Operating cash flow was positive, and biotech upgraded to a model for biopharma: Fuhong Hanlin grew from biotech to a leader in biopharma. The increase in the company's cash before 2020 was mainly based on cash flow generated from financing activities. As the company's various products were approved and commercialized, it achieved a net cash flow of 90 million yuan from operating activities in 2021. The net operating cash flow for the first three quarters of 2023 reached 572 million yuan, achieving net profit of 408 million yuan, and has steadily entered a positive cycle of pharmaceutical value.
The gold content behind the strong sales volume: 2023H1's pharmaceutical sales revenue was 2.164 billion yuan, with a commercial operation team of 1,308 people, with per capita sales of 1.65 million yuan (+12%); judging from the per capita productivity of the sales team, the 2023Q1-3 company's qutuzumab first-line productivity was > 400,000/month, and the per capita productivity of Slulizumab first-line was about 180,000/month. The per capita productivity of the sales team was at the same level as Fu Hong Han Lin. The sales expense ratio of 2023H1 is 31%, which is at a low level among innovative pharmaceutical companies listed on AH. The company achieved excellent commercialization results under relatively orderly and reasonable cost control.
Strong product strength to achieve decisive clinical value: The company's product echelon is unique and has highly differentiated clinical value. For example, slulizumab has not fallen behind in the fierce competition of PD-1 with excellent data on small cell lung cancer; trastuzumab brings great convenience to patients with its unique dual-specification dosage advantages, and is expected to be the first “Chinese” biosimilar approved in China, Europe, and the United States; in terms of ADC development, the company's HLX42 (EGFR ADC) and HLX43 (PD-L1 ADC) have shown initial promising early data. Among them, HLX42 obtained early data with great potential in December 2023. Grant Fast Track Eligibility. A complete product pipeline and a fast and efficient clinical development system will continue to provide sufficient growth impetus for the company's long-term development.
Going international, the company has continued to promote overseas licensing of products over the years, including biosimilar drugs such as trastuzumab, rituximab, adalimumab, and bevacizumab, and innovative drugs such as slulizumab, HLX35 (EGFR×4-1BB double antibody), and HLX11 (HER2 domain II monoclonal antibody), and has achieved external licensing in many countries and regions. Trastuzumab became the first double batch of domestically produced single antibiotics in China and Europe, and an application for marketing in the US was submitted in February 2023. Slulizumab submitted an application for marketing in Europe in March 2023, and plans to submit an application for listing in the US in 2024.
As the company's sales footprint continues to expand, the products will achieve commercial value in a wider range.
Profit forecasting, valuation and ratings: Fuhong Hanlin is a benchmark enterprise for biotech upgrading and iteration to biopharma. It has unique advantages in sales, product strength, and internationalization. Based on the results of the absolute valuation and relative valuation, we gave the company a target price of $18.62, converted to HK$20.50 at the latest exchange rate.
Considering the company's excellent business quality, strong product strength, and international expansion space, the company was given a “buy” rating.
Risk warning: risk of biosimilar collection; risk of increased market competition; risk of failure in innovative drug development.