Sales of tetanus vaccine products are steady, and profits are under pressure in the short term. In 2023, the company achieved revenue of 496 million yuan (-9.4% YoY), net profit of 17.56 million yuan (YoY +3.9%), net profit of 3.39 million yuan (YoY +370.1%). Profit side pressure was mainly due to intense market competition, sales of some products fell short of expectations and led to inventory scrapping and impairment, a decrease in government subsidies year on year, and a significant year-on-year increase in R&D investment. With 2024Q1, the company achieved revenue of 70.8 million yuan (+5.9% year-on-year), net profit of 26 million yuan (year-on-year loss), net profit deducted from non-return mother of 27.84 million yuan (year-on-year loss), mainly due to the addition of 20 million yuan of quadrivalent influenza technology transfer fees and 9.295 million yuan of clinical expenses for phase IV of the AC conjugate vaccine in R&D expenses, which led to a significant year-on-year increase in current R&D expenses.
By product, the company's core product adsorbed tetanus vaccine achieved sales revenue of 463 million yuan (+5.8% year over year), with a gross profit margin of 96.24% (year-on-year +0.6pp); haemophilus influenzae type b conjugate vaccine and group A group C meningococcal polysaccharide conjugate vaccine achieved revenue of 27.27/3.88 million yuan, respectively, -50.1%/-95.4%. Increased market competition led to a decline in sales of the two single-vaccine products.
Investment in research and development has been increased, and clinical promotion of the Staphylococcus aureus vaccine Ph3 is underway. In 2023, the company's R&D investment reached 179 million yuan, accounting for 36.15% of revenue, of which 115 million yuan was spent on costed R&D; by the end of 2023, the number of R&D personnel in the company had increased from 122 to 140 in the same period last year. Regarding the “12 Most Dangerous Drug-Resistant Bacteria List” published by WHO, the company is studying 4 “superbacterial” vaccines, including recombinant Staphylococcus aureus vaccine, oral recombinant Helicobacter pylori vaccine (Escherichia coli), recombinant Pseudomonas aeruginosa vaccine, and recombinant Acinetobacter baumann protein vaccine. Among them, the recombinant Staphylococcus aureus vaccine is undergoing Ph3 clinical research in China, leading the way in the world.
An agreement was reached with Science Park Trade to strengthen the market promotion of AC combined vaccines. The company signed an agreement with Keyuan Trade, a subsidiary of Shanghai Pharmaceutical Group, to entrust Keyuan Trading to carry out exclusive marketing services for AC conjugate vaccines nationwide from 2024-2026. The agreement stipulated that Keyuan Trade's total promotion tasks would total 4 million doses. The vaccine price was based on the actual bidding/online price in each province during the contract execution period (the 2022 AC conjugate vaccine won the bid price was 156 yuan/dose), and the company paid promotion fees to Keyuan Trade according to the agreed ratio.
Investment suggestions: Olin Biotech is a “small but beautiful” private vaccine company. Relying on the old tetanus vaccine, the tetanus vaccine market is expected to expand as domestic policies continue to improve; reached an agreement with Shanghai Pharmaceutical's Science Park to strengthen the AC combined vaccine market promotion; long-term layout of the “superbacteria” vaccine pipeline, and the recombinant Staphylococcus aureus vaccine Ph3 clinical promotion is leading the global progress. It is expected to fill the gap in the industry. According to the company's 2023 annual report and 2024 quarterly report, we have adjusted our profit forecast. We expect the company's net profit to be $0.79/112 million for 2024-2025 (previous value was $122/203 million yuan), and an additional forecast value of $172 million for 2026 will be added, maintaining an “incremental” rating.
Risk warning: risk of product sales falling short of expectations, risk of failure in the research pipeline, etc.