Incident: In the first half of '24, the company achieved revenue of 0.405 billion yuan (-10.16% YoY), net profit to mother 0.079 billion yuan (-14.73% YoY), net profit of 0.074 billion yuan (-12.18% YoY) after deducting non-return net profit of 0.074 billion yuan (YoY). Among them, second-quarter revenue was 0.206 billion yuan (YoY -27.98%), net profit attributable to mother was 0.038 billion yuan (YoY -44.14%), and net profit not attributable to mother was 0.035 billion yuan (-43.92% YoY). The company's performance in the first half of the year was under pressure, mainly due to the year-on-year decline in Q2 Suling's revenue.

“Suling” and Jincao tablets for dogs can be expected to be marketed. The registration application for injectable viper hemagglutinin for dogs was accepted in 2023. Entering the pet medicine field is one of the company's initiatives to manage the life cycle of “Suling”. Currently, it is supplementing related research as required. The phase III clinical study of Jincao tablets (ZY5301) has been revealed. The pain loss rate of the VAS score reached the end of the main study during the 12-week treatment period. At the same time, safety and compliance are good, and the incidence of adverse events is extremely low. It is expected that marketing applications will be submitted in the second half of the year. Furthermore, the phase II clinical study results of ZY5301 were published in a sub-journal of the top medical journal “JAMA” in July 2024, indicating that its clinical research has been recognized by the international academic community.

KC1036 clinical development is progressing smoothly. A number of clinical studies of KC1036, a Class I innovative drug independently developed by the company, are progressing smoothly: 1) Esophageal squamous cell carcinoma: The first phase III clinical study of treating advanced esophageal squamous cell carcinoma with a single drug was enrolled in February 2024. The clinical trial of first-line maintenance treatment of locally advanced or metastatic esophageal squamous cell carcinoma with PD-1 antibodies obtained a clinical trial notice in December 2023, and is currently being promoted; 2) Thymic tumors:

The phase II clinical study of single-agent treatment of patients with advanced thymic tumors has completed the enrollment of all subjects; 3) Juventus sarcoma: A phase II clinical trial for single-agent treatment of advanced Juventus sarcoma in adolescents aged 12 and above is ongoing.

According to the 2016 Interim Report, we lowered our operating income and predicted that the company's earnings per share for 2024-2026 would be 0.78/0.90/1.29 (the original forecast was 1.02/1.11/1.46). According to the valuation level of comparable companies, the company was given a valuation of 37 times in 2024, and the corresponding target price was 28.86 yuan, maintaining the purchase rating.

Risk warning

Market competition risks for the main products on sale, risk of innovative drug development progress falling short of expectations, risk of changing assumptions affecting calculation results, pharmaceutical industry policy risks, etc.