New products drive high growth. The company achieved operating revenue of 130 million yuan in 2024Q1, up 23% year on year, mainly due to increased sales of siglitazide sodium. Product sales increased 666% year on year, and sales revenue increased 3127% year on year. In December 2023, the PTCL indications for sidabendamide entered the medical insurance catalogue for the fourth time, and medical insurance payment prices were reduced by 6%; sales of sidabendamide increased 8% year on year during the reporting period, and sales revenue remained flat year on year.
Cash flow turned loss into profit, and cost reduction and efficiency were beginning to pay off. Net profit due to 2024Q1 lost 18.3 million yuan, narrowing by 44%, and net cash flow from operating activities was 35.43 million yuan. The sales expense ratio was 43%, down 7 pcts from the same period last year, the management expense ratio was 14%, 5 pcts lower than the same period last year, the R&D expense ratio was 40%, 10 pcts lower than the same period last year, the financial expenses ratio was 4%, and the decrease of 3 pcts from the same period last year.
Starting in 2024, the company will enter the harvest year of the original innovative drug.
Two major indications of sidabenamide are expected to drive sales growth.
(1) Diffuse large B lymphoma (DLBCL) indications were approved, and phase III clinical trials were selected as Late-breaking Abstract (LBA) of the American Society of Clinical Oncology (ASCO) Annual Meeting. The LBA, also known as the “blockbuster summary,” is considered to be the most important of this year, promising to change clinical diagnosis and treatment practices, and sensational research results. Therefore, ASCO organizers will keep it confidential in advance, and the full data will not be released until the day of the LBA's speech.
(2) Joint immunization programs for colorectal cancer are included in the CSCO2024 guidelines. CSCO2024 colorectal cancer guidelines add MSS/pMMR immunotherapy to advanced colorectal cancer “Results of a recent phase II clinical study showed that a three-drug combination regimen with sidabenamide... bevacizumab and PD-1 antibodies showed promising curative effects in patients with advanced MSS/PMMR colorectal cancer who failed standard treatment... encouraging... patients to participate in clinical studies with the combined regimen”.
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 siglitazepam sodium was approved by GMP.
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.
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 1.35 to 1.65% and a WACC value of 5.94% to 6.54%, then the company's DCF valuation is a reasonable market value range of 103.8 to 13.01 billion yuan, corresponding to a reasonable value range of 25.23 to 31.64 yuan/share, maintaining a “superior to the market” rating.
Risk warning: R&D progress falls short of expectations, commercialization progress falls short of expectations.