Incident: Sannuo Biotech issued an announcement on December 18, 2024. The company recently received an official notice from U.S. Food & Drug Administration (US Food and Drug Administration, hereinafter referred to as “FDA”) that the “continuous glucose monitoring system” products independently developed by the company have passed the FDA 510 (k) acceptance review (Acceptance Review) and officially entered the 510 (k) substantive review stage (510) substantive review (510) substantive review stage (510).

FDA approval was accepted, and CGM went to sea and Yang Fan set sail. The company's continuous glucose monitoring system product registration application was approved by the US FDA and has entered the substantive review stage, indicating that the company's registration submission materials have reached the acceptable standards for entering the 510 (k) review path. The company will continue to actively promote the subsequent registration of products according to the plan. The main manufacturers of CGM in the US are Dekang and Abbott. As a manufacturer focusing on CGM in the US, the global revenue in 2023 was $3.622 billion, of which the US market revenue was $2.625 billion. We believe that this approval further proves the company's product quality and international competitiveness. The CGM space in the US market is impressive. This approval has laid a solid foundation for the company's overseas profits, and future growth can be expected.

Outstanding R&D capabilities to meet different patient application scenarios. The company's second-generation CGM products have completed registration and obtained a medical device registration certificate. The self-developed continuous glucose monitoring system uses third-generation direct electron transfer technology, which has the advantages of low potential, no oxygen dependency, few interferers, good stability and high accuracy. The acquisition of the medical device registration certificate marks the continuous upgrading and iteration of the company's existing continuous glucose monitoring products, reflecting the company's R&D and innovation capabilities, further enriching the categories of the company's diabetes monitoring product line, helping to meet the diversified testing needs of the market, establishing a closed loop of “perception+evaluation+intervention”, which is conducive to enhancing the overall competitiveness and market expansion capabilities of the company's products.

European distributors have landed, and the European market can be expected in the future. The company previously signed a contract with A Menarini Diagnosticss.r.l., an Italian company whose main business areas include R&D, production and sales of medical diagnostic products, focusing on helping medical professionals make safe and sustainable diagnoses, covering various medical fields such as diabetes, hematology, clinical chemistry, urine analysis and immunology. It is committed to providing innovative solutions for better health outcomes through advanced diagnostic tools and technology, and is one of Europe's leading diagnostic companies. We believe that the signing and successful implementation of this cooperation is beneficial to the company's business development and strategic layout in the European market, and is expected to have a positive impact on the company's business performance.

Profit forecast and investment rating: We maintain our previous profit forecast. We expect the company's revenue for 2024-2026 to be 4.63/5.288/6.093 billion yuan, respectively, and net profit to mother of 0.412/0.524/0.622 billion yuan, respectively, corresponding to the current stock price PE, which is 38/30/25 times, respectively. We believe that the company is a leading company in the industry and is expected to continue to grow rapidly in the future and maintain a “buy” rating.

Risk warning: the risk of delays in approval and promotion of new products falling short of expectations; risk of dealer management; strategic and management risks brought about by the expansion of business scale.