1H23's performance met our expectations
The company announced 1H23 results: revenue of 225 million yuan, up 89.3% year on year; net loss for Gimu was 212 million yuan, compared to 92 million yuan for the same period last year. The results for the first half of the year were in line with our expectations.
Development trends
TAVR's volume is strong, and its market share is increasing rapidly. We judge that TAVR (transcatheter aortic valve replacement) surgeries in China grew rapidly in the first half of the year, and the number of surgeries in the industry was over 50% compared to the same period. Peijia has achieved 1,250 implants, and the company says its share in the commercial stock market has reached 19.3%. Moreover, the company further optimized the production process, and the gross margin of the valve business increased by 8.9 ppt to 87.1% over the same period last year. As of 1H23, the number of company admissions has reached more than 410, and about 20 provinces have included TAVR in various levels of medical insurance reimbursement.
Neural intervention has shown impressive results, and ischemia and the commercialization of the pathway have accelerated. 1H23 Neural Interventions earned 117 million yuan, +76% year over year, exceeding our expectations. 1) Ischemia income was 46 million yuan, +176% year on year.
Among them, new products approved in 2022, such as suction catheters and plug removal brackets, contributed a total of 20 million yuan in revenue. The company expects the Syphone plug holder's share to reach 9% for the full year of 2023. The company expects the NeuroStellar intracranial stent to be approved in 2024. 2) Channel revenue was 39 million yuan, +90% over the same period. 3) Bleeding revenue was 32 million yuan, +8% year on year. The company said its market share increased to 9.5% after collecting spring rings. The company expects the new Shinsuke Business plant to be put into use in 4Q23, and production capacity will increase to 2-3 times the current one.
The valve is progressing smoothly in the research pipeline. The company stated: 1) reflux TAVR has been clinically registered and enrolled in 9 patients; 2) mitral valve clamps have been registered domestically for clinical enrolment; 3) 120 patients with third-generation TAVR dry valve have been enrolled, with 80% progress completed; 4) Mitral Valve Replacement HighLife is clinically registered in multiple centers. The company expects that MonARQ for tricuspid valve replacement and GeminiOne mitral valve clip will be the first batch of products to be shipped overseas. GeminiOne has submitted EFS (Early Feasibility Test) pre-application materials to the US FDA. We expect GemineOne and MonarQ to each receive FDA approval to conduct EFS clinical trials in the US around 2024. We look forward to the innovative results of the company's valve products going overseas.
The company said that in the first half of 2023, it paid about 450 million yuan for milestones such as MonarQ's humanitarian use and reverse TAVR to complete technology transfer (1H23 had 88 million yuan included in R&D expenses, and the remaining portion had previously been included in R&D expenses). As of 1H23, the company still had cash, cash equivalents and term deposits totaling 1.16 billion yuan. The company stated that the remaining milestone payments for the BD project did not exceed 300 million yuan.
Profit forecasting and valuation
Considering that the company is actively expanding the domestic market and investing in R&D of products at home and abroad, we adjusted our net loss forecast for 2023/24 from 244/02 million yuan to 387/267 million yuan. We maintained our outperforming industry rating and lowered our target price based on the DCF model (WACC 10.9%, sustainable growth rate 2.1%) by 16% to HK$12, which is 67% upward from the current stock price.
risks
The competitive landscape worsened, R&D failed, internationalization fell short of expectations, and the impact of policies on prices exceeded expectations.