Key points of investment
The collection pressure is clear, and the rich pipeline continues to contribute new varieties: Yuandong's biological product layout includes anesthesiology, analgesia, cardiovascular, and anti-tumor fields. Affected by the seventh batch of collection of key products, sodium ibandronate injection and caffeine citrate injection, revenue in 2023 fell 4.6% year-on-year, but the company's stock varieties have been exhausted, and the impact of collection has gradually been digested. At the same time, the company has strong R&D capabilities, with a R&D expenditure rate of 21.4% in 2023. It continues to cultivate in the field of layout. In 2022/2023, the company was approved for 6/10 varieties, many of which are expected to be the first imitation/first evaluation or leading peers in R&D progress, and there is no shortage of varieties with a large market size. At the same time, it has abundant reserves in the research pipeline, which will continue to contribute to the company's performance.
Focusing on anesthesia and analgesia, product abundance continued to increase: The company developed a broad business layout in the early years. The field of anesthesia and analgesia mainly involved opioid antagonists, ibuprofen injections, etc., and competed differently with traditional narcotics leaders such as Enhua Pharmaceutical and Renfu Pharmaceutical. However, anesthesiology and analgesia is now the company's focus area. Factors such as the increase in the number of surgeries due to the aging population and the expansion of narcotics use departments brought about by the public's pursuit of comfortable medical care have all driven the steady growth in the size of the anesthesiology and analgesia market. The company's successive approval since 2022 has large market space, such as sodium sugenglucose, norepinephrine, nalbuphine hydrochloride, and butorphinol tartrate. At the same time, varieties under development such as morphine sulfate, naltrexone hydrochloride, aminophenol oxycodone, and EP-9001A monoclonal antibody injections have a better competitive pattern. The company is leading in R&D progress and is expected to gradually be implemented.
The integrated layout of raw materials opens up room for growth in overseas markets: the company continues to build a core competitive advantage integrating APIs and formulations, continuously extends and expands in the industrial chain, and actively explores domestic and international markets for APIs. The company's nalmefene hydrochloride injection was approved by the FDA on 2023.11. It became the second generic drug approved after Purdue Pharmaceutical, and the company's first overseas product. As of 2021, the proportion of drug users aged 12 and above in the US reached 11.7%, with opioids accounting for 36% of drug users. As a result, the market size of the first-generation opioid antidote naloxone exceeded 680 million US dollars in 2022. Nalmefene is a new generation opioid receptor antagonist. It is more effective than naloxone. We think it is expected to gradually seize the US opioid antidote market. At the same time, the company has a wealth of overseas pipelines, and overseas markets will open up a lot of room for growth for the company.
Profit forecast and investment rating: We expect the company's revenue for 2024-2026 to be 1,375/16.94/2.034 billion yuan, respectively, and net profit to mother of 2.81/3.45/412 million yuan, respectively. The PE corresponding to the current stock price is 24/19/16 ×, respectively. Considering that Yuandong's biological stock collection has been cleared, the focus is on the field of anesthesiology and analgesia. The reserve pipeline is rich, and it is gradually realized when going overseas. It was covered for the first time, giving it a “buy” rating.
Risk warning: risk of collecting stock varieties; risk of contract renewal and price reduction for collected varieties; progress in new product development and market development falling short of expectations; overseas commercialization falling short of expectations; policy risks in the pharmaceutical industry, etc.