In early November, Yao Ming Biotech announced the launch of PAWBio's one-stop solution for animal health biopharmaceuticals. We believe that as a leader in the human biopharmaceutical CDMO industry, the company has rich project experience, leading service quality, and high customer recognition. Currently expanding its business into the field of animal biopharmaceuticals, it is expected to bring new business growth to the company.

The number of pets continues to grow, spawning a $10 billion veterinary drug market: with changes in the population and family structure, pets have become an important partner for emotional sustenance and daily companionship for more and more people. Mars recently released the largest pet research report with global coverage and sample data. The report shows that “the current number of pets in the world has exceeded 1 billion.” As the number of pets continues to rise, demand for animal drugs continues to grow. The global animal drug market is about 48 billion US dollars in 2023, and is expected to reach 75-90 billion US dollars (CAGR of 4-6%) by 2033. Similar to human medicine, animal drug research and development also requires high R&D investment. Take Zoetis, the world's largest animal drug company, as an example. In 2023, it achieved revenue of 8.544 billion US dollars (yoy +5.74%) and R&D expenditure of 0.613 billion US dollars (yoy +13.94%).

Leveraging the advantages of human drug service experience and expanding into the field of animal medicine CDMO: Pharmaceutical Biotech launched PawBio's one-stop solution for animal health biopharmaceuticals, based on the rich experience accumulated in human biopharmaceuticals R&D and production, to better meet customer needs and accelerate the marketization process of customer products.

Advantage 1: Integrated technology. The company has advanced technology platforms such as wuxiATM, wuxiUITM, etc., which can shorten the time to enter clinical application and reduce project risk.

Advantage 2: Dual global supply bases. The company has factories in the US and China, and can fully promote everything from cell line construction, process development to production, and meet the standards of USDA, FDA, EMA and other global agencies.

Advantage 3: Efficient cost management. The company excels at combining mature processes with innovative technology to improve production efficiency and reduce production costs.

Advantage 4: Global filing. The company has rich global registration experience and can support the global declaration of animal health products.

Investment advice and profit forecast: We are optimistic about the Pharmaceutical Biotech CRDMO business model and occupy a leading position in the global biopharmaceutical CDMO field with leading technology platforms and high-quality service capabilities. The company has now launched a one-stop solution for animal health biopharmaceuticals, which is expected to bring new performance increases to the company. We expect to achieve revenue of 17.9, 19.9, 22.3 billion yuan and net profit of 3.2, 3.6, and 4.1 billion yuan in 2024-2026, corresponding to PE of 17, 15, and 13 times, maintaining an “increase in holdings” investment rating.

Risk warning: Risks such as geopolitics, exchange rate fluctuations, and investment and financing environment fluctuations.