Key investment events: The company released its 2016 three-quarter report. Revenue and net profit deducted in the first three quarters were 698 million yuan and 332 million yuan respectively, with year-on-year growth rates of -15.1% and -25.8% respectively. Revenue and net profit deducted in Q3 of 2016 were 230 million yuan and 90 million yuan respectively, with year-on-year growth rates of -20.5% and -42.8%, respectively. At the same time, it is predicted that net profit will increase by -30% to -10% in 2016. The impact of health insurance fee control is obvious, and the decline in performance is obvious. The company achieved operating income of 700 million yuan in the first three quarters of 2016, a year-on-year decline of -15.1%; net profit after deducting non-net profit of 330 million yuan, a year-on-year decrease of 25.8%; third-quarter revenue and net profit after deducting non-net profit were 230 million yuan and 90 million yuan respectively, with year-on-year growth rates of -20.5% and -42.8%. The main reason for the decline in revenue was the impact of medical insurance fees. The company's core variety, Beco, was an adjuvant drug, and there was a certain drop in volume and price, and usage in hospitals in many provinces and cities was limited; the main reasons for the decline in net profit were: 1) The sales volume of the core variety declined significantly. Beco was affected by medical insurance fee control, which caused sales volume to fall by about 15%; 2) The company's expenses during the first three quarters were significantly increased by about 100 million yuan, up 32% year on year. The main reason was the impact of marketing system reform, and sales expenses increased by more than 100% in the first three quarters. Lenalidomide is likely to be approved, and may improve performance significantly. Lenalidomide is a scarce drug for clinical treatment of multiple myeloma in China. It is currently the most effective drug for treating multiple myeloma. Global sales in 2015 were 5.8 billion US dollars. The company is the first imitator of this drug in China. This variety was listed by the CFDA as an accelerated review in April 2016. Currently, the review is nearing completion, and there is a high probability that it will be approved by the end of the year. Lenalidomide is one of the five varieties on the “National Health Insurance First Batch Negotiation List”. Currently, 3 varieties have taken the initiative to reduce prices. There is a high probability that the price reduction varieties will enter the new national health insurance catalogue at the time of this adjustment of the national health insurance catalogue; however, lenalidomide research company has failed to accept price reduction negotiations. If the company's products are successfully approved, it may follow the reduced price varieties into health insurance promotion and promotion in many provinces, and the probability of entering national health insurance is high. Entering health insurance will greatly facilitate the company's marketing and sales of this product. After the first trial of lenalidomide is approved, the company is expected to exclusively enjoy the domestic market within the next 3 years. Peak sales may reach 1.5 billion yuan, contributing more than 500 million yuan in net profit. Profit forecasts and investment advice. Since Beco's sales are clearly affected by medical insurance fees, the 2016-2018 EPS is estimated to be 0.71 yuan, 0.82 yuan, and 1.01 yuan (the original forecast was 0.77 yuan, 0.90 yuan, and 1.14 yuan), respectively, and the corresponding PE is 44 times, 38 times, and 31 times. Although the company's short-term performance is clearly affected by industry policies, there is a high probability that the heavyweight variety lenalidomide will be approved by the end of the year, and the company is expected to enjoy the domestic market exclusively within the next 3 years. We are optimistic about lenalidomide's positive impact on the company's performance after listing and maintain a “buy” rating. Risk warning: New drug approval progress may fall short of expectations, drug sales may fall short of expectations, risk of drug price reduction.