Main points:

Research and development innovation-driven biomedical enterprises, the epidemic situation does not change the company's product volume trend. 1) the company is mainly engaged in innovative research, development, production and sales of biomedicine, driven by R & D and innovation, and adheres to the drug development direction based on photodynamic technology, nanotechnology, genetic engineering technology and oral solid preparation technology platform. Equal emphasis is placed on innovative drug research and strengthening the development of drug industrialization. The company's main products are aminolevulinic acid topical powder (trade name: Ella) and Helmpofen for injection (trade name: Fumeda) based on photodynamic technology platform. and long-cycle doxorubicin hydrochloride liposome injection (trade name: Lipodo) based on nanotechnology platform, mainly covering the field of skin venereal disease treatment and anti-tumor treatment. There are no controlling shareholders and actual controllers in the company. 2) the company's products are in volume, the impact of the epidemic has weakened, and the performance has improved in the third quarter.

From 2016 to 2019, the compound growth rate of operating income was 17.22%, and the compound growth rate of return net profit was 17.91%. At present, the company has two production bases in Shanghai and Taizhou, of which two production lines have been built in Taizhou for the production of Fumeda API and injection respectively. The company has an annual production capacity of 2.3 million Ella, 400000 Lipodo and 160000 Fumeida. When designing the existing capacity, the company takes into account the market demand for a long time after it is put into production, and the design capacity is relatively abundant. From 2017 to 2019, the production and sales of major products increased steadily, and the products were still in the stage of volume increase. Affected by the epidemic, the company achieved operating income of 236 million yuan in the first half of the year, down 39.69% from the same period last year, and its net profit was 29.0789 million yuan, down 68.30% from the same period last year. The company's performance recovered significantly in the third quarter, with operating income of 261 million yuan, an increase of 11.29% over the same period last year, and a net profit of 55.769 million yuan, an increase of 87.45% over the same period last year.

The pharmaceutical industry continues to grow, the scale of market segmentation expands, and the application of photodynamic technology has unique advantages. The main results are as follows: 1) the market of dermatology drugs is expanding. In 2018, the total output value of China's dermatology drug market reached 16.731 billion yuan, an increase of 4.3% over the same period last year. The World Health Organization has declared that dermatosis is a disease with the highest incidence and the highest disability rate in human history in the 21st century, which will drive the demand for dermatosis treatment and drugs. it is expected that the dermatology drug market will expand in the future. 2) the application of photodynamic technology has unique advantages. According to the data released by the STD Control Center of the Chinese Center for Disease Control and Prevention in the analysis of epidemic characteristics of condyloma acuminatum in STD surveillance sites in China in 2008 and 2016, the reported incidence of condyloma acuminatum in China was 2465 million, and the number of reported cases nationwide was 340800. The number of patients with condyloma acuminatum in China may be greatly underestimated and has a large potential market capacity. Compared with traditional therapy, photodynamic therapy has unique clinical advantages such as less trauma, low toxicity, high selectivity, high protection to appearance and function of important organs. There are four kinds of photodynamic drugs on the market in China, such as aminolevulinic acid, vitipofen, Helmpofen and hematoporphyrin. the total sales in 2018 are 626 million yuan, of which aminolevulinic acid hydrochloride accounts for 77.16%. 3) the incidence of port wine stain is high, and Helmpofen is the only symptomatic drug approved by ICH. Port wine stain is a common congenital superficial telangiectasia of the dermis. The incidence of port wine stains is about 3 ‰-4 ‰, and there is no racial or regional difference.

According to this incidence rate, the stock of port wine stains in China in the past few decades is as high as 4.2 million, with about 50, 000 new children each year. At present, the mainstream therapy of port wine stain is laser therapy and photodynamic therapy. Hempofen for port wine stains, the world's first photodynamic drug for port wine stains, is an integrated new drug with new drug targets, new compounds and new indications, and is the only drug approved for the treatment of port wine stains within the regulatory body of ICH (International Coordinating Council for Drug Technical requirements for Human use).

