The first low-concentration atropine eye drops to slow myopia in young people in China are on the market, and sales peak is expected to reach 10 billion dollars
The company's 0.01% atropine sulphate eye drops were first marketed through NMPA approval in March 2024, and most of the main competitors are in the application and clinical trial stages. We expect the company's products to have a market monopoly period of 2-3 years. According to expert consensus and related clinical trials, low-concentration atropine is currently the only drug that has been proven to be effective in delaying the progression of myopia, and 0.01% concentration of atropine eye drops have minimal adverse effects and minimal rebound effects after discontinuation compared to high-concentration atropine eye drops; the annual treatment cost of the product is about 3,576 yuan/year, conservatively estimated at a 5% penetration rate, and we estimate the market space to reach 10.9 billion yuan. Considering that the company had certain delivery and distribution requirements in the early stages of product launch, we expect that the revenue of products such as Low A is expected to reach 1.8, 3, and 3.8 billion yuan in 2024-2026, the net profit margin of the product is expected to reach 40-50%, and the company will enter a period of high growth.
0.05% ciclosporin eye drops, a drug for moderate to severe dry eye, is expected to reach a peak sales value of nearly 1.7 billion yuan in China
Topical ciclosporin A drugs have become the standard treatment for moderate to severe dry eyes in the global market. In 2016, the global sales volume of the original research company Erjian Restasis reached a maximum of nearly 1.5 billion US dollars. The company's 0.05% ciclosporin eye drops (Zirun) was approved for the first time in China in June 2020. Currently, only a few companies such as Hengrui (NDA January 2024) and Kang Zhe (Phase 3 Clinical) are laying out low concentration cyclosporine eye drops. The product competition pattern is good in the medium to long term. Zrun successfully renewed its medical insurance category B contract in 2023, corresponding to the current medical insurance price of 165 yuan/30 sticks/box. In 2019, the number of domestic dry eye patients was 210 million. According to estimates of 35% of patients with moderate to severe dry eye disease, 10% treatment rate, and 6-month medication cycle, we expect the peak sales of ciclosporin eye drops in China to reach 1.7 billion yuan.
We have a rich reserve of products under development to build a “full range and variety” ophthalmology drug product system
The company has focused on the field of ophthalmology drug segmentation for decades, establishing cooperative relationships with dealers at all levels. The product sales network covers provincial, municipal and county medical institutions across the country, and has perfect marketing channels and a stable customer base. By the end of 2023, the company had 57 ophthalmic drug approval numbers. Of these, 35 products were included in the medical insurance catalogue and 6 products were included in the national essential drug catalogue. In recent years, the company has continued to increase R&D investment, continuously expanding the company's ophthalmology product line through independent R&D and cooperative development. By the end of 2023, 2 projects in the company's R&D pipeline were in the clinical research stage and 9 were in the generic drug marketing application stage. In the future, the company will continue to focus on its main business, improve the product layout in various fields of ophthalmology, and meet unmet clinical needs.
Profit forecasting
As the company's first low-concentration atropine was approved for marketing, ciclosporin eye drops successfully renewed its medical insurance contract, which led to a significant increase in the company's revenue. We expect the company to achieve operating income of 30.9/44.7/5.44 billion yuan in 2024-2026, up 110.6%/44.6%/21.7% year on year, corresponding net profit to mother of 5.9/8.5/1.07 billion yuan, respectively, up 145.7%/44.9%/25.7% year on year, and corresponding earnings per share of 4.73/6.86/8.62 yuan, corresponding to the closing price of 289.51 yuan on May 10, 2024. PE was 42/34 times 42/34 times, respectively Coverage gives a “gain” rating.
Risk warning
Sales fall short of expectations; risk of medical accidents or negative industry events; risk of increased industry competition; risk of product price reduction.