Event: Jiuzhitang Meike (Beijing) Cell Technology Co., Ltd. of Jiuzhitang signed an agreement on the co-construction of stem cell clinical research base with Beijing Tiantan Hospital affiliated to Capital Medical University. at present, the research base jointly built by the two sides has been completed and will continue to promote preclinical stem cell research.
Cooperate deeply with Beijing Tiantan Hospital to promote clinical research on stem cells
This time, the two sides cooperate to build a stem cell clinical research base for stem cell clinical trials and future stem cell related basic research work. The cooperation stipulates that the intellectual property rights involved in the scientific research achievements jointly participated by both parties in this treatment base shall be shared by both parties. We believe that Beijing Tiantan Hospital is one of the three major neurosurgery research centers in the world and the clinical, scientific research and teaching base of neurosurgery in Asia. This cooperation will help the company to take advantage of the research advantages of Beijing Tiantan Hospital to improve its research level in the field of stem cells, and is expected to provide sufficient resources for the company's clinical research on stem cells.
The company has a leading layout in the field of stem cells, and the investment company has made outstanding achievements in stem cells.
In May 2018, the company's investment fund invested US $70 million in Stemedica in the form of capital increase, and held a 51% stake after the completion of the transaction. Stemedica is engaged in the research, development, production and clinical work of allogeneic adult stem cells and other products. Six clinical trials have been carried out in the United States. Its clinical study on Alzheimer's disease is the first clinical study approved to use stem cells to treat the disease in the United States. Phase IIa trials of ischemic stroke and chronic heart failure have been completed and published. Ten clinical trials have been carried out in Switzerland, Kazakhstan and other countries, among which the acute myocardial infarction study in Kazakhstan has completed the clinical phase III. We believe that the application of stem cells has a broad prospect, and Stemedica is a leader in stem cell research. The company is expected to take advantage of the cutting-edge achievements of Stemedica to carry out related medical services and provide new performance growth points for the company.
Affected by medical insurance control fees and other factors, the company's short-term performance is under pressure, re-evaluation is expected to re-prove the product advantages.
Due to the restrictions of the new version of the health insurance catalogue and auxiliary drug catalogue, medical insurance control fees, "two-vote system" and other factors, the company's sales of prescription drugs (especially traditional Chinese medicine injection Shuxuetong) have declined, resulting in pressure on the company's performance. In the first three quarters of 2018, the company achieved operating income of 2.548 billion yuan, down 7.38% from the same period last year; and home net profit of 334 million yuan, down 35.08% from the same period last year. According to the national symposium on drug supervision and control, the work of drug injection reevaluation is scheduled to start in the second half of 2018. We believe that Shuxuetong shows the advantages of good safety and outstanding efficacy in many third-party studies. With the development of injection re-evaluation, Shuxuetong is expected to stand out and lead to a rebound in future performance.
Investment advice: in view of the fact that the company's business in the field of stem cells is still in its infancy and there is a risk that clinical trials are not as expected, this profit forecast is based on the company's existing business. As the company's injection and other products are greatly affected by medical insurance control fees in the short term, we have adjusted the company's profit forecast. It is estimated that the company's net profit in 2018-20 will be 4.16pm 518max 589 million yuan, corresponding to EPS 0.48pm 0.60max 0.68 yuan. Considering that the company's products are expected to stand out in the re-evaluation, the layout of the emerging medical business is leading, giving the company a valuation of 22 times in 19 years, with a target price of 13.2 yuan and an "overweight" rating. It is suggested that we should pay close attention to the research and development and marketing of the company's stem cell products.
Risk hints: stem cell cooperation related policies, talent and financial risks, stem cell research and development is not as expected, health insurance control costs, re-evaluation is not as expected.