Investment summary Since 2015, Ssanglu Pharmaceutical's major varieties have been under pressure, and the development of new varieties has been slower than expected. Coupled with adjustments in sales strategies, the company has experienced continuous negative growth since listing. Moreover, the company is increasing investment in research and development, and product reserves are gradually becoming abundant. The approval of lenalidomide is expected to accelerate due to its patent advantage and priority review, etc., and is also expected to become a major breed. Ornidazole injection has obvious technical advantages, and it is expected that it can win a large market share after approval. We believe that the company's inflection point is near. The target price for 12 months is 30 yuan. In response to the 43 times valuation of earnings per share in 2018, it is rated as “increase in holdings” for the first time. (Current prices as of June 7) Business performance continued to decline. In 2016, Shuanglu Pharmaceutical's actual revenue was 1.01 billion yuan, down 12.7% year on year, and net profit attributable to parent company was 450 million yuan, down 21.4% year on year. In the first quarter of 2017, the company's revenue continued to decline by 12.5% year on year to 227 million yuan, and net profit attributable to the parent company fell 14.8% to 130 million yuan. Overall, since 2015, the company has entered an adjustment period and has been affected by health insurance fee controls. Although the original product lines such as Becco Energy entered health insurance in most regions of the country, growth has gradually moderated. Specifically, it is mainly dragged down by the decline in biological and biochemical drugs. At the same time, the company adjusted its sales strategy and expanded sales channels, which also led to a sharp increase in sales expenses. The year-on-year increase in 2016 and the first quarter of 2017 was 149% and 161%, respectively. The company has planned to invest in Xinzhong Pharmaceutical, officially enter the contract sales area, and develop academic promotion of some specialty products, which will be beneficial to the future market expansion of major specialty drugs such as lenalidomide. The approval of lenalidomide is expected to speed up the company's product line compared to previous product lines. Against the backdrop of slowing growth in the original product line, the company urgently needs to promote product line upgrades. Therefore, in recent years, the company's investment in research and development has been restorative and increased, promoting research and development in major disease areas such as tumors, cardiovascular, and diabetes. R&D expenses account for 10% of revenue, and the gradual expansion of product reserves, which will support future transformation and development and continued growth. Lenalidomide is a product originally developed by Celgene in the US. It is the most effective drug for treating multiple myeloma. It sold 5.8 billion US dollars worldwide in 2015. Although it obtained approval for listing in China, it was unable to release volume due to excessive prices. Not only because there is a shortage of drugs, it is a probable event that domestic products are being evaluated and approved at an accelerated pace. In April 2016, the CFDA announced that nalidomide would be delivered to the priority review channel. Currently, Celgene has applied for a number of patents domestically, and the most core compound patent will expire in July 2017. Shuanglu Pharmaceutical has taken the lead in applying for patents for compounds, synthetic processes, etc. domestically, all of which have been granted. Therefore, the company is expected to prioritize exclusive approval for listing and make it a major variety. Furthermore, the onidazole injection that the company is reporting for production is also a clinically necessary and urgently needed drug. According to Roche's original formulation development, not only does the drug last for a long time, the PH value is close to 7, so it is more suitable for dissolution than domestic competitors, has lower adverse reactions, and has clear technical advantages, and is expected to gain a larger market share after approval. Currently, domestic onidazole is a large variety with a market size of about 5 billion yuan. Cost control for risk health insurance has exceeded expectations; approval of new varieties has been slower than expected.