occurrences

Kexon Pharmaceuticals released its results report for the third quarter of 2024. The company achieved operating income of 1.038 billion yuan, 7.15% YoY; net profit to mother 0.017 billion yuan, or 131.63% YoY; and net profit after deducting non-return to mother 0.024 billion yuan, or 130.36% YoY.

reviews

The cost control effect is obvious, and profitability continues to improve

Looking at a single quarter, the company's 2024Q3 revenue was 0.278 billion yuan, -13.02%; net profit to mother was 0.005 billion yuan, 178.49% year-on-year; net profit after deducting non-return to mother was 0.003 billion yuan, or 133.50% year-on-year.

In the first three quarters of 2024, the company's gross sales margin was 69.86%, -1.65 percentage points year on year; sales expense ratio was 43.15%, -12.23 percentage points year on year; management expenses ratio 5.90%, -0.28 percentage points year on year; financial expenses ratio 3.00%, year on year +0.64 percentage points; R&D expenses ratio was 10.93%, -6.45 percentage points year on year; net operating cash flow was 0.053 billion yuan, +171.51% year on year.

Overseas performance grew rapidly. Continuing to build a comprehensive overseas commercialization system platform in the first three quarters of 24, overseas revenue was 0.149 billion yuan, an increase of 47.16% over the previous year. The company is deeply involved in emerging markets. After more than 20 years of development, the overseas commercialization platform has covered more than 40 countries, covering all of the top 30 emerging market countries with a population of over 100 million. The company's product, erythropoxide injection, has become a leading local EPO brand product in countries such as Brazil, the Philippines, and Egypt. In the first three quarters of 2024, the company continued to expand more international markets by producing its own products such as EPO, GC, and Chang Lekang, and received new listing registration approvals in Tanzania and other countries.

The share of EPO and GC formulations continued to increase, and the gross margin for overseas sales of self-produced products increased 6.25% year-on-year in the first three quarters of 2024.

The company has more than 20 years of experience in commercializing biopharmaceuticals overseas, has established a relatively complete overseas commercialization system, and has rich comprehensive capabilities in various areas such as product registration, market expansion, and on-site audit of production quality systems. In the third quarter of '24, sales and registration of products introduced by the company accelerated in emerging markets. The company achieved the first shipment of infliximab to Peru, adalimumab completed on-site GMP inspection by the Philippine Drug Administration, bevacizumab completed an online audit by the Pakistan Drug Administration, and liraglutide completed on-site GMP inspection by the Colombian Drug Administration.

High-quality biopharmaceuticals continued to advance overseas, and sales of albumin paclitaxel made a breakthrough in the EU market. The company used the first product, albumin paclitaxel, as a breakthrough to expand into the mature EU market. In the first three quarters of 24, the company continued to break through in sales in the EU market. The company introduced the product albumin paclitaxel, which was approved for marketing by the European Commission in July 2024. The first batch was delivered in August, and sales orders in the EU continued to increase. According to the EMA announcement, white purple is in short supply in most regions of the European Union. The successful achievement of sales revenue in the EU marks the expansion of the company's global sales area from emerging markets to the EU market with albumin paclitaxel (white purple) dosage advantages. Compared with ordinary paclitaxel injections and paclitaxel liposomes, safety and patient compliance have improved, and clinical acceptance is high.

Investment advice

We continue to be optimistic about the company's high-quality biopharmaceuticals going overseas. According to the company's report for the first three quarters, domestic sales revenue was affected by collection. We lowered our previous profit forecast. The company's revenue for 2024-2026 is 1.382/1.728/2.166 billion yuan, respectively (the forecast value before 2024-2026 is 1.55/1.98/2.49 billion yuan), up 9.7%/25.1%/25.3% year on year, respectively. The net profit for 2024-2026 is 0.023/ 0.038/0.137 billion yuan (the forecast value before 2024-2026 is 0.026/0.042/0.14 billion yuan), up 112.2%/64.8%/258.9% year-on-year respectively, and the corresponding valuation is 147X/89X/25X. Maintain an “overweight” investment rating.

Risk warning

New drug development risks, core competitiveness risks, industry policy risks, etc.