Introduction to this report:
The company's proprietary pharmaceutical sector grew steadily in 2023, and the approval of multiple products is expected to drive revenue and profit back to double-digit growth in 2024. A number of R&D pipelines have entered the harvest stage one after another, maintaining an “gain” rating.
Summary:
Maintain an “Overweight” rating. The company announced that it achieved revenue of 31.45 billion yuan in '23, an increase of 1.7% year on year; adjusted net profit of 6.275 billion yuan, an increase of 2.8% year on year. The overall gross margin was 70.5% (-1.4pct), mainly due to changes in product structure and changes in the price of vitamin C. Taking into account the impact of changes in product structure, the revenue forecast for 24-25 was lowered to 350.29 billion yuan and 39.613 billion yuan (originally 357.93 billion yuan, 44.425 billion yuan), and the 26-year revenue forecast was added to 44.835 billion yuan, maintaining the “gain” rating.
The proprietary medicine sector is growing steadily, and approval of multiple products is expected to drive double-digit revenue growth in the sector. Revenue from proprietary drugs was 25.637 billion yuan (+4.6%), of which revenue from neurological products was 9.089 billion yuan (+12.1%), and Enbip maintained double-digit growth; revenue from anti-tumor products was 6.139 billion yuan (-16.4%), which led to a decline in revenue. Irinotecan liposomes set up a dedicated sales team after 23 years of marketing, and rapid release after marketing. Currently, the focus is on gastrointestinal tumors. The future is expected to expand to tumors such as SCLC; revenue from anti-infective products is 4.236 billion yuan (+19.7%), and multiple products are collected and selected antibiotics Product growth was strong, and amphotericin B liposomes doubled through doctor education; revenue from cardiovascular products was 2,440 billion yuan (-15.5%), due to continued impact from the collection of cinnabar. Mingfule's treatment for acute ischemic stroke was approved for marketing in February 2024, opening up market space; affected by the outbreak at the beginning of the year and the fall influenza outbreak, revenue from respiratory products was 1,560 billion yuan (+124.0%).
A number of major innovative products are expected to be launched and sold in 24 years, and smooth progress in the research pipeline will support the company's rapid development in the future. R&D expenses for 23 years were 4.830 billion yuan (+21.2%), accounting for about 18.8% of the proprietary drug business. More than 60 drugs have entered the clinical or application stage, 7 drugs have submitted marketing applications, and 18 are in the clinical registration stage. Omalizumab (urticaria), amphotericin B liposome (deep fungal infection), and SYSA1802 (≥2L cervical cancer, PD-1) are expected to be approved for marketing in 2024 to contribute to increased performance; meloxicacin was accepted for NDA in December 2023, and albumin paclitaxel II will soon be completed (March 2024). The self-exempt drug usinumab and the ADC drug DP303C (HER2 ADC) are all expected to be approved for marketing in 2025, which will support rapid future development.
Catalysts: The volume of core products exceeded expectations, and clinical data of drugs under development exceeded expectations.
Risk warning: Product development falls short of expectations, industry policy risks, and procurement price reductions exceed expectations.