Incidents:
On November 9, 2021, South Africa detected a variant of the coronavirus B.1.1.529 in case samples for the first time. On November 26, WHO defined it as the fifth “variant of concern, VOC” (variant of concern, VOC), named the Omicron (Omicron) variant. Preliminary data suggest that the Omicron strain is more infectious than Delta, but it is unclear whether it will cause serious illness.
In the future, domestic and foreign demand for COVID-19 vaccines targeting mutated strains will still be huge. Watson Biotech's three technology pipelines are simultaneously advancing research and development, which is progressing smoothly. After the product is implemented, it is expected to bring a huge increase in the company's performance.
Comment:
Omicron is spreading globally, and there is huge potential to strengthen the needle market. Recently, the global epidemic has been repeated, and the new strain Omicron has caused a global response. Vaccination booster vaccination is still the most effective means of fighting the epidemic. Judging from the domestic situation, as of November 30, 2021, the country has completed 2.5 billion COVID-19 vaccinations, and it is expected that from December 2021 to March 2022, there will be a peak in booster vaccination; from a foreign perspective, 2 billion COVID-19 vaccines are expected to be exported throughout 2021, and the same level is expected to be maintained in 2022. Watson's COVID-19 vaccine research and development is progressing smoothly, and business is expected to experience a significant increase.
Sequential vaccinations have higher levels of neutralizing antibodies, and Watson's R&D path has obvious advantages. Open research has proven that sequential vaccination can effectively raise neutralizing antibody levels, and Watson Biotech is simultaneously advancing three COVID-19 vaccine development paths: the COVID-19 mRNA vaccine has entered phase III clinical stage; the recombinant COVID-19 vaccine (chimpanzee adenovirus vector) and the recombinant COVID-19 vaccine (CHO cells) are in phase II clinical stage; if the mRNA vaccine phase III results are excellent, we expect it will bring a high elastic increase to the company.
The release of the 13-valent pneumonia vaccine has been stabilized, and development of new products has accelerated. Watson Biotech's 2021Q1-Q3 13-valent pneumonia vaccine received batches of 4.03 million doses, an increase of 21.75% over the same period last year. Among them, the Q3 13-valent pneumonia vaccine was distributed in batches of 1.36 million doses in a single quarter, which remained stable. The company's 2-valent HPV professional review, clinical site inspection, and production site inspection have been completed, and it is expected to be marketed and sold next year; the 9-valent HPV is undergoing pre-clinical preparations for phase III; and the quadrivalent influenza vaccine entered the phase III clinical research stage in October. It is expected that the launch of the new product will further increase the company's revenue significantly.
Investment advice: The company is a leading enterprise in the domestic vaccine industry. Under the COVID-19 pandemic and the continuous fermentation of mutated strains, the company's R&D pipeline advantage is obvious. The 13-valent pneumonia vaccine was released steadily at the same time. The estimated revenue for 21-23 was 34.3/5995/7.35 billion yuan, and Guimu's net profit was 1,226/17.5/2.34 billion yuan. The corresponding PE was 82/59/44 times. The initial coverage gave a target price of 80.54 yuan, giving a “buy” rating.
Risk warning: product sales fall short of expectations, R&D progress falls short of expectations