The 2022 results are in line with our expectations

The company announced its 2022 results: revenue of RMB 48,2067 million, an increase of 529.3% over the previous year, from sales revenue of the listed product contezolomide; the net profit of the mother was RMB 220 million. The 2022 results were in line with our expectations.

Development trends

There was a steady increase in sales of contezolomide after it was included in medical insurance in 2022. By the end of '22, contezolomide tablets had been prescribed in 320 hospitals across the country, and more than 70 hospitals were officially admitted and purchased in batches. Of these, hospital channels and pharmacy channels accounted for 60% and 40% of sales respectively. Sales revenue for the full year of '22 was 48.2067 million yuan. Of these, 2H22 achieved a 77% increase in 1H22 sales volume over 1H22 under the influence of the epidemic. A number of clinical studies initiated by Chinese researchers after contezolid was marketed are currently being carried out in an orderly manner. We expect sales to grow further in the future with the optimization of the company's sales strategy and the expansion of contezolid indications.

Core product clinical trials are progressing steadily. Contezolomide injectable MRX-4 is currently undergoing phase III clinical trials for complex skin and soft tissue infections in China. The company expects to complete patient enrollment and release clinical data in 2024. Furthermore, MRX-4 sequential contezolomide treatment for diabetic foot infection is progressing effectively, and the company expects to launch global multi-center phase III clinical trials for acute bacterial skin and skin structure infections in many overseas countries on 2H23. Furthermore, MRX-8, which is used for multi-drug-resistant gram-negative bacteria, is undergoing phase 1 clinical trials in China. The company expects to release phase 1 data on 1Q24 and make detailed plans for subsequent indications.

The clinical pipeline continues to expand, and the company is targeting anti-infective drug treatment. In addition to the core product contezolamide and its injectable forms MRX-4 and MRX-8, the borane type MRX-5, which is currently being developed, is undergoing early preclinical research on non-tuberculous mycobacteria. In the future, the company will focus on the development and sale of drugs in the field of infectious diseases.

Profit forecasting and valuation

We kept our main business revenue of 103 million yuan unchanged in 2023, and introduced the 2024 revenue forecast of 166 million yuan for the first time. Due to the reasonable control of the company's expenses, we expect the company's R&D expenditure in 2023 to be lower than the previous forecast, so we raised the 2023 net profit forecast from -613 million yuan to -573 million yuan, introducing the 2024 net profit forecast of -520 million yuan for the first time.

We used the DCF valuation method to maintain an outperforming industry rating, slightly raising the target price by 6.6% to 11.0 yuan, with an upward margin of 13.6% from the current stock price.

risks

Risk of new drug development; risk of bacterial resistance; risk of falling product prices due to the impact of competing generic drugs.