Performance Overview: The company generated total revenue of about 0.103 billion yuan in the first half of 2024, reflecting sales of about 0.846 million boxes of Huatangning; other revenue was about RMB 0.055 billion, of which Bayer's milestone revenue amortized about 0.048 billion yuan. Gross profit of 0.048 billion yuan was achieved in the first half of 2024, with a gross profit margin of 46.5% (-16.1pcts). The decline in gross margin was mainly due to the fact that after Huatangning products were included in the national medical insurance drug catalogue at the end of 2023, the sales price dropped from RMB 341.95 per box to RMB 124.88 per box.

After entering medical insurance, the product was quickly released into the hospital. After entering the national medical insurance drug catalogue, Huatangning accelerated his entry into hospitals and pharmacies, particularly in Shanghai, Beijing, Tianjin and other regions, benefiting from the government's policy to support the entry of new drugs into the market. In the first half of 2024, more than 2,100 hospitals issued prescriptions for Huatangning. Huatangning's revenue reached RMB 102.7 million in the first half of 2024, and is expected to continue growing in the second half of 2024. In the first half of 2024, Huatangning was mainly sold through hospitals (accounting for about 72% of total sales), then through pharmacies (accounting for about 20% of total sales) and online pharmacies (accounting for about 8% of total sales). The company plans to use good partnerships to improve the dorzagliatin production process, thereby expanding production capacity and reducing product costs. The company is fully optimizing its operations and aims to be profitable by 2025.

Second-generation GKA overseas clinical trials are progressing smoothly. The second-generation GKA is undergoing a phase I study in the US. The trial is progressing smoothly, and dose escalation has been completed for three groups of type 2 diabetics in the US.

Key data is expected to be available in the fourth quarter of 2024 to support future drug development.

Profit forecast and rating: Huatangning is expected to accelerate in the second half of the year, but considering recent changes in the pharmaceutical business environment, the profit forecast was lowered. The company is expected to achieve revenue of 0.378/0.526/0.728 billion yuan in 2024-2026, an increase of 394.1%/39.1%/38.4% over the previous year. Maintain a “buy” rating.

Risk warning: commercialization progress falls short of expectations, risk of clinical trial failure, risk of regulatory policy