occurrences

Recently, the company released its 2023 annual performance forecast. It is estimated that net profit attributable to owners of the parent company in 2023 will be around -730 million yuan, a year-on-year decrease of about 159%; net profit attributable to owners of the parent company after deducting non-recurring profit and loss will be around -760 million yuan, a decrease of about 126% year on year.

Comment:

R&D investment continued to increase, and net profit declined year over year. The company's revenue during the reporting period was mainly due to sales of chemical preparations and proprietary Chinese medicine preparations. The decrease in net profit was mainly due to (1) a sharp year-on-year increase in R&D investment; (2) a decline in sales and prices of some of the company's products due to national and local collection, leading to a decline in revenue; and (3) the price of Chinese herbal medicines and some packaging materials rose due to the impact of the raw material market. R&D investment continues to increase, and many R&D projects continue to advance.

The company has been established for nearly 20 years and has the advantage of “R&D, production and marketing” integration. The company has 2 new drug R&D centers (SysTimMune, DotBio), 1 antibody and ADC drug manufacturer (DotBio), 1 chemical intermediate manufacturer (Hyatt) and 1 chemical raw material manufacturer (Jingxi Pharmaceutical), 2 chemical formulation manufacturers (Bailey Pharmaceutical, Guorui Pharmaceutical), and 2 marketing companies (Bailey Tianheng, Lhasa Xinbo). The company has a full range of drug research and development capabilities, including small molecule chemicals, macromolecular biopharmaceuticals and ADC drugs, and is a biomedical enterprise with integrated advantages from intermediates, APIs to formulations, and commercial operation capabilities covering the complete “R&D, production and marketing” life cycle.

Continuing to steadily advance the research and development of innovative biopharmaceuticals, the fields of dual/multiple antibodies and ADC have blossomed. Since 2011, the company has focused on innovative research and development of bi/multispecific antibodies and ADC drugs. After more than 10 years of independent research and technology accumulation, the company has built 4 innovative biopharmaceutical core technology platforms with global rights and completely independent intellectual property rights. R&D pipeline More than 20 innovative biopharmaceutical projects, including BL-B01D1 (EGFR/HER3 dual antibody ADC), GNC-038 (CD19/PDL1/4-1BB/CD3 quadruple antibody), SI-B003 (PD1/CTLA-4 double antibody) and many competitive R&D pipelines. In December 2023, the company and Bristol-Myers Squibb (BMS) reached an exclusive licensing and cooperation agreement for the BL-B01D1 project. After the cooperation agreement comes into effect, BMS will pay SysTimMune an initial payment of US$800 million, with a potential total transaction amount of up to US$8.4 billion. The R&D pipeline has blossomed, and it is expected that the product value will continue to be realized.

Profit forecasting and investment ratings: The company focuses on the development of innovative biopharmaceuticals, with promising potential. It is expected to achieve operating income of 5.35/73.88/1,016 billion yuan in 2023-2025, and earnings per share of -1.82 /15.12/-1.16 yuan/share, covering the first time, giving the company an “increase in wealth” rating.

Risk warning: Increased industry competition, product development, commercialization falling short of expectations, etc.