Description of the event

On August 29, 2024, Osecon released its 2024 semi-annual report: 2024H1 achieved revenue of 0.923 billion yuan, a year-on-year increase of 29.6%; realized net profit attributable to shareholders of listed companies of 75.5945 million yuan, compared to -0.158 billion yuan in the same period last year, reversing losses.

Incident comments

Operating income grew rapidly, and net profit due to mother profit reversed losses. 2024H1 achieved revenue of 0.923 billion yuan, an increase of 29.6% over the previous year; net profit attributable to shareholders of listed companies was 75.5945 million yuan, which was -0.158 billion yuan in the same period last year, reversing losses, indicating that the company's generic drug stock business has reached an inflection point and returned to growth.

Cash flow is healthy, similar to when transformation is underway. As of June 30, 2024, the company's cash on hand exceeded 1.9 billion yuan, and R&D investment was drastically reduced to 0.18 billion yuan, a year-on-year decrease of 44.2%, mainly because some new drugs have completed critical clinical research and development stages with high R&D investment, and there is no need to continue large-scale R&D investment. The company continues to focus on the development of innovative drugs and complex formulations with high barriers, and works in both directions through independent R&D and introduction cooperation to meet unresolved clinical needs around the world. Currently, the company has a total of 48 research projects, including 11 disclosed innovative drugs focusing on chemical and biological innovation. Many innovative drugs are about to be realized: ASK120067 is in the NDA stage; both ASKC109 and ASKB589 have entered phase 3 clinical phase.

Early molecular clinical trials are progressing smoothly, and BIC potential is beginning to appear. ASKG712: The world's second VEGF/ANG2 ophthalmology drug to enter clinical stage after Roche Faricimab. The ASKG712 treatment for neovasal age-related macular degeneration (NaMD) was completed in the first half of 2024, and clinical phase IIa studies are being carried out. ASKG712 treats diabetic macular edema (DME) and has now completed phase I clinical studies. The main advantage of Roche Faricimab is reflected in patient compliance, which can reduce the frequency of injections to once every 4 months; cytokine therapy: by the company's SmartKine? Technology platform incubation enables drugs to exist in the form of complete precursors in normal system circulation and be activated at specific points in the tumor microenvironment. Clinical trials of the two IL-15 cytokines are progressing steadily. Among them, ASKG315 (IL-15) combined with PD-1 has entered phase 1 clinical trials, and ASKG915 (PD-1/IL-15) has entered phase 1 clinical trials in China and the US.

Profit forecast and investment advice: The company's net profit for 2024-2026 is expected to be 0.107 billion yuan, 0.305 billion yuan and 0.369 billion yuan, respectively, and the corresponding EPS is 0.12 yuan, 0.33 yuan and 0.40 yuan, respectively, maintaining the “buy” rating.

Risk warning

1. Pharmaceutical industry policy risks;

2. Risk of sales falling short of expectations;

3. Risk of failure in the development of new drugs.