Core views

As a leader in peptide CDMO in China, the company has leading polypeptide drug process R&D and large-scale production capabilities, and has a comprehensive “raw material-formulation” integrated layout. Actively expand overseas customers, and the share of sales in overseas markets is constantly increasing. Limited by production capacity bottlenecks, the company's revenue growth in recent years is mostly due to product restructuring. Starting in '24, the company's new production capacity was gradually implemented, and 24H2 is expected to be gradually put into use, easing the previous tight production capacity situation. Combined with the “patent cliff” of some polypeptide drugs and growing demand for GLP-1 APIs, the company is expected to accelerate growth.

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Deeply involved in peptides for more than 20 years, leading the layout strength of the entire industry chain

Shengnuo Biotech is a comprehensive leader in the field of peptides in China. Its main products and services include R&D and production of peptide APIs and formulations and CDMO services for innovative peptide drugs.

The company's chairman and chief scientist, Wen Yongjun, is one of the earliest experts in the field of peptide drugs in China. The core technicians all have more than 15 years of research and practical experience in the field of peptide synthesis. Revenue and performance have maintained steady growth in recent years. An equity incentive plan was launched in 2023 to bind the company's core technical talents and ensure the company's long-term development.

Patented cliffs are superimposed on GLP-1 for continuous catalysis. The peptide market accelerates the expansion of peptides. They are important active molecules in organisms that participate in and regulate important physiological processes such as cell proliferation, growth, differentiation, metabolism, and apoptosis. Polypeptide drugs are currently widely used in the fields of tumors, diabetes, cardiovascular diseases, etc., and the market scale is expanding year by year. 2014-2026 is the peak of patent expiration for major types of peptide drugs. Currently, liraglutide has been listed as generic drugs at home and abroad, and simeglutide is expected to expire in 26 years in some countries. More than 20 billion US dollars of single-product patents will expire. Combined with the continuous expansion of GLP-1 drugs in new indications such as weight loss, cardiovascular, and sleep-respiratory syndrome, the peptide raw material market is expected to expand at an accelerated pace.

Deep technical reserves and comprehensive layout in the field of peptides

The company has always focused on research and development of large-scale production technology for polypeptide drugs. After years of accumulation, the company has mastered independent core technologies for peptide synthesis and modification, such as long-chain peptide coupling technology. Currently, it has 31 invention patents and 13 utility model patents. 1) APIs: As of 2023, there are 17 self-developed peptide drug types. The domestic market has obtained 13 API production approvals or activation records. Overseas, 9 varieties of the company, including liraglutide and simeglutide, have obtained US DMF registration, and 9 varieties are active. 2) Formulation: Based on the layout of existing polypeptide varieties, 10 products have been approved for marketing. The company's octreotide acetate injections were included in the 7th batch of centralized national drug procurement, and atostatins acetate injections and injectable somatostatin were included in the 8th batch of centralized national drug procurement, laying a good foundation for the company's pharmaceutical-side growth. 3) CDMO: As of 2023, the company has provided more than 40 innovative peptide pharmaceutical CDMO services for new drug research and development companies and scientific research institutions. Of these, 1 variety has entered the commercialization stage, 2 are in the production stage, and 19 have entered clinical trials. The service customers of the company's peptide CDMO business are mainly domestic innovative peptide drug research and development companies and scientific research institutions.

Production capacity is gradually released to help the company accelerate growth

The actual production batch of the company's original workshop dropped significantly during the listing phase due to increased requirements of drug management regulations and equipment aging, etc., and the production capacity of the 101-103 workshop dropped to 404 kgg/a. Beginning in 2021, the original production capacity was no longer able to meet the company's growing demand for APIs. Combined with the entry of pharmaceutical-side products into collection in recent years, it is also necessary to absorb part of the API production capacity, so the company's overall revenue growth in recent years has been slow. The company's IPO fund-raising project “395 kg of peptide API production line project” plans to add 4 new peptide API production lines. The main construction will be completed within 2023 and is expected to be put into operation in the second half of 2024. At the same time, there is also a “peptide innovative drug CDMO, API industrialization project”, which plans to use the plant's 104B, 105, 106, 107 and 108 workshops to be used to transform or expand. The overall project is expected to start construction in December 2023. Completed at the end of '24. 24H2's new production capacity is expected to be put into operation to ease the company's tight production capacity. The company's production capacity is expected to reach 1249 kg by the end of the year. The gradual implementation of new production capacity is expected to help the company continue to meet market demand and accelerate growth.

Profit forecast and investment suggestions: The company has leading peptide drug process R&D and large-scale production capabilities, and the integrated layout of “APIs and formulations” is comprehensive. At the same time, we are actively expanding our customers at home and abroad, and our share of sales in overseas markets is constantly increasing. We expect the company's 2024-2026 revenue to be 0.593 billion yuan, 0.74 billion yuan, and 0.882 billion yuan, corresponding growth rates of 36%, 25%, and 19%. The company's net profit for 2024-2026 is 0.111 billion yuan, 0.142 billion yuan, and 0.17 billion yuan, corresponding growth rates of 58%, 28%, and 20%. The company's corresponding PE for 24-26 was 20, 16, and 13X, covered for the first time, and gave it a “buy” rating.

Risk warning: New drug development falls short of expectations; market competition enhances risk; capacity utilization falls short of expectations; industry policy risk