occurrences
On March 29, 2024, Tebao Biotech announced its 2023 annual report. The company achieved operating income of 210 billion yuan, +37.55% year over year; net profit to mother of 555 million yuan, +93.52% year over year; net profit after deducting non-return to mother of 579 million yuan, +73.58% year over year. Among them, 23Q4 revenue was 641 million yuan, +66.93% YoY, +15.16% month-on-month, and net profit to mother was 187 million yuan, +115.37% YoY and +11.88% month-on-month.
Comment:
The results of reducing costs and increasing efficiency are remarkable, and there is still room for improvement in net interest rates
The company's overall gross margin was 93.33%, +4.42 percentage points year on year, and net interest rate was 26.4%, +7.6 percentage points year on year; the period expense ratio was 61.15%, -3.51 percentage points year on year; sales expenses ratio (including R&D expenses) was 20.96%, +2.09 percentage points year on year; financial expenses ratio -0.23%, +0.04 percentage points year on year; net operating cash flow was 512 million yuan, +41.01% year on year. The company continued to increase R&D investment in 2023, reaching a total of 280 million yuan (+34.96% year over year) to support research and development of YPEG-GH and other projects. It has now completed phase III clinical research, and has submitted a marketing application to the NMPA and accepted it.
Pegbin's new indication NDA for hepatitis B treatment continues to expand the patient population. Pegbin (polyethylene glycol long-acting interferon a-2b injection) was launched in 2016. It is the first PEG-modified long-acting interferon produced in China, and is currently the only long-acting interferon product on the market.
After many years of incubation in large-scale academic promotion programs such as the “Everest Project” and “Oasis Project”, physicians' and patients' views on “hepatitis B cure” have changed dramatically. On March 15, 2024, the marketing application for Pegbin combined with nucleoside analogs for clinical use in the clinical treatment of chronic hepatitis B in adults was accepted by the State Drug Administration. Since Roche's competitor Luo Xin officially announced its withdrawal from the Chinese market in October 2022, the company has been actively filling the gap in market share. Among similar biological products companies, Tebao Biotech's net interest rate is still rising and climbing, and they continue to be optimistic that the company's Pegbin volume will drive rapid growth.
Academic plans continue to deepen, laying the momentum for medium- to long-term growth
As a pioneer in the field of hepatitis B treatment, Tebao Biotech has been promoting the market in recent years. Hepatitis B has long been regarded as not curable clinically. Since hepatitis B virus HBV integrates with hepatocyte DNA to form cccDNA, it is difficult to remove, so reducing surface antigen has been the main treatment goal for many years.
Interferons are commonly used to control the virus in hepatitis B patients after nucleoside treatment and improve patients' immunity. They have the best clinical benefit for patients with HBsAg <1000 copies, and are known as dominant groups. The “Everest Project” aims to explore the clinical cure rate of long-term interferon for hepatitis B, and was completed in 2023. The “Oasis Project” explores the clinical effects of interferon in preventing the progression of liver cancer within 5 years. With the promotion of the program, it continues to benefit the majority of hepatitis B patients and bring continuous growth momentum to the company.
Investment advice
Considering that the company is in a high growth stage and profit margins are still at a low level, we have raised our profit forecast. We expect the company's revenue from 2024 to 2026 to 27.2/35.4/4.38 billion yuan (2024-2025 pre-year value was 2.272/3.51 billion yuan), up 29.6%/29.9%/23.8% year on year, respectively; estimated net profit to mother is 7.7/10.5/1.36 billion yuan (value before 2024-2025 was 6.93 billion yuan), respectively. The increase was 38.3%/37.0%/28.8%, and the corresponding valuation was 33X/24X/19X. I am optimistic that the company has been deeply involved in the hepatitis B field for many years. Pegbin's strong competitive position, the smooth progress of academic programs, the continuous expansion of the scope of application groups, and the maintenance of a “buy” rating.
Risk warning
The risk of fluctuating sales, industry policy uncertainty, new drug development risks, etc.