Incidents:

On October 1, 2024, the company announced that the holding subsidiary Shanghai Zhigen Pharmaceutical Technology Co., Ltd. has recently completed clinical phase I of the ZG-001 capsule research project and signed a “Cooperation Framework Agreement” with Beijing Anding Hospital affiliated to Capital Medical University for the joint development of the ZG-001 project in mainland China. The two sides intend to jointly establish a project company targeting the development of the ZG-001 patent results in China to jointly promote ZG-001 drug registration and marketing in China, and share the rights and benefits according to the agreed proportion.

Comment:

1. ZG-001 capsules have excellent clinical performance in phase I and are expected to become the first non-addictive revolutionary “BIC” innovative drug for depression. ZG-001 is a novel antidepressant with a novel structure independently developed by Genesis Pharmaceuticals. After administration, it rapidly enhances the expression of ptrKB in the brain and activates the BdnFtrkB signaling pathway; it is intended to treat adult depressive disorders, including major depressive disorder (MDSI) or refractory depression (TRD) or major depressive disorder (MDD) associated with suicidal ideation or behavior. The results of this phase I clinical trial showed excellent safety, no adverse effects above grade 1, no ketamine-related isolation or sedation symptoms, and no withdrawal symptoms; excellent pharmacological performance, rapid absorption, and linear increase in exposure with the increase in dosage. There was no significant gender difference and no accumulation. Currently, there are many new antidepressants being developed in China. Judging from the target mechanism, most of them are still concentrated in traditional fields such as SSRIs. The company's ZG-001 capsule works by activating the BDNF-TrkB signaling pathway. It is the only target target being developed in China and is leading in global progress. It is expected to become the first fast-acting, non-addictive antidepressant drug in China, and a potential “BIC” variety in the 10 billion depression drug market.

2. A project company was established in cooperation with Beijing Anding Hospital to accelerate the transformation of clinical research and subsequent results. Beijing Anding Hospital affiliated to Capital Medical University is one of the earliest public psychiatric hospitals in China. It is a leading domestic and internationally renowned national clinical key specialist hospital in the clinical and scientific research field of mental illness. It has an excellent platform for scientific and technological innovation and achievement transformation, and can provide a full range of clinical research and outcome transformation services for innovative drug research. The company plans to establish a project company with the goal of developing the ZG-001 patent results in China to jointly promote ZG-001 drug registration in China. In the future, it will use this as a platform to plan drug promotion matters, including promoting market access, market coverage, market education, brand building, etc.; and share rights according to the agreed proportion.

Profit forecast: We expect the company's 2024-2026 revenue to be 1.701, 1.982, and 2.295 billion yuan, respectively, with year-on-year growth rates of 18.75%, 16.47%, 15.79%, and net profit to mother of 0.236, 0.29, and 0.353 billion yuan respectively. The year-on-year growth rates are 11.80%, 22.95%, and 21.63%, respectively. Corresponding to the current stock price PE, it is 19, 15, and 13 times, respectively, maintaining the “Highly Recommended” rating.

Risk warning: Risk of uncertain content and progress of implementation of cooperation agreements, risk of centralized drug procurement across the country, risk of consistent evaluation, risk of poor development of new products, increased risk of market competition, risk of market development falling short of expectations, product quality risks, etc.