4Q23 Rapid growth in revenue and profit
The company released its 23-year performance forecast on 1/29, achieving revenue of 3.09 billion yuan (+11.4% yoy), net profit of 1.18 billion yuan (-25.5% yoy), after deducting non-net profit of 1.17 billion yuan (+39.6% yoy), of which 4Q23 revenue was 1.10 billion yuan (+47.7% yoy), after deducting non-net profit of 416 million yuan (+131.6% yoy). The main reasons for the rapid revenue growth rate: 1) 4Q23 received technical service revenue from Jianyou Co., Ltd. (we estimate ~ 100 million yuan); 2) 2Q23 did not complete enough collection, medical institutions reduced insulin purchases from leading companies, compounded 3Q23's external environmental impact on poor delivery, and 4Q23 reimbursement. The growth rate after deducting non-profit is higher than the revenue growth rate mainly due to the fact that technical service revenue is included in profit, compounded by a decrease in sales expenses and a decrease in management expenses ratio (reduction in equity incentive expenses). Considering that the insulin collection contract will be renewed in May '24, and that liraglutide has been approved for listing, we expect net profit of 11.78/13.49/1,579 billion yuan to the mother in 23-25, and a target price of 15.59 yuan (prior value of 13.76 yuan) of 23xPE (comparable company Wind agreed to 22x, leading company gave a premium) to maintain the “buy” rating.
Steady growth in insulin sales
1) Second-generation insulin: We estimate a high single-digit increase in second-generation insulin sales in '23, but considering the high price base of 1-4M22, sales increased slightly throughout the year. 2) Third-generation insulin: We estimate that sales of insulin glycine increased rapidly in 23, with sales growth of ~ 30%; sales of Mendong insulin (quick-acting +30/50 premix) exceeded 100 million yuan in 23. We believe that the insulin market pattern will remain stable after collection (biologics collection is different from chemical preparations, and the distribution amount is based on the company's original market sales, and the subsequent market is expected to focus on leading domestic companies + major foreign manufacturers), and it is expected that the decline in contract collection renewals in May of this year will be manageable.
The R&D pipeline blossomed, liraglutide was approved, and the URAT1 data disclosure company's R&D pipeline layout was comprehensive: 1) GLP-1 series: liraglutide was approved for hypoglycemic indications in December 23, the second domestic company, we expect to contribute 100+ million yuan in sales in 24 years; THDBH 120/121 (GLP-1/GIP) hypoglycemic phase 1 clinical; THDBH 110/111 (GLP-1 small molecule) hypoglycemic phase 1 clinical; 2) URAT1 series: THDBH (130 URAT1) clinical phase 2a The main end point was reached, THDBH 150/151 (XO/URAT1) phase 1 clinical; 3) insulin series: laipuline insulin (soon to be produced), ultra-fast acting complementary insulin (phase 3 clinical enrollment), soluble glycine and complementary insulin (phase 1 clinical end in Germany), and Tokugu insulin liraglutide (phase 1 clinical trial soon).
Teaming up with fitness friends, insulin is about to go overseas
The company reached a cooperation with Jianyou Co., Ltd. to export glycine, mentong, and insulin to the US market in September '23. We speculate that Europe and the US will submit INDs simultaneously after the Spring Festival, which is expected to avoid clinical approval for interchangeable insulin biosimilar drugs. At the end of this year, the US BLA is expected to be approved for listing in '26. Considering the huge diabetes market in the US (US diabetes treatment market of 379.5 billion US dollars, IDF 21), we think biosimilar drugs are expected to gain a large market share (Mylan's agent's insulin-like glargine was approved by the FDA in '21 as an interchangeable biosimilar, with a sales market share of 12% in the US from June '22 to June '23).
Risk warning: Product sales fall short of expectations, risk of product price reduction, R&D progress falls short of expectations.