Revenue continues to grow, and expense rates have declined slightly. The company released its 2022 annual results, with revenue of 6.319 billion yuan (YoY +26.4%), mainly due to the rapid release of innovative drugs. Innovative drug revenue was 4.128 billion yuan (YoY +32.3%), accounting for 65.3% (YoY +4.7%). R&D, sales, and management expenses were 1,728 billion yuan (YoY +21.9%), 2,402 billion yuan (YoY +17.9%), and 444 million yuan (YoY +21.0%) respectively. The cost rates were 27.3%, 38.0%, and 7.0% respectively, all of which decreased slightly compared to 2021. Net profit related to operations was 676 million yuan (YoY +49.2%).
There must be a new lead, and commercialization results in the three core fields are impressive. Revenue from the three major areas the company focused on increased across the board: revenue from the neurological sector was 2,267 billion yuan (YoY +41.0%), accounting for 35.9% of total revenue, mainly driven by strong sales at the beginning. It has already benefited 880,000 patients, covered about 3,440 medical institutions and successfully renewed national health insurance contracts; revenue from the oncology sector was 1,430 billion yuan (YoY +15.5%), accounting for 22.6%; revenue from the self-exemption sector was 1,280 billion yuan (YoY +39.4%), accounting for 20.2%.
Two new drugs were approved, self-developed+BD dual-wheel drive development process. Kosela and sennoshin were conditionally approved in 2022 to treat first-line ES-SCLC and mild to moderate COVID-19 adult patients, respectively. With nearly 60 projects in the research pipeline, the new sublingual tablets have been submitted for pre-NDA to jointly promote overseas development of this product with Ningdan Pharmaceutical; the cervazumab phase III SCORES study will be completed in 2023H1; with the introduction of Daridorexant from Idorsia, domestic phase I and III clinical trials will commence simultaneously within the year. Meanwhile, the company has granted Almirall the right to develop SIM0278 overseas, with a potential milestone of up to US$492 million.
Profit forecasts and investment recommendations. The company's EPS for 23-25 is expected to be 0.48 yuan/share, 0.57 yuan/share, and 0.71 yuan/share respectively. Considering the company's smooth release of innovative products and the efficient clinical progress of products under development, the company was given 25x reasonable PE in 2023, corresponding to a reasonable value of HK$13.54 per share, maintaining the “buy” rating.
Risk warning. Product promotion fell short of expectations; medical insurance price cuts exceeded expectations; R&D progress fell short of expectations.