The predicted net profit was slightly better than we expected
The company released a positive profit forecast: The company expects net profit of 915 million yuan for FY2021, which is slightly better than our expectations. We expect annual expenses to be slightly lower than our expectations, mainly due to annual expenses being slightly lower than our expectations.
Key points of interest
Earnings for FY2021 were slightly better than expected, and cash flow varieties grew steadily. The new thymic method injection was included in the fifth batch of national collection and implementation began on 4Q21. The company's new thymic method product, Rida Xian, was not selected for national collection, but benefiting from its own channels such as GTP (GTP) outside the hospital (GTP) built earlier by the company, as well as the expansion of indications brought about by real-world research and post-marketing clinical research, the pressure on Ridaxian collection was alleviated, and it still maintained a certain share at the clinical terminal. According to the company's announcement, Ridaxin maintained a good release momentum throughout 2021, and we expect the impact on collection and implementation to be relatively moderate. Furthermore, research on COVID-19 vaccination, sepsis, and oncology immunization continues to advance, and we believe it is expected that the scope of application of Ridaxin will be further expanded.
The Boao Pioneer Zone for Drug Use for Rare Diseases has been launched. Follow the progress of official approval. In December 2020, the company and Y-mABS reached a cooperation on the development, registration and commercialization of the neuroblastoma (candidate) drugs Naxitamab and omburtamab in Greater China, expanding the field of diseases to rare diseases of the central nervous system.
Naxitamab was officially approved for listing in the US in November 2020. Saisheng Pharmaceutical is promoting the launch of this variety in pioneering regions such as Boao, Hainan, and has now received a small number of patient orders. Furthermore, the company is in the process of officially filing Naxitamab in China, and we expect it to be officially approved domestically by 2Q22. According to Y-mABS's official website, Y-mABS plans to submit another marketing application for Omburtamab to the US Food and Drug Administration (FDA) on 1q22. We expect Saison to initiate the domestic marketing application for Omburtamab within 2022.
The introduction pipeline is starting clinical trials one after another, and follow-up progress is being followed. The company has disclosed a pipeline package including 5 late-stage drugs and 3 early-stage drugs. Among them, Nomico was approved for marketing and commercialization in China in January 2021. Additionally, we expect RRx-001 (multi-mechanism small molecule drug candidate, involved in CD47 pathway regulation), phase III of domestic phase III will start patient enrollment on 1H22, and PEN-866 (HSP90 small molecule conjugated drug candidate) is expected to complete the domestic IND declaration in 2022. We expect that in the future, as pipeline products gradually advance, the company's product structure will gradually be upgraded to innovative products.
Valuation and recommendations
Considering that the company's annual cost investment for 2021 was slightly lower than our previous estimate, we raised the 2021 return net profit forecast by 3.7% to 915 million yuan, maintained the 2022 profit forecast, and introduced the 2023 return net profit of 1.11 billion yuan for the first time. The current stock price corresponds to 4.5/4.1 times the price-earnings ratio for 2022/2023. We maintain our “outperform the industry” rating and maintain a target price of HK$15.00, corresponding to the price-earnings ratio of 8.6/7.8 times 2022/2023, which has 91% upside from the current stock price.
risks
The product pattern has deteriorated, drugs with expired patents have been collected, and the progress of research and development of new drugs has fallen short of expectations.