\u3000\u3000 Pharmablock Sciences (Nanjing) Inc(300725) (300725)
Key investment points:
The innovative molecular building block leader extends its business to the fields of cdmo and drug screening.
The company has focused on molecular blocks for 14 years and accumulated many years on the chemical process technology platform. With its excellent design, synthesis and supply capacity in the field of drug molecular blocks, the company has a good industry reputation and technical advantages. Based on the laboratory level molecular block business, the company has gradually built and strengthened the drug molecular block, downstream key intermediates, API and even preparation business, continued to invest in new processes and new production technologies, and further created the dual brands of "medicine stone R & D" + "medicine stone manufacturing". In the upstream, the company uses the drug molecular block library accumulated for many years to build fragment molecular library, DNA coding library and virtual molecular library. Combined with biological screening technology, the company expands the front-end drug discovery and solves the diversified needs of customers from R & D to production in one stop.
Benefiting from the increase of pharmaceutical R & D investment and penetration, China's molecular block industry has broad prospects.
Molecular blocks are small molecular compounds used to design and construct drug active substances. Molecular blocks with rare structure and good physical and chemical parameters can reduce the subsequent synthesis steps and are excellent structural modifiers. According to the estimation of the Department of health policy of Harvard Medical School, 30% of the global medical R & D expenditure is used for the production, purchase and outsourcing of drug molecular blocks. Excluding the R & D expenses in the clinical stage, we estimate that the global market scale of drug molecular blocks will be us $18.5 billion in 2020 and 4% CAGR in 2020-2024. Benefiting from the continuous increase of drug R & D investment outside China, the cornerstone "molecular block" of small molecule R & D is expected to show good growth potential at the R & D and production ends. Chinese high-quality enterprises are expected to gain greater market share in outsourcing and outsourcing production by virtue of their advantages in technology, cost and rapid response.
The one-stop biomedical cdmo service platform is gradually established, and the profitability is expected to continue to rise.
On July 20, 2018, Pharmablock Sciences (Nanjing) Inc(300725) partner Agios pharmaceuticals announced that tibsovo ® (ivosidenib) the new drug has been approved by the FDA of the United States, which preliminarily proves the ability of drug stone molecular block from preclinical to commercial cdmo. After Zhejiang Huishi production base passed the FDA audit with zero defects in 2019, the cdmo business downstream of the company's molecular blocks increased significantly, accounting for 41.6% in 2021h1 from 33.0% in 2019. High value-added API (main active ingredient) projects continued to be implemented. With more projects extending to the later stage of clinical practice, the fluctuation of cdmo revenue is expected to be smooth. Through process innovation Route optimization and other control costs, and the gross profit margin above the kilogram level is expected to remain above 40%.
Earnings forecast, valuation and rating
From 2021 to 2023, the company's apparent net profit was RMB 489 / 377 / 533 million respectively, with a growth rate of 165.7% / - 22.9% / 43.3% and PE of 35 / 46 / 32x. Considering the income from changes in fair value exceeding RMB 200 million in 2021, it is estimated that the net profit after deducting non-profit from 2021 to 2023 will be RMB 236 / 367 / 523 million respectively, with a growth rate of 35.9% / 55.7% / 42.4%. In 2022, the average valuation of comparable companies was 50 times. Based on the advantages accumulated in molecular blocks, the innovative drug cdmo business of "non GMP / GMP intermediate API preparation" was vertically integrated. We are optimistic about the integrated cdmo layout of the front and rear ends of the drug stone, giving 52 times PE in 2022, the first coverage and "overweight" rating.
Risk tips
New business expansion is less than expected risk; The risk of intensified market competition; Domestic and foreign covid-19 epidemic situation intensifies the risk.
