Innovative enterprises transforming to industrialization. Fudan Zhangjiang specializes in biomedical products, involving genetic engineering drugs, photodynamic drugs, medical diagnosis and drug delivery systems and other fields. At the beginning of its establishment, the company focused on the research and development of innovative drugs, and its profits mainly came from technology transfer income. around 2007, the company began to transition to industrialization and made a profit for the first time in 2010. in 2011, the income and net profit were 1.34 yuan and 31 million yuan, respectively. Ella and Ribodo account for more than 90% of the total income.
The growth of the existing product group is sufficient. The main product Ella indication for condyloma acuminatum, conservatively estimated that the number of domestic patients more than 10 million. Compared with the traditional therapy with high recurrence rate and easy to lead to side effects, photodynamic therapy is safe and non-invasive, and the recurrence rate is low. Ella is currently the only photodynamic drug used in the treatment of condyloma acuminatum in China, with a compound growth rate of 70% in the past three years. With the increase of the company's sales and promotion efforts, Ella is expected to maintain a growth rate of more than 30%. Libodo has an obvious advantage over ordinary doxorubicin, occupying 42% of the doxorubicin market after only two years on the market, ranking first. We expect that Ribodo will maintain rapid growth and is expected to achieve nearly 100 million yuan in revenue in 2014.
The reserve product line is attractive. The company invests a lot of money in the development of innovative drugs, and R & D investment even exceeds operating income in some years. The R & D expenditure rate in 2011 is about 25%. The company has formed a very attractive product line under research, covering oncology, rheumatism, dermatology and other fields. Among them, Helmpofen, which is used for port wine stains treatment, completed clinical trials and submitted applications for new drugs in 2010 and is expected to be approved by the end of 2012 or 2013. Photodynamic therapy is the first time in the field of port wine stains and needs some time to be popularized in clinical practice.
Risk factors. (1) Cash flow risk. The company is still in the transition stage of attaching equal importance to R & D and industrialization. Taizhou production line construction and GMP transformation all need a lot of money, and more capital expenditure will test the company's cash flow. (2) R & D risk. The company takes innovation as the driving force for development, with high investment in biomedical development, long cycle, and the risk of failure. (3) the risk of product price decline. Although the company's products are located in patented innovative drugs, the probability of a sharp drop in prices is low, but the possibility of forced price reduction cannot be ruled out.
Profit forecast, valuation and investment rating. The company is currently in a period of transition, the industrialization of key varieties is still in its infancy, and it has just turned from deficit to profit in 2010. therefore, the current low profit scale can not reflect the long-term development power brought by the product line under research cultivated by the company's independent innovation. We choose the absolute valuation method for the valuation of the company, according to the DCF valuation results, the reasonable value of the company is HK $2.66 per share. The company's current price is HK $2.40, corresponding to 27 times the dynamic PE in 2012E, reflecting certain rapid growth expectations, and is rated as "overweight" for the first time.