Event

On May 22, 2017, the official website of the State Food and Drug Administration CFDA updated the drug approval number of tenofovir dipyrifoxil fumarate capsules declared and produced by Fujian Guangshengtang Pharmaceutical Co., Ltd. the drug approval number is H20170005 and the processing status is "under examination and approval".

Comment

The drug approval number obtained by tenofovir and the first approval of HBV are settled, which is an important milestone in the company's "imitation-first imitation-innovation" strategy.

A) it is no accident that the company won the first imitation of tenofovir. Guangshengtang participated in initiating the patent challenge to Gillian Scientific compound Patent (Application No. 97197460.8) and synthetic method Patent (Application No. 98807435.4, the former branch applied for patent 200710196265.3). All the above invention patents were declared invalid on April 4, 2014. The company's Novovir Class 3.1 application (acceptance number CXHS1400157) was the first to be undertaken by CDE on July 23, 2014.

B) the company is applying for the first imitation drugs in the fields of alcoholic fatty liver and hepatitis C through a similar path, and is expected to add new troops in the next 3 years to maintain the first imitation advantage in the field of liver disease.

C) in the future, the company will continue to maintain R & D investment accounting for more than 20% of revenue, and gradually move forward from first imitation to innovation. 1.1 new drugs (including hepatitis B cocktail therapy, alcoholic fatty liver and liver cancer) cooperated with Wuxi Apptec are progressing smoothly. Some products are expected to enter the clinic in 18 years, laying the foundation for the company to move to a higher level in 5-10 years.

The company will become the only pharmaceutical company in China that has two major anti-hepatitis B virus first-line drugs, entecavir and tenofovir, and is expected to seize key hospitals under the rules of one product and two regulations with the help of the first imitation advantage, so as to lay the foundation for future market share.

A) the competition area of entecavir in hepatitis B market is fierce, and tenofovir's new entry into medical insurance has become a new growth point in the field of hepatitis B. The company is expected to grab more market share through the differentiated promotion strategies of entecavir (low-end market) and tenofovir (top500 Hospital).

B) the current market concentration of hepatitis B is relatively high, on the one hand, it is reflected in the core provinces, such as BMS, where Guangdong Province contributes 30% of the income of Boludine (entecavir); on the other hand, it is reflected in top hospitals, where 302, you'an and The Temple of Earth account for 60% of Beijing's share.

C) the company has completed the sales layout of key markets, and the sales target in the second half of 17 years is mainly to be admitted to the hospital (generating sales): Guangdong (former sales director of BMS), Zhejiang (former Zhejiang regional manager of GSK), Beijing (top Hospital has produced cooperation).

Profit adjustment

Based on the fact that R & D will continue to be over-invested in the next few years (expected to spend nearly 80 million in 17 years) and tenofovir is approved to gradually increase the endogenous growth rate, we expect the net profit in 2018 to be 0.72 and 2019, with a corresponding growth rate of 8.96%, 91.9% and 59.8%, and the current stock price is about 47.6 times that of 18-year Pamp E.

Investment suggestion

Recommended logic: 1) chronic hepatitis B market is huge, tenofovir will be the mainstream drug in China in the next 5 years; 2) Guangshengtang tenofovir is the first approved HBV indication; 3) the company's direct sales team is expanding, which can support the volume of entecavir and tenofovir. The company actively cooperates with the state control to ensure the stability of supply on the one hand, and expand the OTC market and long-tail medical terminal on the other. 4) the company actively distributes innovative drugs in the field of liver disease, and is expected to become an evergreen enterprise in the field of liver disease, with long-term investment value.

The company is looking for extension opportunities: in the management fees disclosed in the 2016 annual report, "a number of proposed mergers and acquisitions were fully adjusted, and intermediary consulting fees increased by 3.5 million"; at the same time, the company plans to jointly set up Fujian Guangming Pharmaceutical Innovation and Research Center (Limited Partnership) with Shenzhen Wuming Investment, with a total subscription of RMB 200 million, which will mainly focus on drugs and medical device projects.

Based on the company tenofovir HBV indications of the first imitation of the future performance flexibility, maintain the overweight rating.

Risk hint

Product price pressure, uncertain time to market of new products, low growth rate of new product sales, etc.