Incident: On August 22, Sansheng Pharmaceutical released its 2024 semi-annual report. The company achieved revenue of 4.39 billion yuan in the first half of the year, up 16% year on year; gross profit of 3.8 billion yuan, up 18.6% year on year; net profit to mother of 1.09 billion yuan, up 11.1% year on year; and adjusted operating net profit of 1.11 billion yuan, up 1.5% year on year.

The core products are growing steadily, and the market penetration rate continues to increase. The semi-annual report was analyzed by product. The core product, Terby Australia, increased its sales value to 2.476 billion yuan in the first half of 2024, up 22.6% year on year, mainly due to the increase in sales volume of Terby Australia. During the reporting period, Terby Australia's sales accounted for 56.4% of the Group's revenue. Currently, Terbiao ranks first in the platelet raising drug market, with a market share of 66%. Ibio & Cyborg:

The first half of 2024 achieved revenue of 0.516 billion yuan, an increase of 11.3% over the previous year. It also ranked first in the EPO drug market, with a market share of 33%. Furthermore, Ibio's quality standards met European Pharmacopeia standards and received full clinical recognition. The penetration rate of the two EPO products increased by double digits in the field of oncology, and perioperative anemia was included in 2023 medical insurance, further opening up the potential market. Yisaipu: Achieved revenue of 0.329 billion yuan in the first half of 2024, an increase of 9.5% over the previous year. Its market penetration rate continued to increase, and it actively expanded new dosage forms to continue to drive the downturn at the grassroots level.

Septin: Achieved revenue of 0.162 billion yuan in the first half of 2024, a year-on-year increase of 48.9%. It was recommended by CSCO for HER2 positive advanced breast cancer. Mandy, a product in the hair field, achieved revenue of 0.55 billion yuan in the first half of 2024, an increase of 10.0% over the previous year. Mandy is the only topical OTC drug for hair loss approved by the FDA and CDE in the world, and was also recommended at the highest level of the Chinese Female Androgenic Hair Loss (FAGA) Guidelines. Furthermore, its foam form was approved for OTC marketing in July 2024. The new formula does not contain propylene glycol to fill the gaps in medication use for sensitive people.

Research and development continues to be increased, and innovative results are highlighted. In April 2024, Sansheng Pharmaceutical's application to the CDE to market Mandy (5% minoxidil) foam as an over-the-counter treatment for androgenic alopecia and alopecia areata was approved. In the same month, Terbi Australia and New Zealand's core product was approved for the treatment of persistent or chronic primary immune thrombocytopenia in children or adolescents. In May 2024, Sansheng Mandy and Shenzhen Hanyu Pharmaceutical Co., Ltd. signed the “Simeglutide Injection Cooperation Agreement”. The agreement stipulates that Hanyu Pharmaceutical and Sansheng Pharmaceutical will jointly develop and exclusively supply/procure and sell simeglutide injections (weight loss indications).

Sansheng Mandi will pay Hanyu Pharmaceutical a milestone payment of up to RMB 0.27 billion under the agreement, including RMB 45 million in consideration for pre-clinical technical results.

Investment advice: The company's core products dominate the corresponding treatment field. We expect the company's revenue to be 9.053/10.313/11.938 billion yuan in 2024-2026, up 15.8%/13.9%/15.8% year-on-year, and net profit to mother of 2.251/2.917/3.394 billion yuan respectively, corresponding to PE of 6/4/4 times, maintaining the “recommended” rating.

Risk warning: collection risk, increased risk of market competition, risk of policy changes, risk of product development falling short of expectations, generic drug risk.