Innovation and transformation will be successful, and the impact of generic drug collection and price adjustments of innovative drugs will gradually decrease
Hengrui Pharmaceutical is a typical example of the transformation of traditional domestic pharmaceutical companies from generic drugs to innovative drugs. Its main business includes anti-tumor, anesthetic, and contrast agents. Since 2021, the variety of pharmaceutical products involved in the collection of the company has continued to increase, the number of innovative drug medical insurance negotiations and increased competition for homogenization. However, at the current time point: 1) The company's innovative drug sector achieved operating income of 8.116 billion yuan (excluding tax, accounting for 38% of total revenue) in 2022, and H1 Innovative Drugs achieved operating income of 4.962 billion yuan (tax included). After three years of release and adjustment, the fifth and seventh batches involved cumulative PDB samples of important varieties The share of hospital sales fell from 59% in 2020 to 13% in Q1 in 2023; among subsequent formulations, ioferol and butolfinol accounted for relatively high sales, but there were less than 4 overrated manufacturers; 3) In 2021-2022, several of the company's innovative drug varieties entered health insurance negotiations and prices were drastically reduced (in particular, PD-1 dropped by 85%), and the impact of price adjustments has already been unleashed in 2023.
New products continue to be implemented, driving performance into an upward channel, and the share of innovation has increased. Currently, the company has a total of 16 marketed innovative pharmaceutical products (2 introduced), covering various treatment fields such as tumors, hematology, narcotics and analgesia, chronic diseases and infections. Among them, the first tier products have been on the market for a long time and lack sufficient growth momentum; the second tier includes 8 innovative pharmaceutical products approved after 2021. Among them, haitripopa (the first domestic TPO-RA), darsilil (the first domestic CDK4/6i), and revelumide (the first domestically produced ARi) have large product potential and are in the golden release period of sales, contributing to the core performance promotion of the innovative drug sector. In addition, in 2023 and beyond, the company has been newly approved for four innovative varieties of orteconazole, adbellib, reagliptin, and tigilidine, and will soon enter the sales volume stage. We believe that due to various factors such as the reduction in the impact of drug collection and price adjustments of innovative drugs and the accumulation and distribution of new products, the company has achieved both revenue and profit increases in the first three quarters of 2023. Performance has entered an upward channel, and the share of innovative drug revenue is expected to increase further.
The reserve pipeline is rich and has many major products, laying the foundation for long-term development Hengrui Pharmaceutical's innovative drug storage pipeline is mainly divided into the three major sectors of cancer, self-prevention, and chronic diseases. Tumors: PD-L1/TGF-beta dual antibody SHR-1701 is in critical phase III clinical trials, and the multi-target kinase inhibitor famitinib has submitted an application for marketing; the HER2-ADC drug SHR-A1811 is positioned as a DS-8201 Me Better product, showing no less efficacy than DS-8201 in breast cancer with high and low HER2 expression, and its safety performance is more outstanding. 5 domestic sexual therapy certifications have been obtained. Self-exemption:
The large molecule IL-17A monoclonal antibody SHR-1314 and the small molecule JAK1 inhibitor SHR0302 have both been submitted for marketing. In particular, JAK1 inhibitors are effective against various spontaneous diseases, and expansion of indications is expected to further open up the growth ceiling. Chronic diseases: Under the aging trend, chronic diseases have huge demand for medication. As the third-largest new drug development strategy after cancer and self-immunity, the company has a product layout in various fields such as diabetes, blood lipid reduction, gout, and weight loss, and there are many highlights.
Profit forecasting
The company's net profit for 2023-2025 is estimated to be 4.891 billion yuan, 6.021 billion yuan and 7.259 billion yuan respectively, corresponding to EPS of 0.77 yuan, 0.94 yuan and 1.14 yuan, respectively. This is the first coverage, giving it a “buy” rating.
Risk warning
1. Pharmaceutical industry policy risks;
2. Risk of sales falling short of expectations;
3. Risk of failure in the development of new drugs;
4. Risk that profit forecasting assumptions are untrue or fall short of expectations.