Matters: Haiwang Biotech's announcement: Based on the company's existing R&D division, Haiwang Pharmaceutical Technology Research Institute Co., Ltd. and the Haiwang Pharmaceutical Consistency Evaluation Research Center are invested in the establishment of Haiwang Pharmaceutical Research Institute Co., Ltd., of which Haiwang Pharmaceutical Research Institute reserves no more than 20% of shares to implement equity incentives for core management personnel and R&D teams. At the same time, the company invested in Provision Healthcare through the establishment of a new company called Sun Hairong International, and established a joint venture to obtain exclusive management rights for the Provisions Group's proton therapy system in China. Guoxin's view: The establishment of a research institute company and a consistency evaluation research center will expand the company's value chain to the clinical development stage and enter the CRO field. Haiwang Biotech established the research institute mainly to improve the equity incentive mechanism. 20% of the shares of the newly established research institute will be used to incentivize the original R&D managers, as well as the imported core R&D team, rationalize the incentive mechanism of the R&D department, and enhance the company's R&D strength. The establishment of the Drug Consistency Evaluation Research Center is in line with the country's generic drug consistency evaluation requirements. On the one hand, it serves internal generic drug type consistency evaluation projects, and on the other hand, it also promotes the improvement of drug quality from partner suppliers through external (expected to be mainly suppliers of the Group's full drug network), guarantees the efficacy of drug GPO procurement from all drug networks, and truly reduces unreasonable drug prices for medical insurance and consumers on the basis of guaranteed efficacy. We believe that this incident will raise the market's expectations for the company's extension to introduce a core R&D team, and provide a long-term guarantee for the optimization of the company's profit structure and the sustainability of the Group's full-drug network procurement. Furthermore, the company took a stake in the tumor proton therapy company Provision and set up a joint venture to obtain exclusive management rights in China, expanding into the field of tumor proton therapy. Haiwang will profit from both the launch of proton therapy equipment and the distribution of medicines to partner hospitals, expanding new profit boundaries, but the profit prospects in terms of operation are still yet to be seen, and the expansion of the distribution business is quite accurate. We are optimistic about the company's layout in the field of CRO consistency evaluation and the long-term synergies that will subsequently be brought to GPO procurement for the entire drug network. We will not adjust the short-term profit forecast for the time being. The EPS for 16-18 is expected to be 0.53/0.88/0.98 yuan, corresponding to PE37x/22x/20x, maintaining the buying rating. Risks: The introduction of the generic drug consistency evaluation R&D team did not meet expectations, there was a risk that the clinical trial base was under-resourced, the FDA registration of the Provision proton therapy device failed, and the profitability of the provision proton therapy device launch fell short of expectations. Comment: n Set up a research institute company and a consistency evaluation center to enter the CRO field, Haiwang Biotech newly established Haiwang Pharmaceutical Technology Research Institute Co., Ltd. (“Research Institute”). The Institute's investment includes 888.14 million yuan in cash and the R&D fixed asset net assets of Haiwang Biotech's existing R&D division of 11.186,000 yuan. The investment ratio of listed companies accounts for 80% of the shares, and the wholly-owned subsidiary Haiwang Dongfang accounts for 20% of which Haiwang Dongfang's shares are mainly reserved to inspire the current management team, core technical personnel, and future talents of Haiwang Research Institute. At the same time, the company entered the clinical CRO field by establishing a new holding (51%-100% equity) of the Research Institute and introducing external partners to establish the Haiwang Pharmaceutical Consistency Evaluation Center. The establishment of a research institute company is mainly to rationalize the incentive mechanism for the company's R&D team and create more favorable incentive conditions for the subsequent introduction of excellent R&D talent teams. Furthermore, in opening up external cooperation and incubating promising pharmaceutical projects, setting up a separate research institute company also has obvious advantages in the directness of decision-making in the management mechanism and the flexibility of the sharing mechanism. Meanwhile, the establishment of a drug consistency evaluation research center is in line with the national policy requirements for generic drug consistency evaluation. On the one hand, it provides consistency evaluation research and development services for the company's internal varieties, and on the other hand, it also provides generic drug consistency evaluation research and development services to external partner suppliers. n Generic drug consistency evaluation has a market space of about 13.5 to 225 billion before 2018. Currently, there are urgent needs of pharmaceutical companies. According to the generic drug consistency evaluation series policy documents issued by the State Food and Drug Administration since 2015, by 2018, it is necessary to complete the consistency evaluation of 289 generic drug types, of which at least 600 total specifications are at least 600, 5 manufacturers are evaluated according to each specification, and there will be at least 3,000 consistency evaluation items. Among them, the pharmaceutical consistency evaluation price is about 2 to 4 million, BE The price is about 2.5 to 3.5 million yuan. A consistency evaluation project requires an investment of 4.5 to 7.5 million yuan, and