The impact of the collection of large generic products has gradually smoothed out, and the company's performance is expected to reach an inflection point. Osecon is one of the top 100 pharmaceutical companies whose products cover treatment fields such as digestion, anti-tumor, chronic diseases, and anti-infection.

As of the 7th batch of national drug collection, the company has participated in the collection of 13 drugs, all of which are drugs in the company's main product catalogue. Among them, Osikang, the company's key product, was not selected, and the price of the remaining 12 products dropped by an average of more than 90%. At the same time, the company selected local drugs for centralized procurement (including centralized procurement by various types of alliances), and prices and sales volume declined to a certain extent. In terms of revenue structure, the total revenue from anti-cancer and digestive products reached 97.05% in 2019. Among them, digestive contribution revenue fell from 3.366 billion yuan to 299 million at the end of 2023, and anti-tumor revenue fell from 1,019 million to 617 million yuan.

Focus on the company's areas of advantage, focus on high-end replication+formulation innovation, and build characteristic product groups to select the first batch of first-class, exclusive varieties, and high-barrier complex formulations to develop. Since 2021, 20 generic drug types have been approved: 5 of the first batch of marketed varieties, 4 of the first exclusive varieties, and 3 of the 135 major specialty varieties, 3 high-barrier complex formulations, 2 first-generation imitation varieties, and 1 exclusive specification, continuously enriching the company's traditional areas of strength in anti-tumor, digestive tract treatment, and emerging anti-infective and chronic disease drugs, and building and strengthening the company's unique generic product group.

The transformation of new drugs is about to enter the harvest period. ASKB589 is expected to become the 3 billion-grade third-generation EGFR inhibitor ASK120067, which can strongly inhibit EGFR resistance mutations (T790M), EGFR sensitive mutations (such as L858R, exon19del), and EGFR double mutations, and has good curative effects on patients with CNS (central nervous system) diseases. It is currently undergoing marketing application review; ASKB589 is the most advanced Claudin18.2 monoclonal antibody target drug in the world. The response rate (ORR) is 79.2%, and the disease control rate (DCR) is 95.8%. The clinical data is excellent. It has now entered phase III clinical research in China, and according to our estimates, it is expected to become a 3 billion grade variety.

Investment advice and profit forecasting

With the rapid clearance of the company's traditional dominant sector — the collection of anti-tumor and digestive imitation products, the rapid rise of anti-infective and chronic disease generic drugs, and the upcoming harvest period of the company's innovation and transformation, the 2024-2026 revenue growth rate is expected to be 13.03%/20.90%/18.98%, respectively; net profit to mother turned loss into profit in 2024, and the net profit growth rate for 2024-2026 was 122.85%/120.45%/122.48%, respectively; EPS 0.04 /0.08/0.18 yuan/share, corresponding PE is 288.25/130.76/58.77X. First coverage, giving a “buy” rating.

Risk warning

Risks such as new drug development failure or progress falling short of expectations, risk of drastic price reduction in volume procurement, and uncertainty about approval or commercialization of drug marketing applications.