3 innovative drugs entered health insurance, and performance continued to grow
Three innovative drugs, diazepam nasal spray, tericizumab injection, and methotrexate injection - psoriasis have all been included in the national medical insurance catalogue. The rare disease drug tetrabenazine tablets and new activators have been successfully renewed. Currently, 5 products are newly included/continue to be included in national health insurance. These innovative drugs are expected to drive rapid performance growth. In mid-2023, the company achieved a 3.6% increase in turnover to RMB 4.610 billion. Based on pharmaceutical sales revenue, it was RMB 5.536 billion, up 7.1% year on year, and net profit was 1,916 billion yuan, up 6.7% year on year. Against the backdrop of a downturn in the pharmaceutical industry, it has achieved continuous growth in performance, thanks to the company's rich and competitive product line, strong commercialization team and efficient management capabilities.
Abundant innovative drug pipelines:
Three major drugs were approved in the first half of '23 and successfully entered medical insurance. Among them, Diazepam nasal spray: became the first innovative drug for people with epilepsy aged six and above in China. Telericizumab injection: suitable for moderate to severe plaque psoriasis, filling gaps in related fields in the country.
It is conservatively estimated that these 3 new drugs will contribute 3-5 billion yuan in revenue in 2024. The company has deployed 30 innovative pipelines around the world, mainly FIC and BIC, and 2 innovative drugs are under NDA review. Among them, methotrexate injections for RA have been accepted; and more than 10 registered clinical trials are being carried out in an orderly manner.
The internationalization of business development is expected to become a new growth point for performance:
The company will focus on the huge demand for drugs in the Southeast Asian market, take Singapore as the management center, cover ASEAN countries such as Indonesia, the Philippines, and Vietnam, and fully enter the Southeast Asian market. It is proposed to establish a business organization structure focusing on product development and production, pharmaceutical CDMO, and marketing promotion. Insulin and PD-1 were promoted into Southeast Asia for the first time, and lucotinib will also enter the Southeast Asian market.
The dermatology and aesthetic ophthalmology business is growing rapidly:
Currently, Kangzhe Mei's product line continues to be enriched. In 2022, a new Lucotinib cream was introduced. The products also include dermatological skincare products, hyaluronic acid, and botulinum toxin products. The ophthalmology team has more than 300 people, strengthened pharmaceutical device layout and commercialization capabilities, and promoted rapid performance growth. The revenue of the dermatology, aesthetic, and ophthalmology businesses increased by 27.4% and 29.4% in the middle of 2023, respectively.
Maintain the buying rating with a target price of HK$19.44:
Innovative drugs will drive rapid growth in performance, returning to double-digit growth in 2025 as Delicin, Eustafr, and Boeidine enter collection. We expect the company's EPS for 2023-2025 to be 1.34, 1.46, and 1.69 yuan respectively. We gave the company a target price of HK$19.44, corresponding to 2024 PE 12.0 times, with room for growth of 42.73% over the current price, giving it a “buy” rating.