Incident 1

On April 27, 2024, Kexon Pharmaceuticals released its 2023 annual performance report. The company achieved operating income of 1,259 million yuan, -4.32% year over year; net profit to mother - 190 million yuan, or -110.74% year on year; net profit after deducting non-return to mother - 210 million yuan, -108.28% year over year. Looking at a single quarter, the company's 2023Q4 revenue was 290 million yuan, -22.01% year on year; net profit to mother was -136 million yuan, -304.98% year over year; net profit after deducting non-return to mother was -121 million yuan, -226.04% year on year.

Incident 2

On the same day, Kexon Pharmaceuticals released its performance report for the first quarter of 2024. The company achieved operating income of 361 million yuan, +11.79% year over year; net profit to mother of 12 million yuan, +241.49% year over year; net profit after deducting non-return to mother of 10 million yuan, +180.77% year over year. The 2024Q1 company turned a loss in profit.

reviews

Q1 profit increased sharply year on year, and the cost control effect was obvious. In 2023, the company's overall gross margin was 70.79%, -4.57 percentage points year on year; the period expense ratio was 91.51%, +6.25 percentage points year on year; of which the sales expenses ratio was 54.75%, -8.16 percentage points year on year; management expense ratio 6.90%, +0.37 percentage points year on year; financial expense ratio 2.48%, +1.34 percentage points year on year; net operating cash flow It was -0.87 billion yuan, +1.45% YoY.

In the first quarter of 2024, the company's overall gross margin was 72.64%, -0.01 percentage points year on year; the cost ratio for the period was 66.91%, -11.55 percentage points year on year; of which sales expenses ratio was 49.20%, -5.22 percentage points year on year; management expenses ratio was 5.47%, -0.62 percentage points year on year; financial expenses ratio was 2.48%, -0.40 percentage points year on year; and net operating cash flow was -0.06 billion yuan, -86.64% year on year.

With years of experience in overseas commercialization of biopharmaceuticals, the company has built a comprehensive overseas commercialization system and is deeply involved in emerging markets. After more than 20 years of development, the overseas commercialization platform has covered more than 40 countries and is located in more than 60 countries, covering all of the top 30 emerging market countries with a population of over 100 million and GDP. The company's product, Erythromycin injections, has become a leading local EPO brand product in countries such as Brazil, the Philippines, and Egypt. The company has more than 20 years of experience in commercializing biopharmaceuticals overseas, has established a relatively complete overseas commercialization system, and has rich comprehensive capabilities in various areas such as product registration, market expansion, and on-site audit of production quality systems.

During the reporting period, the company cooperated with well-known domestic pharmaceutical companies such as Zhengda Tianqing, Changzhou Pharmaceutical, and Xinhua Pharmaceutical, and introduced a total of five products. Up to now, the company has signed contracts with customers in more than 40 countries and has successively submitted registration applications for imported products. Various products such as infliximab, bevacizumab, and albumin paclitaxel have successively completed on-site audits in Egypt, Brazil, Indonesia, the European Union, etc., and it is expected that overseas sales of these products will be achieved in 2024.

High-quality biopharmaceuticals are about to go overseas, and albumin paclitaxel will break through the EU market

The company used the introduction of the first product, albumin paclitaxel, as a breakthrough to expand into mature markets in the European Union. The albumin paclitaxel (white purple) dosage form has clinical advantages. Compared with ordinary paclitaxel injections and paclitaxel liposomes, safety and patient compliance have improved, and clinical approval is high. As of the end of the reporting period, albumin paclitaxel was only sold in the EU by original research BMS and generic drug company TEVA, which had a good competitive pattern. Demand for albumin paclitaxel in the EU market is expected to expand further. Albumin paclitaxel is the mainstream first-line medication recommended by the European Society of Medical Oncology for the treatment of metastatic pancreatic cancer and non-small cell lung cancer. In the past five years, the incidence of cancer in Europe has been on the rise, and sales of albumin paclitaxel have gradually increased in the European market. During the reporting period, the company actively prepared for EU GMP on-site inspections, successfully completed on-site inspections before EU approval in February 2024, and completed partner contracts in 35 European and South American countries, which is expected to become the company's first fully internationalized macromolecule drug.

Investment advice

We expect the company's revenue from 2024 to 2026 to be 15.5/19.8/2.49 billion yuan, respectively, up 22.9%/27.9%/25.8% year-on-year. Considering that the company achieved positive profit in the first quarter of '24, we raised our 2024 performance forecast. We expect net profit to the mother for 2024-2026 to be 0.3/0.4 billion yuan (-0.1 billion yuan 24 years ago), up 113.6%/63.4%/231.0%, respectively. The corresponding valuation is 127 X/78X/78X/ 23X Maintain an “overweight” investment rating.

Risk warning

New drug development risks, core competitiveness risks, industry policy risks, etc.