The company's recent situation
The company announced the equity incentive plan in December. Combined with recent BD developments, etc., the market has responded positively.
reviews
Implement equity incentives to demonstrate the company's confidence. The company announced that 394,000 share options were granted to employees at an exercise price of HK$13.40 per share (the closing price on the announcement date), of which 50% will be unlocked in 2024 and 50% in 2025. The unlocking conditions include the company's main performance goals and employees' individual performance. We believe that the grant of relevant share options not only motivates employee performance, but also reflects the company's confidence in business growth.
The dosage of Ridaxen is steady, focusing on the potential demand driven by the high incidence of respiratory diseases. The company's core product, Ridaxian, is an immunomodulator that has been marketed domestically for more than 20 years. It has extensive academic accumulation and integration into many guidelines. It has maintained growth in recent years in the context of collection, with sales of nearly 2.2 billion yuan in 2022. We expect to maintain double-digit growth in the future. At the same time, the company is also actively exploring the collaborative potential of Ridaxian in more indications to further expand the market space. 2H23 has launched joint PD-1 exploration for colorectal cancer and sequential treatment of non-small cell lung cancer with radiotherapy. Furthermore, with the recent outbreak of respiratory infectious diseases in China, we recommend focusing on the impact of related events on the public's sense of self-health, as well as the potential impact on demand for related varieties such as Ridaxen.
The BD strategy is clear, and the focus is on the volume of new pipelines being launched. Based on existing products such as Ridaxen, the company has established an efficient commercialization team and a unique online platform in the field of anti-cancer and infection. At the same time, it has introduced relatively mature and more deterministic molecular methods developed overseas through extensive cooperation to expand the product portfolio around superior departments. In the field of oncology, the company introduced the pediatric oncology drug Dayouze (humanized GD2 monoclonal antibody, marketed domestically) and the gynecological oncology drug Oserdu (partner menarini, the world's first marketed oral SERD. We conservatively expect to launch domestic declarations in 2025-2026. According to the company's public communication, the company plans to launch first sales in Boao and the Greater Bay Area on 1H24); in the field of antibiotics, the company introduced advanced antibiotics Vibativ (can be used for MRSA infections, domestic NDA has already been accepted) and Voreabm (domestic NDA has already been accepted) and Voreabm (Partner beauty Nalini can be used for carbapene-resistant bacterial infections (stage III in China), etc. We believe that the BD strategy, which focuses on deterministic molecules, is more helpful in leveraging the back-end capabilities and comparative advantages that the company has accumulated in corresponding departments. These mid to advanced players are expected to rely on the company's mature commercialization platform to further drive revenue growth within the next 2-3 years.
Profit forecasting and valuation
We conservatively estimate the volume of Ridaxian and maintain the profit forecast, corresponding to the price-earnings ratio of 7.8/7.3 times in 2023/2024; maintaining an industry rating. Considering the recent recovery in the overall valuation of Hong Kong Stock Pharma, driven by emotional recovery and fundamentals/transformation progress, we raised our target price by 33.3% to HK$18, corresponding to 9.8/9.2 times the price-earnings ratio in 2023/2024, with 26% room for improvement compared to the current stock price.
risks
The product pattern deteriorates; the impact of drug collection; the development of new drugs falls short of expectations; the supply of products falls short of expectations.