Key points of investment

Incident: On March 21, 2024, the company announced that the multi-center, randomized, double-blind, placebo-controlled phase III clinical trial of the company's innovative traditional Chinese medicine, Jincao tablets in female patients with chronic pelvic pain sequelae of pelvic inflammatory disease has reached the main end.

Phase III of Jincao tablets has reached the main end point and is expected to fill the domestic treatment gap. Pelvic inflammatory diseases are a group of infectious diseases of the female upper genital tract, mainly including endometritis, salpingitis, ovarian abscesses, pelvic peritonitis, etc.; about 20% of patients with acute pelvic inflammatory disease will have chronic pelvic pain after an attack. Chronic pelvic pain is often reflected in 4-8 weeks after an acute attack of pelvic inflammation. The rate of patients with chronic pelvic pain during one episode of pelvic inflammation is 12%, compared to 67% when it occurs more than three times; currently there are no drugs available to treat chronic pelvic pain after pelvic inflammatory disease in China batch.

Jincao tablets (total cyclotene ether terpenoside tablets) are the only active part of traditional Chinese medicine preparations approved for clinical use by the State Drug Administration that accurately target this indication. The substance base is clear and the mechanism of action is clear. A total of 414 patients were enrolled in the phase III clinical group, including 276 cases in the trial group and 138 cases in the placebo group. The main efficacy index was the pain elimination rate after 12 weeks of treatment; it has now reached the main end point, with good safety and tolerability, and low incidence of adverse events. Based on excellent and long-lasting curative effects, Jincao tablets are expected to fill the gap in domestic treatment of this indication after being marketed.

It is gradually being harvested in the research pipeline, and KC1036 is expected to provide new drug options for ESCC backline use. In terms of the company's other research and pipeline, (1) Su Ling: NDA for dog use has been accepted. In recent years, with the increase in the number of domestic pet dogs, the scale of the pet medical market has gradually expanded, and the demand for “safe and effective” hemostatic drugs is becoming more and more intense. Suling's development in the pet medicine circuit is expected to extend its life cycle and further open up product space; at the same time, the company is expected to use this as an opportunity to continuously enrich the pet medicine product pipeline. (2) KC1036: Self-developed multi-target receptor tyrosine kinase inhibitor such as ALX, VEGFR, and CSF-1R. Currently, it is actively promoting multiple clinical trials covering gastrointestinal tumors, thymic tumors, etc. Among them, ESCC phase III has completed the enrollment of the first patient, and 1LESCC maintenance treatment in combination with PD-1 has been approved for clinical use. Currently, there are no preferred options for esophageal cancer after second-line cancer, and there are many that do not meet clinical needs; judging from the competitive pattern of ESCC indications in China, with the exception of PD-1 drugs, KC1036 is advanced in research and is expected to provide new drug options for ESCC backline use. (3) KC-B173 (recombinant human coagulation factor 7): Non-clinical research is being carried out according to the plan.

Investment advice: Suling's volume+equity incentives guarantee the company's rapid growth in performance and gradual gains in the research pipeline. The prospects for KC1036 are promising. We raised our original profit forecast. The company's net profit for 2023-2025 is estimated to be 1.61/1.96/235 million yuan (previous value: 1.28/142/167 million yuan), respectively, with growth rates of 59%/22%/20%, respectively.

The corresponding PE was 31/26/21 times, respectively, maintaining the “buy-B” recommendation.

Risk warning: industry policy risk, risk of R&D failure or progress falling short of expectations, risk of uncertain marketing of new drugs, risk of falling short of expected sales, etc.