Key points of investment
Investment logic: High-quality overseas platform: With more than 20 years of overseas experience, we have achieved full coverage of all emerging market countries with a population over 100 million and reached 13 overseas project licensing cooperation. It is expected that they will be listed overseas one after another, ushering in a second growth curve.
Target emerging market countries and deeply cultivate overseas commercialization platforms: On the demand side, emerging market countries have a fast economic growth rate, large population base, rapid population growth rate, urbanization rate needs to be increased, and the pharmaceutical market has great potential. Over the next five years, pharmaceuticals will see population-driven sales growth and a shift towards more expensive product portfolios. On the supply side, national policies have emphasized the international competitiveness of pharmaceuticals. China's CDE General Administration aims to achieve multilateral mutual recognition of international GMP certification to help pharmaceutical companies go overseas; along with the booming development of China's pharmaceutical industry in recent years, the pharmaceutical export structure has been optimized, and the transformation from APIs to Western pharmaceutical preparations and biochemicals with high added value has been transformed. The company seizes the opportunities of the times and has a forward-looking overseas strategy. It has covered 40+ countries and 60+ countries, covering all the top 30 emerging market countries with a population exceeding 100 million and GDP. The total covered regional economy is close to China, and the overseas commercialization platform is relatively mature.
Achieved cooperation on 13 products and realized the value of overseas commercialization platforms: The company has 20 years of overseas commercialization experience and successfully reached overseas commercial cooperation for 13 products, mainly focusing on anti-tumor and immunomodulators. In the field of breast cancer treatment, the company has introduced 7 products, from adjuvant treatment to advanced second-line breast cancer treatment; in terms of chemotherapeutics, the company already has albumin paclitaxel and eribulin; in terms of targeted drugs, trastuzumab, bevacizumab, and neratinib; in the endocrine direction, pipebasil and olapalil, which cover a larger market. Among them, the company is keenly aware of the market situation where demand for white purple is rising in Europe, and the limited supply capacity of European pharmaceutical companies brought opportunities, accelerated the construction of the company's white purple production line, and obtained EU GMP certification for the white purple production line in May 2024. We expect the product to officially enter EU sales in 2024, becoming a breakthrough in mature markets in Europe and the US.
The original business formed the mainstay of the company's revenue and contributed to a stable cash flow: the company's original business included four major products. Revenue from each product was stable, gross margin remained stable at a high level, sales volume was still growing, and the market share was leading in various segments. 2023, Serokin? The domestic market share of short-acting injectable human interferon has maintained the top ranking for many years; ipudine? In China, the market share of erythropoietin is ranked second; Bai Texi? Ranked 5th in the short-acting human granulocyte stimulating factor market; Chang Lecang? It has long been ranked in the top three in the JD “Diarrhea Medication List”.
Profit forecast and investment rating: Many biosimilar drugs and Western medicine formulations in the company's cooperative products have completed GMP testing in many countries and regions. We expect these products to be officially launched and sold in 2024. Therefore, we predict that the company's revenue for 2024-2026 will be 1,48,17.8 billion yuan, and 2.37 billion yuan, respectively, and net profit to the mother will be 23.9, 141.0, and 232.9 million yuan respectively. Considering that the company's original business continues to contribute stable revenue, and that the impact of the alliance's collection has already been clarified. The overseas business has 20 years of overseas experience to help commercialization progress and implement rapidly, compounded by the scarcity of overseas platforms, we judge that Kexon Pharmaceuticals has great potential for growth. First coverage, giving a “buy” rating.
Risk warning: material supply risk; risk of overseas commercialization progress; risk of increased industry competition; risk of pharmaceutical policy uncertainty.