The company's photodynamic technology is in the leading level in the world, and the clinical competitive advantages of the two major products are outstanding. The company is a pioneer in the development of photodynamic therapy and is one of the representative enterprises of photodynamic technology in the world. The company's photodynamic technology is in the leading level in the world, and the company continues to develop and develop based on this technology platform. Photodynamic drugs are one of the company's important product groups. At present, the company has mature photosensitive compounds including aminolevulinic acid, Helmpofen, dotepofen and other mature photosensitive compounds, among which aminolevulinic acid and Helmpofen have been listed in China. In the field of condyloma acuminatum treatment in China, the company's product aminolevulinic acid ranks first in the market share, occupies more than half of the market share, and has a large gap with other varieties in the market, and the market position is stable. The main results are as follows: 1) Ella has significant clinical advantages and high competition barriers. Ella is the first photodynamic drug for condyloma acuminatum in the world. it has become the first choice in clinic after it has been on the market for many years. Compared with traditional therapy, Ella photodynamic therapy significantly reduces the recurrence rate of condyloma acuminatum after treatment, solves the clinical problems of the disease, and fills the international gap in the treatment of condyloma acuminatum in special parts (urethra, anal canal and cervix). It has become a representative product of photodynamic therapy in China. Compared with drugs in other fields, photodynamic drugs can generally be in a state of exclusive or minority competition for a long time. Ella's sales have increased steadily in the past three years, with sales of 575200 in 2017, 699600 in 2018 and 7999 in 2019. Affected by the epidemic this year, Ella's sales fell 48% in the first half of the year and narrowed in the third quarter. Ella's indication is venereal warts, resulting in reduced personnel mobility, limited diagnosis and treatment, and its recovery is relatively slow. 2) Fumeda photodynamic therapy is expected to replace pulsed dye laser therapy and has a large market space. Helmpofen is another photodynamic drug of the company. It is the first photodynamic drug to treat port wine stains in the world. It is a 1.1 class new drug that integrates new drug targets, new compounds and new indications. At present, the main treatments of port wine stains in China are Haimpofen photodynamic therapy and pulsed dye laser. Compared with the traditional laser therapy, Helmpofen photodynamic therapy has obvious advantages such as stable structure, rapid metabolism, low phototoxicity, uniform regression of lesions, high cure rate, short period of avoiding light, low incidence of scar, not easy to relapse and so on. According to the incidence of port wine stains and the retail price of Fumei, the stock market space of related treatment fields in China will also exceed 20 billion yuan, and the market capacity of new children is about 250 million yuan every year, which has a large market space. and Fumei has filled the lack of treatment in the clinical field of port wine stains, and it is possible to gradually replace pulsed dye laser therapy in the future. at present, it is still in the market cultivation stage and has a large space for development. Fumei obtained the new drug certificate in 2012, obtained the production approval in 2016, and began to industrialize its production and sales in 2017. Fumei has been on the market for only three years, and by the end of 2019, it has sold a total of 45200 units and accumulated sales revenue of 169 million yuan. In 2019, Fumida produced and sold 20100 units, with a sales revenue of 7. 5%., 9.0555 million yuan. Sales revenue in the first half of 2020 was 2, 1.2053 million yuan, down 34% from a year earlier, and sales improved significantly in the third quarter.

