Event: Kexin Virtue, a subsidiary of Jiuzhitang, recently received a "Clinical trial notice" approved and issued by the State Drug Administration, which considers that REMD-477 meets the relevant requirements of drug registration in China and approves this product to carry out clinical trials.
REMD-477 was approved by the State Drug Administration, and the domestic clinical trial of new diabetes drugs began on November 29, 2018. The REMD-477 drug was approved and issued by the State Drug Administration. The indication of the drug is diabetes. We believe that the approval of the clinical trial for REMD-477 reflects the approval and support of the SFDA to the drug to a certain extent; the approval of the clinical trial also means that the company can start clinical trials of diabetes drugs in China, saving the time cost of the company in the research and development and trials of innovative diabetes drugs, and reducing the uncertainty of launching the drug in the domestic market to a certain extent.
REMD-477 is expected to challenge the status of insulin, and Cosin has all its patents and commercial rights. REMD-477 is an important research project of REMD Biotherapeutics in the United States. REMD-477 is the first human monoclonal antibody clinical molecule developed against glucagon receptor in the world. The first phase trial of the drug in the United States for type 1 diabetes showed that after a single injection, patients not only significantly reduced the dose of insulin, but also reduced their blood sugar levels. At the same time, the drug can be used once a week or once a month, which provides great convenience for patients with diabetes (at present, most patients with diabetes take insulin every day), so the drug has the potential to subvert the status of insulin. According to the company announcement, Beijing Kexin Meade Biopharmaceutical Technology Co., Ltd. has global patents and commercial interests in all indications of REMD-477 molecules, and the company holds a 5.8% stake in REMD-477, which will benefit the company if it is successful.
The company's short-term performance is under pressure under factors such as medical insurance control fees, and it is suggested that the company's trend in innovative drugs is affected by the restrictions of the new version of medical insurance catalogue and auxiliary drug catalogue, medical insurance control fees, "two-vote system" and other factors. the 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. The net profit is 334 million yuan, down 35.08% from the same period last year. The re-evaluation work in the future is expected to reverse this situation. Although the company's traditional business is at a low ebb, the innovative drug business has made rapid progress. In addition to the layout of diabetes drugs, the US Stemedica invested by the company's investment fund is a leader in stem cell research, and the company's Jiuzhitang Meike (Beijing) cooperates with Beijing Tiantan Hospital to promote preclinical stem cell research. The market for diabetes and stem cell drugs is promising, and the company's layout of these drugs is expected to provide the company with new growth points and reverse the decline of its traditional business.
Investment advice: in view of the fact that the company's business in the field of innovative drugs is still in its infancy, this profit forecast is based on the company's existing business. It is estimated that the company's net profit in 2018-20 will be 4.16 pound 5.18 / 589 million yuan, corresponding to an EPS of 0.48 pound 0.60 plus 0.68 yuan. Considering that the company's injection 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 recommended to pay close attention to the research and development of diabetes drugs in the company.
Risk hints: the progress and results of clinical trials are not as expected, the future product market competition situation is complex, medical insurance control fees, re-evaluation is not as expected.
