Event 1: the company announced that Zhejiang Haisheng Pharmaceutical (insulin assets), a holding subsidiary, intends to increase its capital and shares and transfer some of its old shares by introducing social capital, in accordance with the state-owned assets management regulations in the form of public listing. The capital increase and share increase and the transfer of old shares are based on Haisheng Pharmaceutical's pre-investment valuation of not less than 1.9 billion yuan, the planned capital increase is not less than 800 million yuan, and the transfer of old shares is not less than 685 million yuan.
Event 2: Hanhui Pharmaceutical and Novartis AG signed an "exclusive Promotion Service Agreement" for three adult COPD maintenance drugs, which will be paid for the exclusive promotion rights in the Chinese region where the three drugs are paid, valid for 10 years. The signing fee is 200 million yuan.
Comments on the incident:
The valuation is in line with expectations and is still expected to increase gradually in the future.
The pre-investment valuation of this capital increase is not less than 1.9 billion yuan, which is in line with our previous judgment of 2 billion yuan, exceeding market expectations, initially showing the valuation of the company's bio-drug research and development. With the completion of clinical trials-declaration of production, the valuation is expected to increase steadily. Upon completion of the transaction, the company's shareholding in Haisheng Pharmaceutical will be reduced to 45%, and the statements will no longer be consolidated. Through this transaction, Haisheng Pharmaceutical received 800 million yuan of funds to meet the insulin follow-up clinical trials in the research & reporting expenses. The 685 million yuan obtained through the transfer of 25.37% of Haisheng Pharmaceutical's shares (calculated according to the proportion of shares held after the completion of the transaction) can be used to pay for unpaid insulin projects, replenish liquidity and repay bank loans. At the same time, the recovery of pre-R & D investment in the insulin project will have a positive impact on the company's performance.
Enhance the degree of marketization and achieve win-win results
The company has three major marketing platforms: Hanhui Pharmaceutical, Baiying Pharmaceutical and Haikun Pharmaceutical, among which Hanhui Pharmaceutical's leading varieties are anti-tumor, anti-infective and cardiovascular drugs; Baiying Pharmaceutical focuses on rheumatic immune biological drugs; Haikun Pharmaceutical is a cooperative agent promotion platform, the company has not yet set up a professional insulin sales team, insulin marketing has shortcomings. After the introduction of strategic investors, Haisheng Pharmaceutical will have a higher degree of marketization. With the help of strategic investors' mature experience in industry operation, management and academic marketing, it is expected to quickly complete the construction of sales system and channel construction, and speed up the process of product release. In the future, listed companies can continue to focus their limited marketing resources on the existing areas of advantage. For strategic investors, four insulin projects under study (two of which have entered the clinical III phase) and production sites have been obtained at a lower cost. This transaction has achieved a win-win situation and will help Haisheng Pharmaceutical Co., Ltd. to maximize its value.
The progress of the research project is leading and the harvest time is approaching.
The total sales of glargine insulin and asparagus insulin in the domestic market are nearly 9 billion yuan, benefiting from the increase in the prevalence and treatment rate of diabetes, the increase in the number of patients who need to use insulin due to disease progression, and the replacement of second-generation insulin. It is expected that the market scale of glargine insulin and asparagus insulin will continue to grow in the future. The company's glargine insulin and aspartate insulin have reached clinical III phase, which is in a leading position among similar products in China, and is expected to be approved for listing in Q2 in 2020 and Q1 in 2020, respectively. Degu Insulin is also about to start a clinical phase I study, which is the first in China. The insulin business is nearing harvest.
Event 2 comments:
Signed the promotion service agreement, CSO ability is recognized by the international pharmaceutical giants, the three products that have won the exclusive promotion rights in China are (1) Indaterol maleate inhaled powder (2) indoterol bromide inhalation powder capsule (3) guronium bromide inhalation powder capsule for maintenance treatment of adult chronic obstructive pulmonary disease (COPD) patients, all are Novartis original research and innovation drugs. Global sales in 2017 were $112 million, $411 million and $151 million, respectively, and were listed in China in 2012, 2017 and 2018, respectively. At present, the sales varieties of Hanhui pharmaceutical agents are mainly the original research drugs injected by Pfizer Inc and other expired patent drugs and Haizheng's own products. The three products of this new agent are all innovative drugs under the international pharmaceutical giants. On the one hand, it shows that the company has the ability of innovative drug marketing and promotion, and has been recognized by international pharmaceutical giants. After the entry of Hillhouse Capital, it has not only brought continuous improvement in performance (the 40% increase in reported profits has been reflected), but also brought products and other resources.
