Incident 1
On April 20, 2024, Zejing Pharmaceutical released its 2023 annual report. During the reporting period, the company achieved operating income of 386 million yuan, +27.83% year over year; net profit to mother - 279 million yuan, +39.08% year over year; net profit after deducting non-return to mother - 349 million yuan, +29.46% year over year. Looking at a single quarter, the company's 2023Q4 revenue was 104 million yuan, -0.07% year on year; net profit to mother was -0.76 billion yuan, +18.26% year over year; net profit after deducting non-return to mother was -105 million yuan, -4.81% year on year.
Incident 2
On the same day, Zejing Pharmaceutical released its 2024 quarterly report. The company's 2024Q1 revenue was 108 million yuan, +0.12% year over year; net profit to mother was -039 million yuan, +30.98% year over year; net profit after deducting non-return to mother was -43 million yuan, +33.51% year over year.
reviews
Operational efficiency gains are steady, and operating cash flow is positive for the first time
The company's overall gross margin in 2023 was 92.44%, +1.09 percentage points year on year; the period cost ratio was 193.69%, year on year -70.32 percentage points; of which sales expense ratio was 64.82%, -10.50 percentage points year on year; management expense ratio was 4.29%, -24.27 percentage points year on year; financial expense ratio -3.85%, +0.66 percentage points year on year; R&D expense ratio was 128.44%, and total R&D investment was 496 million yuan, the absolute value decreased by 0.14 percent year on year 100 million yuan; net operating cash flow was -233 million yuan, -37.15% year-on-year.
In the first quarter of 2024, the company's gross margin was 93.40%, +0.32 percentage points year on year; the period expense ratio was 140.01%, year on year -16.00 percentage points; of which sales expenses ratio was 55.53%, +4.23 percentage points year on year; management expense ratio was 12.99%, -7.04 percentage points year on year; financial expense ratio -6.43%, -6.11 percentage points year on year; R&D expense ratio was 77.92%, -7.08 percentage points year on year, R&D investment decreased by 0.08 billion yuan year on year, absolute value decreased by 0.07 billion yuan year on year Yuan; Net operating cash flow was 89 million yuan, which was corrected for the first time, with a year-on-year increase of 390.88%.
Existing commercial products resumed growth, and sales of 24H1 commercialization highlights stabilized again in 23Q4, resumed steady commercialization, further expanded market coverage, and maintained a year-round sales revenue growth of nearly 30%. Revenue generated from sales combined with reduced costs and expenses brought about by the company's efficient operation has continued to narrow. As donafenib continues to benefit patients during the survival of liver cancer, it is expected that the growth rate will continue to grow steadily in 2024.
The company entered an intensive commercialization period in 2024. After successfully cooperating with Yuanda Liaoning in December 2023 and was officially approved for marketing in January 2024, commercialization preparations are currently underway. Relying on the partner Yuanda Liaoning's existing extensive channels, it is expected to quickly open up the market and change the single product sales pattern of Zejing Pharmaceutical, and is expected to reach a peak sales value of 2 billion yuan in the future.
The company's next major small-molecule drug, jacketinib, covers the two major fields of cancer and autoimmune diseases, and has broad market prospects. Global sales of the main competitor lucotinib reached US$3.729 billion in 2021. The effectiveness and safety of the company's jacketinib were superior to similar imported competitor lucotinib, and it is expected that the best in class product (Best in Class) can be replaced domestically.
In October 2022, the NDA application for jacketinib tablets to treat myelofibrosis was accepted by the CDE. Registration tests, clinical verification, and two-in-one on-site verification have been completed. The data has been updated, and it is expected that it will be approved for marketing in 2024H1. A phase II/III clinical trial of jacketinib hydrochloride cream for the treatment of adolescents aged 12 and above and adults with non-segmental vitiligo was recently approved.
Following the deployment of BIC and FIC pipelines, the dual-antibody and triple-antibody platform entered the verification period, and the progress of various dual-target and three-target antibody products of the company's biopharmaceutical multi-antibody platform is in the leading echelon in the world. The company's ZG006 CD3/DLL3 three-specific antibody target potential is beginning to show. Its similar product, Amgen's CD3/DLL3 double antibody, recently released phase 2 clinical data for post-treatment SCLC. ORR reached 40%, and target efficacy was initially verified; while DLL3 CART-related assets were favored by major MNC manufacturers such as Novartis and MSD, the company's ZG006CD3/DLL3 multi-specific antibody was the first in the world. Early clinical data from multiple pipelines will be disclosed at academic conferences in 2024, and the platform will enter the verification period.
Investment advice
We expect the company's revenue for 2024-2026 to be 9.4/18.8/2.95 billion yuan, respectively, up 142.3%/100.4%/57.0% year-on-year, and net profit to mother of -1.6/1.00/270 million yuan, respectively, up 41.8%/160.9%/173.6% year-on-year, respectively. The corresponding valuation is loss/124X/45X. I am optimistic about the commercialization prospects of the company's recombinant human thrombin and jacketinib. The promotion of multiple FIC pipelines such as CD3/DLL3/DLL3 will drive the company's long-term growth, and the company is expected to become the next generation of comprehensive innovative pharmaceutical companies. Maintain a “buy” rating.
Risk warning
Risk of failure in drug development, risk of failure in approval of approval, risk of falling short of expectations, industry policy risk, and risk of fluctuating sales