Based on the advantages of the characteristic API platform, the company actively laid out “formulation integration”, gradually transformed from an API and generic drug enterprise to a “synthetic combination”, and gradually laid out the entire pharmaceutical industry chain.
Chemical synthesis capacity creates API barriers. As a powerful domestic chemical synthesis and production technology enterprise, the company with a rich product matrix is at the world's advanced level of drug synthesis and production technology. Its main specialty API products, such as carbophenine and micafenin, have high sales prices and high added value, and the company's gross margin remains above 50% all year round. In 2016-2022, the company's revenue increased from 201 million yuan to 1,017 million yuan, CAGR reached 31.04%, net profit after non-return to the mother increased from 14 million yuan to 240 million yuan, and CAGR reached 60.39%, mainly due to sales volume of high-value-added APIs. At the same time, technology transfer and downstream formulation customer equity sharing expanded on the revenue side. At the same time, the company is developing many API projects. Nearly one-third of the pipeline has already entered the pilot phase, covering many fields such as anti-tumor, anti-fungal, nephrotic, anemia, and contrast agents. We believe that the company is based on characteristic API R&D barriers and five core technology platforms, and is expected to continue to maintain a tiered product portfolio to provide strong support for long-term performance.
Lay out “formulation integration” and “imitation integration” based on the advantages of APIs to create new growth poles
1) With the advantages of specialty APIs, the company has achieved full industry chain coverage from “API initiators → cGMP high-difficulty intermediates → specialty APIs → pharmaceutical products”, and has successively obtained drug approvals such as entecavir tablets, fondafenac sodium injections, micafenin sodium for injection, oseltamivir phosphate capsules, oseltamivir phosphate capsules, oseltamivir phosphate for injection, etc. Another series of pharmaceutical products are under review. Entecavir, which was successfully developed by the company, completed the first listing of entecavir preparations in China in 2010 through cooperation with Chia Tai Tianqing, breaking the import monopoly of BMS entecavir and quickly conquering the market. In 2019, the market share was over 40%. In February 2023, the company's eribulin methanesulfonate injection was approved for listing. Previously, only the original research products of Eisai were marketed in China. This example successfully verified the company's drug synthesis capability once again. At the same time, the company continues to promote the construction of an echelon of complex pharmaceutical products, including iron agents and inhalants, to enrich the high-end product matrix.
2) In terms of innovative drugs, the company independently developed drugs such as BGC0228, BGC0222, and BGM0504 based on the conjugated drug technology platform. Compared with ADC drugs, BGC0228 can enhance tumor permeability, reduce immunogenicity, and lower production costs due to its smaller molecular weight. It mainly targets solid tumors such as pancreatic cancer, colorectal cancer, esophageal cancer, and ovarian cancer. BGM0504 injection is a double agonist of GLP-1 and GIP receptors developed independently by the company, which has biological effects such as controlling blood sugar, weight loss, and treatment of non-alcoholic steatohepatitis (NASH), and has the potential to treat various metabolic diseases. Up to now, the approved Lilly GIP/GLP-1 receptor agonist Tirzepatide has been on the market for less than 9 months, with sales of 483 million US dollars. There is huge market space. Currently, no similar target drugs have been approved for marketing in China.
Profit forecasting and investment advice
In summary, considering that the company is a powerful domestic chemical synthesis and production technology enterprise, we believe that the company's performance will maintain steady growth as the company's active pharmaceutical ingredients grow steadily, and as the company's pharmaceutical products are gradually released and innovative drugs provide long-term potential.
We expect that the 2023-2025 revenue will be 1,186/1368/1,647 billion yuan respectively, net profit of 2023-2025 will be 2.78/332/416 million yuan respectively, and the 2023-2025 EPS will be 0.66/0.79/0.99 yuan respectively, corresponding to the 23.35 yuan/share price of May 25, 2023, and PE in 2023-2025 will be 35/30/24X respectively, giving the company an “increase in holdings” rating.
Risk warning
Innovative drug development risks, product substitution risks, price risks affected by policies such as consistency evaluation, volume procurement, etc., and macro-environmental risks.