the corresponding market space is 135-225 billion yuan. Due to the tight evaluation period, generic drug consistency evaluation has become an urgent core requirement for pharmaceutical companies at present. Currently, there is a shortage of clinical trial bases. How to obtain hospital resources and approval from hospitals has become one of the core competencies of generic drug consistency evaluation. On the one hand, the future business development of the Haiwang Pharmaceutical Consistency Evaluation Research Center relies on the company's original R&D technology accumulation and clinical resource accumulation and will actively introduce appropriate R&D teams. On the other hand, the company, as an integrated pharmaceutical industry and business company, has established a good service relationship with clinical base terminals - hospitals, and has certain resource advantages for subsequent entry into CRO (37 in Shandong, 19 in Henan, 34 in Hubei, 13 in Anhui, 17 in Heilongjiang, and 77 in Guangdong. The above is the coverage area of Haiwang Biomedical's commercial business, with a total of clinical trial bases 197 places). n The consistency evaluation of generic drugs complements the GPO shortfalls of the entire drug network. The subsequent synergy effect is obvious. Quanya.com, a subsidiary of Haiwang Group, is currently promoting drug GPO procurement in Shenzhen, with the goal of reducing total drug costs by 30%. Under the pressure of price reduction, the price of purchased drugs will be significantly lower than the original pricing level, especially the fiercely competitive types of mature generic drugs. This also raises market concerns about whether the quality of drugs from suppliers can meet the standards. Our research information shows that the suppliers selected by Quanyao.com all require that they pass a consistency evaluation in the future to ensure the quality and sustainability of the supply of drugs supplied by Quanyao.com. Therefore, we believe that the most important customers of the Drug Consistency Evaluation Research Center established by the company come from Quanyao.com's huge supplier base. The Drug Consistency Evaluation Center is set up to, on the one hand, to provide suppliers with the services they urgently need, and on the other hand, to judge the supplier's drug quality through an internal evaluation system (such as in vitro dissolution tests). These are all expected to dispel quality concerns about GPO procurement by Quandrug Network, and there is an obvious synergistic effect. n invests in Provision and establishes a joint venture to obtain exclusive operation rights for treatment equipment, which is expected to expand profit boundaries, but there is still obvious uncertainty. Haiwang Biotech invested 250 million yuan through its wholly-owned subsidiary Galaxy Investment and Sun company Haiwang Huitong to establish Hairong International, and purchased 972,500 million shares of Provision Healthcare through Hairong International with an investment of 25 million US dollars, accounting for less than 10%. At the same time, Hairong International and Provision Asia, a subsidiary of Provision Healthcare, formed a joint venture as the exclusive reseller of Provision proton therapy systems in China and has exclusive rights to develop proton centers or oncology centers in China. Proton therapy helps companies lay out cancer treatment, and the company will reap profit benefits in terms of equipment investment and hospital medicine distribution shares. Proton therapy is currently the most advanced treatment in radiotherapy. It has obvious advantages for fragile tissues and childhood cancer, and is helpful for solid tumors that are not suitable for surgery. As of April 2015, there were 49 proton therapy devices worldwide, of which 16 were under construction in the US and 29 were under construction. In ****bo Wanjie Hospital's Borag Proton Therapy Center (which was shut down due to technical reasons) and Shanghai Proton Heavy Ion Hospital are in operation. Currently, 8-15 are under construction or preparation for construction. Proton therapy has a large investment and extremely high fees (the US charges about 900,000 yuan once, Japan about 180,000 once, Germany about 400,000, and China about 280,000). It has certain advantages for some tumors, but there is currently great uncertainty about whether it will actually become the mainstream treatment for cancer treatment in the future. However, we believe that in the future, proton therapy will become a new “medical equipment competition” target for major public hospitals. From the perspective of providing equipment and treatment systems, there will still be good market space in the country. According to research information, the Provisions proton therapy system's revenue is around 60 million US dollars, and the investment profit margin of Neptune's agent equipment is between 15-20%. If it can participate in purchasing the operation of proton therapy centers in hospitals, Neptune will have a clear advantage in undertaking the distribution of medicines from partner hospitals. Since the ProNova proton device of the participating company Provision has not yet obtained 501 (k) certification from the FDA, there is still some uncertainty about subsequent cooperation. Furthermore, the profit prospects of the operation of the proton therapy center itself are still yet to be seen, but the company will reflect accurate profits in terms of hospital medicine distribution. n Optimistic about the layout consistency evaluation and subsequent GPO collaboration of the entire drug network, maintaining “buying” and optimistic about the company's layout in the CRO consistency evaluation field and the subsequent long-term synergy effect brought to GPO procurement of the entire drug network. Since the current changes in the company's business are still yet to be implemented, the short-term profit forecast will not be adjusted yet. It is estimated that the EPS for 16-18 will be 0.53/0.88/0.98 yuan, corresponding to PE37x/22x/20x, maintaining the purchase rating.