The company's performance in 2023 was mediocre. In 2023, the company's revenue was 520 million yuan, down 1.2% year on year. Net profit to mother was 88.84 million yuan, up 408.1% year on year. After deducting non-net profit loss of 220 million yuan, net operating cash flow outflow was 160 million yuan. In 2023, the company's revenue of sidabendamide was 4.7 billion yuan, which was basically the same as the previous year. The new drug release revenue of siglitabenide was 42.25 million yuan, an increase of 167.0% year on year, and technology licensing revenue was 6.62 million yuan, down 84.9% year on year. We believe that the company's 2023 performance was average due to the slowdown in the growth rate of existing indications for sidabenamide and the sharp decline in licensing revenue.

Starting in 2024, the company will enter the harvest year of the original innovative drug.

Sitaglipat has entered the dosage period. Siglistat sodium is a new mechanistic insulin sensitizer independently developed by the company. It is also the world's first PPAR full agonist approved to treat type 2 diabetes. In January 2023, it was included in the medical insurance list for type 2 diabetes. In November 2023, the company disclosed that a new production line for siglitazide sodium was approved by GMP. On a quarterly basis, the company's revenue for the fourth quarter of 2023 was 175 million, a significant increase from 107 million, 135 million, and 107 million in the previous three quarters.

Large indications for sidabendamide will soon be approved. According to the company's investor relations activity record sheet of 4/1/24, the DLBCL indication for sidabenamide is likely to be approved in the first half of 2024. DLBCL accounts for about 50% of non-Hodgkin lymphoma, and 30% of patients have MYC/BCL2 dual expression characteristics. According to the company's treatment plan, patients also need to maintain treatment with sidabendamide for 6 months after recovering, so both the number and dosage of DLBCL are larger than the current PTCL indications.

In 2024, the company's multiple data were read out and submitted for listing. The estimated data for sidabenamide diffuse B, siglitazide NASH phase II, sidabendamine+PD-1 first-line non-small cell lung cancer stage II, and Theoroni small cell lung cancer stage III were read, and Theoroni small cell lung cancer is expected to apply for marketing.

Sidabendamide+PD1 revealed many data showing advantages, which is expected to open the “IO+ sidabenamine” era. Excellent data on PD1 in combination with sidabendamide has been observed in multiple tests and multiple tumors.

On March 4, 2024, the Capability-01 study led by Professor Xu Ruihua and Professor Wang Feng of the Sun Yat-sen University Cancer Center was listed in the world's top academic journal Nature Medicine (IF=82.9, one of Nature's most valuable sub-journals). The study showed that for patients with metastatic colorectal cancer (mCRC) with complete microsat stabilization/mismatch repair function (mCRC), the three-drug regimen sidabendamide+cindirizumab plus bevacizumab was treated with the third line of treatment, and the 18-week PFS reached 64.0%, ORR of 44.0%, and median PFS of 7.3 months, which is considered a very promising treatment option for patients with advanced MSS/pMMR CRC.

Sidabendamide is currently undergoing melanoma global multicenter phase III with PD-1 in 17 countries. The company believes this clinical outcome will be positive.

The company has seen very good data on indications such as urothelial cancer and non-small cell lung cancer. The company expects to see randomized, double-blind, multicenter phase II results for sidabendamide combined with PD-1 first-line treatment for non-small cell lung cancer in 2024.

Profit forecasting and valuation. The company's 2 indications have entered the quantitative phase. We believe that the company's revenue side will continue to grow in 2024-26, and there is some uncertainty that the profit side will be affected by R&D investment. We expect the company's revenue in 2024-26 to be 710 million yuan, 940 million yuan, and 1.22 billion yuan, respectively, up 34.5%, 33.1%, and 30.5% year-on-year, respectively; net profit to mother in 2024-26 is -160 million yuan, -80 million yuan, and 0.1 billion yuan.

We assume a sustainable growth rate of 0.20 to 0.80% and a WACC value of 5.95% to 6.55%, then the company's DCF valuation is reasonable in the market value range of 84.7 to 10.83 billion yuan, corresponding to a reasonable value range of 20.59 to 26.33 yuan/share, maintaining a “superior to the market” rating.

Risk warning: R&D progress falls short of expectations, commercialization progress falls short of expectations.