Backed by Luye Pharmaceutical, R&D, production and marketing are developing in parallel. The company has excellent research and development, production and commercialization capabilities for macromolecules (including biosimilar drugs, innovative antibodies, ADC, etc.), and is widely deployed in various therapeutic fields. The listed company Luye Pharmaceutical Group indirectly holds 67.28% of the company's shares. The company's senior management team allocates outstanding talents in production, R&D, and commercialization. Among them, CEO Ms. Jiang Hua, Chief Financial Officer, Mr. Dou Changlin, R&D President and Chief Operating Officer, and Mr. Chi Guangming, Vice President of the Business Operation Center, have held key positions at Luye Pharmaceutical, the majority shareholder of the company, or its subsidiaries. The company has a solid talent resource guarantee. The company uses biosimilar drugs to build steady cash flow, can be expected to go overseas, and the innovative drug sector has bright spots. The company's R&D pipeline is divided into biosimilar drugs and innovative drug segments. 1) Biosimilar drugs: bevacizumab and desumab have been approved for marketing in China, dulose peptides and abacip biosimilar drugs have been accepted by the BLA in China, and the international multi-center phase III clinical trial of desumab is progressing in an orderly manner, and it is expected to enter the European and American core markets in the near future. 2) Innovative drug: The long-acting IL4R monoclonal antibody BA2101 has already been implemented in China. The company's innovative strength has been recognized by large pharmaceutical companies. Currently, it is in phase II. The CD25 monoclonal antibody BA1106 and CD228 ADC BA1302 are pioneering varieties with broad-spectrum anti-cancer potential. CLDN18.2 ADC BA1301 has obtained FDA orphan drug certification, and the innovative drug sector is quite bright.

The company recently achieved its first profit, reducing costs and increasing efficiency significantly. The company continues to accumulate and release biosimilar products. Revenue in 2021/2022/2023 reached 0.16, 0.52, and 0.62 billion yuan respectively, and revenue reached 0.36 billion yuan in the first half of 2024. The company's scale effect is beginning to appear. The sales expenses rate, management fee rate and R&D cost ratio (2024H1 R&D expenses decreased by about 40.2 million yuan, mainly due to an increase in R&D investment to cover deferred development costs in the second half of 2023. More R&D projects progressed to (Phase III clinical trials were capitalized as a result) were 40.4%, 6.7%, and 23.6% respectively in the first half of 2024, which is a significant optimization compared to 2023, so the company achieved its first profit in the first half of 2024.

Biosimilar drugs: The layout and marketing progress are leading among similar products, and desulumab is expected to go overseas in Europe and the US. According to Pharmaceutical Rubik's Cube, in the Chinese market, the company's bevacizumab, desumab, abacip, duracopeptide, and navulizumab ranked 3rd, 1st, and 1st in the R&D progress of similar biosimilar drugs, respectively. In the US market, the company's desumab and duracopeptide ranked 4th and 1st in the R&D progress of similar biosimilar drugs, respectively. The biosimilar drugs that the company has already laid out are leading among similar products. It is expected to seize the critical market window period after the original research patent expires, and the commercialization prospects are improving. The company's international multi-center phase III clinical study of desumab antibiotics was carried out simultaneously in Europe, the United States, and Japan, and all subjects were enrolled in January 2024. The company has a strong industrialization system in line with the international community, with a commercial production capacity of 9,000 L, and is building a commercial production capacity of 6000 L. The company's production system meets GMP and other quality standards set by relevant regulators in China, Europe, America and Brazil. The company has the ability to promote desulumab biosimilar drugs to the core markets in Europe and the US at both the R&D and production levels. It is planned to complete the third phase of authorized cooperation with desulumab International in developed markets in Europe, America, and Japan. It is expected that the company's business will expand into overseas markets in the near future.

Innovative drugs: Late varieties have completed external licensing, and two FICs have been laid out. The dose escalation phase I clinical study of the company's CD25 innovative monoclonal antibody BA1106 is expected to be completed within the year and will enter the dose expansion phase. It is expected that the single dose escalation group will be completed in China in 2024, the combined treatment IND will be submitted, and conference submissions will be completed on 2024.12. Therefore, early research data on BA1106 is expected to be read out next year. The first anti-CD228 ADC, FDA Pre-IND has received positive responses. The long-term anti-IL-4Rα monoclonal antibody has joined hands with the major domestic Pharma Health Group in the respiratory field. The revenue scale of prescription drugs in the health care field has developed rapidly in recent years, reaching 1.74 billion yuan by 2023. It is expected that BA2101 will be rapidly released in the domestic market with its help.

Profit forecast and investment suggestions: We expect the company to achieve operating income of 0.72, 1.02, 1.49 billion yuan and net profit of 0.07, 0.12, and 0.24 billion yuan in 2024-2026. Considering that the company relies on the excellent resources of Luye Pharmaceuticals, the domestic biosimilar market continues to expand varieties+volumes. The European and American markets are in the late stages of clinical research, and the innovative drug sector has several differentiated varieties. A number of external licensing collaborations have already been implemented to prove the company's BD capability. Comparable to the company's average PS in 2024, the company's PS was 7 times higher. For the first time, coverage was given.

Risk warning: New product introduction falls short of expectations; risk of clinical research failure; risk of information lag; risk of third party data distortion