The company had previously anticipated significant losses in 2019. We judge that the most difficult period for the company is over. After new products gradually enter the harvest period in 2020, the company is expected to reach an inflection point.
Key points to support ratings
The crisis is organic, and an inflection point is approaching. China's pharmaceutical industry began a long period of major transformation in 2018. Most pharmaceutical industry enterprises have faced an even more difficult situation, and many have even suffered extinction. Although Jingfeng Pharmaceutical had already made a forward-looking assessment of changes in the industry a few years ago and had begun to increase R&D for 4-5 years (cumulative R&D investment was close to 900 million yuan), it also experienced such a difficult period when the industry actually changed. “Dangerous organic”:
After the pain brought about by traditional products due to industry changes in 2019, the company gradually ushered in a harvest period for new products after accumulation and loss of hair in 2020. At the same time, the company continued to divest non-main businesses from the end of 2018, and will concentrate more on core business in the future. With the launch of new products (domestic generic drugs+US generic drug export+new orthopedic drugs), the CDMO business+innovative drug business introduces strategic investors, and the gradual withdrawal of non-main business, the company will enter a new era starting in 2020.
New products began contributing incrementally in 2020. 1. Domestic generic drugs marketed on 19-20 include flurbiprofen ester, letrozole tablets, voriconazole tablets, pregabalin capsules, etc. Domestic generic drugs will capture “4+7”
The opportunity to buy in volume, quickly contribute to incremental revenue. 2. In terms of consistency evaluation, supplementary applications for telofiban, irinotecan, and gemcitabine have been officially accepted. 3. The US generic drug business has made 15 ANDA declarations, 10 of which have been approved. Within the next 2-3 years, special and complex injections will be increased, and 505 (b) (2) new drug research and development will be gradually initiated, and strategic cooperation with domestic and international pharmaceutical companies in joint R&D, production and sales will be carried out selectively. 4. In terms of new drugs, the company's heavily stocked variety of cross-linked sodium hyaluronate injection (long-acting HA) for orthopedics is in phase 2 clinical trials and is expected to be reported by NDA in the second half of 2022. 5. In terms of domestic high-end formulations: the anti-tumor liposome JS01 project has completed commercial-scale process development, the JZC23 project has received clinical approval; the biopharmaceutical project JZB01 biosimilar (injectable recombinant human B-type natriuretic peptide, with a market size of 1 billion) has completed clinical sample production, and JZB28 (recombinant EGFR) and JZB34 Class 1 drugs (benchmarking against omalizumab) are in clinical progress. 6. The subsidiary Haimen Huiju is an API company with R&D capabilities and CDMO capabilities, and plans to introduce strategic investors will not be ruled out in the future.
valuations
Net profit for the year 2020 to 2021 is expected to be $74 million/163 million, corresponding to a price-earnings ratio of 52 times/23 times. Covered for the first time, a neutral rating was given for the time being. Continued attention due to positive changes in the company.
The main risks faced by ratings
The progress of the launch of new products, the speed of new product release was lower than expected, 4+7 volume procurement caused the company's product prices to drop more than expected, and the capital invested in R&D and sales systems was higher than expected.