A high quality overseas formulation export platform enterprise with large single products+stock product release. Jianyou Co., Ltd. is a leading manufacturer and exporter of heparin APIs in China. Since 2016, it has obtained the first FDA-certified injection production line in China through the acquisition of Jianjin Pharmaceutical. In 2019, Enoxaparin sodium injections were approved for listing by the FDA, and in the same year, Jianyou acquired Meitheal of the United States to quickly establish overseas direct sales channels. Currently, the company's main products in the US market consist of enoxaparin sodium+non-heparin injections. In the US market, enoxaparin will grow steadily with overall market demand. The main short-term growth point comes from the rapid increase in the number of ANDA in non-heparin preparations and the launch of large single products. As of 2023Q3, the company and its subsidiaries have obtained a total of 89 ANDA approvals. Compared with similar domestic companies, the number of ANDA injections for Jianyou is leading. In addition, the company has cooperated with Hainan Shuangcheng Albumin Paclitaxel and Tonghua Dongbao on sales of glycine, laipong, and mendong insulin in the US market. Currently, Bai Zi has submitted an ANDA generic application to the FDA in March 2022, and insulin products are also expected to be approved for marketing in 2026. The non-US market is mainly enoxaparin sodium injections. Due to the small base, they will also be released quickly. In the medium to long term, the growth of the company's overseas formulations will depend on the approved release of bioanalogues. The prospects for the US biosimilar market are broad, and the company's overseas pharmaceutical exports are expected to continue to grow rapidly.

The quantity and price of heparin APIs is at a historically low level, and the disturbances in the declining revenue share have weakened. According to wind data, the average export price of heparin raw materials in November 2023 was 6116.05 US dollars/kg, a year-on-year decrease of 33%. Compared with the high of 2021 H1, it is currently at an all-time low. We speculate that it is mainly due to the high inventory volume of downstream customers during the pandemic, the current weak demand for terminals, and price competition among manufacturers. As a new round of inventory removal cycles is completed and supply and demand return to a tight balance, the volume and price of heparin APIs will gradually recover, and it is expected to return to pre-epidemic levels within the next 2-3 years. As the company's stock business, APIs will gradually reduce their share of revenue, and the company's performance will gradually get rid of cyclical disturbances.

The risks of domestic drug collection have basically been clarified, and growth will continue to be steady in the future. The company's domestic pharmaceutical sales mainly include four major products, namely enoxaparin, natriparin, and daxaparin, and benzenesulfonatracurium injections used in the field of anesthesia. The risks of collecting large single products of enoxaparin sodium and natriparin calcium injections have been clarified, and due to the failure of the original research, the company's low molecular weight heparin preparations are expected to further replace unclassified low molecular weight heparin preparations (sales volume of about 3 billion yuan in 2022) and the original research. In terms of profit, savings in sales expenses after collection can offset most of the price reductions in collection, and the net profit of single formulations is expected to remain stable. In the future, with the gradual approval of domestic ANDA, the domestic formulation sector will achieve steady growth.

Investment advice: Jianyou has grown into a comprehensive pharmaceutical enterprise integrating heparin raw materials, sterile injection exports, and CDMO business. As an excellent platform enterprise for domestic pharmaceutical companies to export overseas preparations, it has broad prospects for long-term growth. We expect the company's net profit to be 10.71/12.79/1,681 billion yuan in 2023-2025, up -1.81%, 19.42%, and 31.42% year-on-year. The current stock price corresponding to 2023-2025 PE is 23/19/14 times, covered for the first time, and given a “recommended” rating.

Risk warning: the risk that rising raw material prices will affect the gross margin of the product, the risk that exchange rate fluctuations will affect the company's exchange earnings, the risk that downstream demand will not recover as expected, and the risk that R&D progress falls short of expectations.