Performance review
1H22 revenue and adjusted net profit slightly exceeded our expectations
The company announced 1H22 results: revenue 54.535 million yuan, year-on-year + 162.1%, adjusted net profit-76.85 million yuan, return to the mother net profit-192.669 million yuan, corresponding to earnings per share-0.29 yuan, income and adjusted net profit slightly exceeded our expectations, mainly due to the increase in hospital channel promotion service income and royalty income slightly exceeding our expectations.
Trend of development
The company continues to expand product lines. As of June 30, 2022, the company has 24 ophthalmic drug combinations, of which 7 drug candidates are in clinical III phase. According to the company, among them: 1) OT-4012022 was approved by CDE in June, and the company expects 2H22 to begin commercial promotion; 2) OT-101 expects to complete its international phase III clinical trial at the beginning of 2023 at the earliest; 3) the phase OT-1001 III clinical trial reaches the main clinical end point in March 2022, and the company expects that 2H22 will complete listing document preparation as soon as possible in the future. 4) 38 subjects have been enrolled in the OT-502 real-world study, and the company expects the earliest 3Q22 to complete its first phase III clinical trial; 5) OT-202 will complete its first phase I clinical trial in June 2022, and the company expects the earliest 4Q22 to obtain a phase I clinical report and start the phase II trial; 6) OT-702 expects to complete the phase III trial as soon as the end of 2022. 7) OT-703 was approved clinically in June 2022.
The company is rich in commercial pipelines to create a product matrix with full coverage of first-and second-line drugs. According to the company announcement, the company has more than 10 products in the commercial stage. 1H22's revenue from the sale of Oqin and other ophthalmology products reached 28.219 million yuan, + 39.1% compared with the same period last year; revenue from promotion services for pharmaceutical products such as Shilida and Celica reached 8.608 million yuan, and royalties based on the sales of Emmetine and Bateshu reached 17.708 million yuan. We expect the company to continue to expand the market coverage of commercial products and improve its influence in the domestic ophthalmology market in the future.
1H22 gross margin increased, adjusted R & D expenditure improved compared with the same period last year. According to the company announcement, 1H22 Suzhou Xiaxiang factory carried out equipment commissioning, Emmetine, Oqin and other drugs completed product process verification and trial production, 1H22 company gross profit reached 34.304 million yuan, + 118.7% year-on-year. The adjusted R & D expenditure of 1H22 is 199 million yuan (of which R & D expenditure is 98 million yuan), which is-18.7% compared with the same period last year. This is mainly due to the fact that 1H22 has not capitalized significant upfront payments related to authorized products.
Profit forecast and valuation
Taking into account the commercialization of the company's 2H22 core products, we raised our 2022 revenue forecast by 7.4% to 140 million yuan, and adjusted net profit from-180 million yuan to-130 million yuan, but taking into account the company's share option plan and share-based payment amortization in the share incentive scheme, we reduced our net profit from-180 million yuan to-250 million yuan. We maintain the revenue forecast of 350 million yuan and net profit forecast of-135 million yuan in 2023. Considering that the company's future pipeline milestones are expected to be fulfilled one after another, we maintain an outperform industry rating and a target price of HK $16.60 based on DCF valuation, which has 26.7% upside over the current share price.
Risk.
The launch of new products is not as expected; the profitability of drug candidates is not as expected.