The compound preparation Enomitide was successfully included in the medical insurance catalogue. It is expected to usher in a continuous increase in sales volume and the number of AIDS patients treated in China, and there is still plenty of room for long-term growth in demand for medication. China's anti-HIV drug market is mainly dominated by domestically produced generic drugs, supplemented by imported drugs, and independent innovative drugs are scarce. Enomi tablets were approved for marketing on December 30, 2022, and successfully entered the 2023 medical insurance catalogue. The scope of medical insurance payments is limited to HIV infections and can be used for the initial treatment of HIV patients.

As the first trifecta monoclonal compound with independent intellectual property rights in China, Enomil is a phase III clinical trial data showing that compared to Gilead's integrase inhibitor, Enomi tablets can also maintain virus suppression for a long time in HIV-infected people who have been suppressed by the virus, and have a clear advantage in cardiovascular metabolic safety indicators.

The company currently has 2 marketed anti-HIV drugs, all of which are in the early stages of commercialization. In 2022, it achieved annual sales volume of 334.95 million yuan, and in 2023, sales revenue of about 73.5788 million yuan, an increase of 119.67% over the previous year. Anovirin tablets have successfully renewed the 2023 medical insurance catalogue, and the scope of medical insurance payments was adjusted from “adult HIV-1 infected patients treated for the first time” to “limited to HIV infection”.

In-depth layout of drugs used in the HIV field, and various products are under development

The company has an in-depth layout of medicines in the HIV field. Apart from ACC007 and ACC008 (for first-time patients), which have already been marketed, the company is still developing 3 products in the field of anti-HIV virus. A phase III trial of ACC008 for new indications (for treated patients) has been completed, and an NDA has been submitted in 2023. The integrase inhibitor ACC017, a new drug in the HIV field, has entered phase I clinical trials, and pre-clinical research on the HIV long-term drug ACC027 is ongoing as planned.

Core business revenue grew steadily, and subsequent pipelines formed an echelon

The company's operations were generally steady, and revenue recovered to 411 million yuan (yoy +68.44%) in 2023. The gross revenue of the core business human protein in 2023 was 259.7539 million yuan, an increase of 81.11% over the previous year; throughout 2023, the total sales revenue of new HIV drugs was about 73.5788 million yuan, an increase of 119.67% over the previous year, providing the company with a stable cash flow. Innovative anti-HIV drugs, enovirin tablets and enomi substitutes continued to be released after marketing. Sales of innovative HIV drugs have gradually covered the cost investment, and are expected to become the main source of revenue in the future. The company aims to build pipelines for serious diseases such as AIDS, inflammation, and stroke. By the end of '23, the company was developing 18 projects, the core of which included 8 new Class 1 drugs and 4 new Class 2 drugs.

Profit Forecasts and Investment Ratings

Considering the company's outstanding advantages in innovative HIV drugs, the core business market space is large, and I am optimistic about the company's development.

We estimate that the company's revenue for 2024 to 2026 will be 406.808/1,022 million yuan, respectively; net profit to mother will be -0.91/0.16/0.84 billion yuan, respectively. Using the DCF method to calculate the company's market value, assuming WACC is 9.00% and the sustainable growth rate is 1.0%, corresponding to a market value of 8.759 billion yuan, and the target price is 20.82 yuan. The first coverage was given a “buy” rating.

Risk warning: market competition risk; risk of commercialization of innovative drugs; risk of failure in the development of new drugs; risk of subjective assumptions in related estimates