Hanhui Pharmaceutical as a scarce standard sales platform, the value of CSO platform begins to reflect, and it is expected that there will be new product agents in the future.
Open up the drug market in the respiratory field, and enrich the product line continuously.
At present, Hanhui Pharmaceutical's product line includes antineoplastic drugs, anti-infective drugs, cardiovascular drugs and hormones, among which hormone and antibiotic product lines have been well covered in respiratory departments. Before that, the company has also obtained the domestic general agent right of Ampisheng Pharmaceutical Montelukast Sodium chewable tablets, responsible for its domestic market promotion and product sales, this agent of Novartis original research new generation of LABA, LAMA, LAMA/LABA compound preparation. All are the main first-line drugs recommended by the guidelines in this field, and the company will form a more efficient and complete product line covering different mechanisms, including oral and inhaled treatment of COPD and asthma, so as to systematically enter the field of asthma and COPD, and further enrich the company's product line. Indaterol maleate was included in the national health insurance in 17 years, and the sales of H1 increased by 172% in 18 years (PDB data). As a first-line drug, it has great growth potential in the future. Novartis will also help promote the other two products to be included in health insurance. The domestic use of COPD drugs has reached 10 billion yuan, and the growth space is huge, and respiratory drugs are expected to become the new growth pole of Hanhui Pharmaceutical. With reference to the net interest rate of Hanhui Pharmaceutical before, it is estimated that the net interest rate of the three products is 10% or more.
Valuation and investment advice-the former king, the inflection point of history!
Haisheng Pharmaceutical's plan to introduce war investment indicates that the company's biomedical clinical research and industrialization capability has been recognized by industrial capital, which initially shows the valuation of the company's biopharmaceutical research and development. In addition to insulin, adamumab in the monoclonal antibody plate has been declared for production, and infliximab, rituximab and trastuzumab have all entered the clinical phase III study, which is about to enter the harvest period, with a valuation of about 8 billion yuan.
The company's business and management are expected to usher in a historic inflection point: 1) after the entry of Hillhouse Capital to optimize management, Hanhui Pharmaceutical profits grew rapidly, 2018H1 grew by more than 40%, and revenue basically did not grow because of the change in the two-vote system, with a real growth of more than 20%. The mature CSO model will be adopted to continue to grow through the introduction of varieties; 2) the value of the biopharmaceutical sector is seriously undervalued. Ambanol began to grow rapidly after production expansion, Adamu monoclonal antibody production; 3) chemical innovation drug Haize Maibu III clinical data is good; 4) a large number of generic drug BE, no stock, large production capacity, benefiting from the national collection policy, is expected to make full use of fixed assets; 5) once the fixed growth is completed, the management system is straightened out, management-incentive will usher in a historical inflection point.
If the fixed increase is successfully completed, the reasonable market value will be 25-30 billion yuan in 2019, taking into account the dark horse attribute, and a 20% discount will be given out of the principle of prudence, with a reasonable valuation of more than 20 billion. Among them, 1) Hanhui Pharmaceutical: it is estimated that the 19-year net profit of Hanhui Pharmaceutical Co., Ltd. is 685,100,856 million yuan, an increase of 39%. Haizheng Pharmaceutical holds 51% equity, and the net profit of equity is 349,000,000 yuan, which is calculated at 29 times PE, corresponding to a valuation of 10 billion yuan. 2) Biopharmaceuticals: with reference to the valuation of similar enterprises such as Fuhong Hanlin and INNOVENT BIO, the value of the monoclonal antibody part is about 8 billion yuan. The insulin plate is valued at 2 billion yuan, with a total valuation of 10 billion yuan. 3) Chemical drugs: the existing varieties still have great growth potential, the clinical data of the III phase of the new drug Haize Maibu is good, the achievements of R & D investment for many years begin to show, the echelon of products under development is good, give a valuation of 5 billion yuan. 4) API: net profit of 2000-30 million yuan in 2017, gradually enter the recovery channel after the lifting of the ban on FDA, EU certification is expected to be re-passed, FDA and EU ban before the normal net profit of more than 300 million yuan, calculated by 10 times PE, the valuation is 3 billion yuan; 5) Pharmaceutical business: 2018 net profit of 31 million yuan, is expected to continue to maintain stable growth, a reasonable valuation of 500 million yuan. It is estimated that the company's annual net profit in 18-19-20 will be 125 million yuan, 354 million yuan and 580 million yuan respectively. Maintain a "buy" rating.
Risk tips: capital increase and share expansion failed without investors delisting; sales of agent varieties are not as expected; management is not straightened out; Adamu monoclonal antibody has not been approved or slow progress; depreciation of fixed assets is too much.