The CSO industry is growing rapidly, and the company is on the fast track of growth. 2023 was a year of acceleration on the commercial outsourcing circuit. We not only observed that MNC's sales team streamlining and diversified outsourcing accelerated, but also observed that many domestic companies joined the CSO industry. Baiyang Pharmaceutical, as a leading company in the CSO industry, also entered the fast track. Taking its operating data for the third quarter as an example, the 23Q3 company had net profit of 190 million yuan (+49.2%), net profit after deducting non-return to mother of 190 million yuan (+32.9%), achieving revenue of 3.09 billion yuan (+16.8%), and revenue of 3.95 billion yuan (+15.5%) after restoring the two-ticket system. The two major products, Diqiao and Hailu, also maintained good endogenous growth, demonstrating the company's ability to operate the brand.
The commercialization process is being accelerated, and nuclear drugs and high-end equipment are being deployed. In November '23, the company signed strategic cooperation agreements with Guangdong Radios and Beijing Midis. Among them, it is stipulated that after radiopharmaceuticals and imaging equipment products such as SPECT, including 99mTC-3prgD2, 99mTC-HPark2, and 99mTc-POFap, are approved for marketing, Baiyang Pharmaceutical will obtain commercial rights in the products and be responsible for the promotion and sales of the mainland China market; with Midis, with regard to its approved ultrasonic electromagnetic positioning puncture guidance devices, Baiyang Pharmaceutical will obtain commercial rights in the product. It is responsible for the promotion and sales of the mainland China market. The company continues to expand in the field of innovative drugs and high-end medical devices. Product matrix, implement the “drug and device integration” strategy.
Set up industrial funds, build an ecosystem, and guarantee enterprise growth in multiple dimensions. To achieve the strategic layout of the industry, seize opportunities for strategic cooperation, and make full use of the investment management, high-quality resources and professional capabilities of professional partners to promote the company's industrial expansion, upgrading and asset optimization, the company plans to jointly fund the establishment of an investment fund with Baiyang Zhongxin Health, Baiyang Pharmaceutical, the Beijing Mentougou District Jingxi Industry Guidance Fund, and the Beijing Zhongguancun High Precision Parent Fund, with a joint pledge of RMB 250 million. The company plans to invest 49.5 million yuan as a limited partner, accounting for 19.80%.
We believe that by setting up an industrial fund, the company not only introduces partners with deep industrial backgrounds, but also aims to build a pharmaceutical industry ecosystem, and the company's commercialization capabilities will have a leverage effect.
Since the outside CSO industry is booming beyond expectations and the company's product endogenous extension situation is quite optimistic, we slightly raised the company's BD schedule and sales volume assumptions. We forecast the company's EPS for 23-25 to be 1.24/1.65/2.15 yuan, respectively (the original 23-24 forecast was 1.21/1.53 yuan). Based on comparable companies, the company was given a PE valuation of 21X in 2024, corresponding to a target price of 34.65 yuan, to give it a purchase rating.
Risk warning
New types of BD fall short of expectations, concentration of brand operations, policy risks, and increased market competition