Events:

On October 28, 2023, the company released its third-quarter results report for 2023. In the first three quarters, the company achieved revenue of 301 million yuan, an increase of 124.91% over the same period last year, of which the revenue of anti-HIV innovative drugs was 46.4866 million yuan, an increase of 151.46% over the same period last year. The net profit of returning to the mother in the first three quarters was-32 million yuan, narrowing the year-on-year loss by 57.84%.

Comments:

Q3 performance growth slows slightly, and the industry affects quarterly fluctuations.

The company achieved revenue of 63 million yuan in the third quarter, an increase of 4.17% over the same period last year, of which the revenue of anti-HIV innovative drugs was 13.66 million yuan, an increase of 28.53% over the same period last year. The net profit of returning to the mother in the third quarter was-23 million yuan, an increase of 159.66% over the same period last year. In terms of expenses, the company's sales expense rate in the third quarter is 35.8% (+ 8.0pct), and the R & D expense rate is 18.58% (- 19.8pct). The company has entered a new commercialization stage of full preparation for sales, and the increase in sales expenses is mainly reflected in the expansion of the sales team. Affected by the adjustment of team structure and the overall impact of the medical industry, the company's performance growth slowed down slightly in the third quarter, and the sales team needed time to maintain optimism about the follow-up development of the company.

IND, an integrase inhibitor developed by the company, was accepted by the company during the reporting period. During the reporting period, the company obtained enomitie tablets (ACC008, conversion therapy for virus-suppressed HIV-1 infections) and imported original drug integrase inhibitors Aicoen Bantin tablets (trade name: Jafukang?, Gilead R & D) The first widely used anti-HIV innovative single-tablet compound preparation included in health insurance in China) head-to-head III phase clinical study. Studies have shown that enomitidine tablets are equally effective in maintaining viral inhibition, liver and kidney safety, and have significant advantages in cardiovascular metabolic safety indicators such as blood lipids, body weight and uric acid. It is the first domestic three-in-one compound single-tablet preparation that can truly achieve daily single-tablet use. With the follow-up treatment indications approved, enomitie will meet the domestic demand for conversion treatment for HIV-1-infected people, which will help to reduce the economic pressure of patients and realize import substitution. On the basis of the continuous accumulation of high-level evidence-based medicine in China, the company will continue to promote the coverage and volume of enovirin regimens (Enovir tablets and Enovir tablets). In terms of the new pipeline, the company independently developed a new chemical structure of human immunodeficiency virus (HIV) integrated chain transfer inhibitor (INSTI)-ACC017 tablet clinical trial application was accepted, while the long-acting protease inhibitor ACC027 is in the preclinical research stage, the company iterates, multi-target layout of HIV, in line with overseas treatment methods.

Dual products will soon participate in the state-to-state negotiations on health insurance, and health insurance payment will greatly increase the volume of dual products listed by the company, ACC007, and ACC008, the first domestic compound single tablet, will participate in this national health insurance negotiation during November. Enovelin first entered health insurance through negotiations in December 2021, with a price of 515 yuan per box and will renew its contract this year. Enovetin will be approved for listing in January 2023 and will be negotiated for the first time, with the current terminal price of 1125 yuan per box. With its head-to-head Jiefkang phase III clinical data with excellent results, it is expected to strive for a milder reduction.

There are 1.2 million patients with HIV in China, and the number is increasing at the rate of 100,000 to 150,000 per year. With the change of concept and way of life, the mode of transmission of HIV has changed from blood transmission in the past to the main sexual transmission at present, and it is mainly homosexual transmission. In the past, the payment method of AIDS drugs was centralized procurement by the government. With the improvement of patients' ability to pay and the improvement of people's privacy requirements, AIDS drugs have a huge imagination in the health insurance and self-financed market. The company's Enovirin and Enomitte are gradually gaining more and more data support in evidence-based medicine and clinic. the successful commercialization of the product will be the company's next priority, and health insurance payment will greatly boost the volume of the product.

The new senior management team has been in place, opening a new chapter in commercialization and R & D. after the successful launch of two new HIV drugs on the market, the company has entered a new stage of historical development, promoting the successful commercialization of products and strengthening the follow-up pipeline has become the company's top priority at present and in the future.

Through equity incentives, the company stabilizes talented and backbone employees to a large extent, especially a large number of equity incentives for two new executives, showing Adi Pharmaceutical's determination to start a new commercialization and innovative research and development.

1) CEO Zhang Jie has many years of experience in pharmaceutical company management, former Director, Assistant to the President, Vice President, and Senior Vice President of CP Tianqing Pharmaceutical Office, and INNOVENT BIO Senior Vice President. He has worked in CP Tianqing for nearly 30 years, and has profound experience in drug marketing management. The new CEO will promote the commercialization of the company's listed products, enrovirin and enomit, as well as sales promotion channels across the country.

2) Qin Hong, vice president and chief medical officer, has a clinician background and many years of experience in clinical development of antiviral drugs, and has worked in the Department of Oncology, the first affiliated Hospital of Medical College of Xi'an Jiaotong University. successively entered GlaxoSmithKline PLC (China) and other well-known biomedical enterprises at home and abroad, engaged in clinical development and medical affairs, helping the company to strengthen pipeline layout and accelerate pipeline process.

3) the company has newly appointed Mr. Gu Gaohong as Senior Vice President. Mr. Gu Gaohong has worked in Zhengda Tianqing Pharmaceutical Group for more than 36 years and has rich practical experience in commercial operation, brand building and overall management of innovative drugs. The new executives provide new development ideas for the company, accelerate the commercialization of the company's innovative drugs, and believe that the company's future development momentum and HIV new drug release potential.

Investment advice: maintain a "buy" rating

As the first domestic third-generation oral new drug of HIV and the first oral triple compound single tablet, the company's core products ACC007 and ACC008 are optimistic about the market scarcity and volume capacity of the core products, as well as the company's large single product leadership and comprehensive product layout in the field of AIDS.

Taking into account the impact of the medical industry's policies on hospitalization and other activities in the second half of the year, we have adjusted the company's performance forecast. It is estimated that the company's revenue in 2023 to 2025 will be 394 million yuan, 674 million yuan and 965 million yuan respectively (the previous value is 4.97 million yuan), an increase of 61.3%, 71.2% and 43.1% respectively over the same period last year. It is estimated that the net profit of returning home is-49 million yuan, 34 million yuan and 150 million yuan respectively (the previous value is 0.01max 0.67 billion yuan), an increase of 60.6%, 169.2% and 342.9% respectively over the same period last year, corresponding to a loss of PE, 156x and 35X. Maintain a "buy" rating.

Risk hint

The risk of floating sales of enovirin and enomi; the risk that the persistence of human protein orders is not up to expectation; the risk of uncertainty of health insurance policy, etc.