The commercialization and development of innovative drugs progressed smoothly. The 2Q22 business situation was the same, with significant improvement over the previous month: in Q2 2022, the company achieved revenue of 685 million yuan (yoy +25%), net profit of 44 million yuan (yoy +32%), after deducting net profit of 33 million yuan (YOY +221%) from non-Gumo. In H1 2022, the company achieved revenue of 1,247 million yuan (yoy -2.26%), narcotic products reached 129 million yuan, an increase of 1602.52%; the company's net profit attributable to the mother was 70 million yuan (yoy -78.20%), after deducting net profit of 51 million yuan (+93.87%).
The commercialization of cyclopofol, a major innovative drug, is progressing smoothly: cycloprolol injections were approved for marketing in December 2020. In November 2021, cyclopofol was included in the “National Medical Insurance Drug Catalogue (2021 Edition)” and was officially implemented in January 2022. The number of units sold in the first half of 2022 was about 1.5 million, and it has already entered more than 900 hospitals. Of these, hospitals above the top three accounted for 55%. We aim to cover about 1,400 hospitals throughout the year and achieve sales of more than 4 million units.
The innovation pipeline is progressing smoothly: the company's commercialized products and clinical-stage candidates have 8 new drugs, including 1 commercial-stage drug and 7 clinical research projects: 1) Phase III clinical trials of long-acting hypoglycemic drugs (HSK7653) are progressing at an accelerated pace, and are scheduled to file an NDA by the end of 2022; 2) Neuralgia drugs (HSK16149) actively promote phase II/ joint clinical trials; 3) Acute and chronic pain medication (HSK21542) accelerates phase III clinical trials; 4) the anti-tumor drug HSK29116 accelerates phase I climbing trials; 5) The improved innovative drug HL231 is actively promoting phase I/II clinical trials; 6) The respiratory drug HSK31858, the circulatory system disease drug HSK31679, and the hematological disease drug HSK36273 have completed phase I clinical trials and are preparing for clinical phase II trials.
International innovation continues to advance: the US clinical phase III trial of cyclopofol injection and the HSK29116 US phase I clinical trial. The primary indication for the development of cyclopofol injection in the US is anesthesia induction (IGA). The company plans to conduct three phase III clinical studies on IGA indications in the US. Currently, the trials are progressing smoothly. HSK29116 was approved for clinical trials by the FDA in April 2022. It will enter phase I clinical research in the US within this year, and the first case will be enrolled.
To strengthen business development, in March 2022, the company collaborated with Aquestive Therapeutics, Inc. on exServan, a medicine for fever, and was responsible for its registration and commercialization activities in China.
Profit forecast and investment rating: Due to the impact of the 2Q22 epidemic, 5 batches of collection, and the expansion of sales investment, 1H22's revenue and profit fell short of expectations. However, operations improved in 2Q22 as the company continued to deliver cyclopropenol. We expect the share of innovative drug revenue to increase, gross profit margins and net interest rates to increase, and profits are expected to accelerate. We adjusted the net profit attributable to the mother in 2022-2024 from 3.7, 47, and 670 million yuan to 220, 41, and 640 million yuan. The current market value corresponding to 2022-2024 PE was 101, 54, and 35 times, respectively, maintaining the “buy” rating.
Risk warning: the risk that the volume of innovative drugs will fall short of expectations, and that drug prices will drop due to volume procurement