Doxorubicin ranks first in the market share of anthracycline antineoplastic drugs, and Ribodo is still in a rapid dose-release process. 1) Cytotoxic antibiotics include anthracyclines and polypeptides, in which anthracyclines are chemicals with anti-tumor activity produced by microorganisms, which are commonly used for breast cancer, leukemia, lymphatic cancer, ovarian cancer and lung cancer. Doxorubicin ranks first in the market share of anthracycline antineoplastic drugs, with the fastest growth. The continuous expansion of its market share is mainly due to the rapid growth of sales of doxorubicin liposome preparations. compared with ordinary doxorubicin preparation, doxorubicin hydrochloride liposome preparation has the characteristics of long action time, low cardiotoxicity and good tumor targeting. At present, the drug has been recommended by the National Comprehensive Cancer Network (NCCN) guidelines for first-line treatment of lymphoma, multiple myeloma, ovarian cancer, second-line treatment of breast cancer, bone and soft tissue sarcoma, AIDS-related Kaposi sarcoma and other cancers. In 2018, anthracyclines accounted for 98.51% of the global market share of cytotoxic antineoplastic drugs. The market sales of anthracycline antineoplastic drugs in China are increasing year by year, from 2.869 billion yuan in 2013 to 5.644 billion yuan in 2018, and the market share in 2018 increased by 15.68% compared with the same period last year. 2) in 2009, the company realized the first domestic imitation of doxorubicin liposome drug Doxil (Ribodo). In 2018, Baoduo ranked fifth in terminal sales of anthracycline antineoplastic drugs in China, and third in terminal sales of doxorubicin preparations in China, with a market share of 9.52% and 19.79%, respectively. In 2018 and 2019, Baodou's sales increased by 88.58% and 68.08% respectively compared with the same period last year. Due to the impact of the epidemic, sales fell by 30% in the first half of this year compared with the same period last year, and basically returned to the level of the same period last year in the third quarter. We believe that Ribodo is still in the process of rapid release, and it is expected to resume rapid growth after the impact of the epidemic weakens.

Adhere to innovative R & D-oriented, business positioning in line with the development direction of pharmaceutical innovation.

1) the state has issued a number of pharmaceutical industry policies to encourage innovation and promote industrial upgrading.

2) Business positioning is in line with the development direction of pharmaceutical innovation, and the four core technology platforms drive industrialization development. Since its inception, the company has always taken "exploring the shortcomings and deficiencies of clinical treatment and providing more effective treatment programs and drugs" as the core positioning, and whether it can reflect the unique clinical treatment effect as the decisive factor in project evaluation. business positioning is very consistent with the industrialization policy of pharmaceutical innovation as the direction of development. The company adheres to the drug development direction based on genetic engineering technology, photodynamic technology, nanotechnology and oral solid preparation technology platform, the company adopts the research model of expanding new clinical indications for selected drugs and continuing to develop new drugs and design new treatment schemes for selected diseases. The Recombinant Human-Mouse Anti-CD30 Monoclonal Antibody-MCC-DM1 Coupling Agent ("CD30-DM1") for injection on the genetic engineering technology platform is conducting phase I clinical trials. Trop2 antibody coupling drugs and Her2 antibody coupling drugs for the treatment of triple negative breast cancer, bladder cancer, gastric cancer and other tumors are conducting preclinical studies. The research projects of the photodynamic technology platform are Helmpofen IV phase clinical trial and US registration project, aminolevulinic acid used in the treatment of cervical precancerous lesions infected by HPV and phase I clinical research project of aminolevulinic acid in the treatment of moderate and severe acne. The paclitaxel albumin nanoparticles project for tumor treatment based on nanotechnology platform is carrying out preclinical research and has made a breakthrough in large-scale production process. the transformation of the production line of the project has been completed. the company will carry out clinical consistency evaluation research and apply for production approval as soon as possible according to its market situation. Under the oral preparation technology platform, the company's auberocholic acid for the treatment of hepatobiliary diseases has obtained the corresponding invention patent in Chinese mainland and has entered the clinical consistency evaluation research. At the same time, the company's small molecule targeted drug JAK1 selective inhibitors is a research field that has been confirmed to have great value in the treatment of autoimmune diseases, and the company expects to find a new drug (me-better) product with therapeutic advantages.

Investment advice:

We expect the company's net profit from 2020 to 2022 to be 1.71max 2.76 / 330 million, EPS 0.16max 0.26max 0.32, and the current share price corresponding to Pamp E to be 129-80-65 times. At present, the median Pamp E (TTM) of the chemical industry is 36 times, and the company is overvalued. We give it a "neutral" investment rating for the first time.

Risk Tips:

The recovery of hospital diagnosis and treatment services is not as expected; the product market expansion is not as expected; the risk of product price reduction.