
Adhere to innovation leadership and transform into a leading international biopharmaceutical enterprise
Xuanzhu Biotech has more than 25 products under development, 2 of which are about to apply for an NDA, and 11 products have entered clinical phase I to III clinical trials. The pipeline focuses on various treatment fields such as oncology, metabolism, anti-infection, and digestion. The CDK4/6 inhibitor pirosinil for advanced breast cancer was approved for phase III clinical trials; KM254 with low HER2 expression is the first patented dual antibody ADC in China; the self-developed PDE-5 inhibitor fudanafil was approved for pulmonary hypertension indications. Huisheng Biotech's new class 1.1 drug, gaglizine, has completed phase III clinical trials and is ready to apply for an NDA; fourth-generation Tegu insulin injections are undergoing phase III clinical trials, and Tokumendong insulin has obtained clinical trial approval; 2021H1 high-end generic drug research and development platform's non-key monitoring catalogue product revenue was 1,191 billion yuan, an increase of 122.0% over the previous year.
Incubate a variety of new businesses to drive future growth potential
Aokang Pharmaceutical, a subsidiary of the company, is currently the only enterprise in Jilin Province that has obtained the license to cultivate industrial hemp with high CBD content. It explores the development of the entire industry chain from upstream cultivation, extraction and processing to downstream applications, and is committed to building an industrial hemp research and marketing center in the north. The company established Kangtong, Jilin in 2020, with the goal of becoming a leading integrated CDMO enterprise in the field of pharmaceutical intermediates and APIs. Currently, it has more than 100 overseas customers and nearly 50 Chinese customers.
Profit Forecast: Forecast Assumptions: ① The medical and aesthetic business maintains rapid growth in sales revenue and net profit; ② Revenue from non-key monitoring catalog products is expected to maintain rapid growth, driven by sales of Klein Ao, Plutinol, Huineng, and new products to be launched soon. We expect the company's net profit in 2021/2022 to be 85/1.19 billion yuan respectively, maintaining the purchase rating.
Risk warning: sales and promotion fall short of expectations; risk of volume procurement not winning bids; risk of market valuation fluctuations