Huadong Medicine Co.Ltd(000963) (000963)
Main points:
The performance of comprehensive pharmaceutical enterprises is expected to stabilize. The company's business covers the whole pharmaceutical industry chain, takes the pharmaceutical industry as the leading, and expands the pharmaceutical business and medical beauty industry at the same time. The pharmaceutical industry of the company is deeply engaged in the R & D, production and sales of specialty, chronic disease drugs and special drugs. It has covered the core product pipeline mainly in the fields of chronic kidney disease, transplantation immunity, endocrine and digestive system, and has a number of front-line clinical drugs with market advantages in China. At the same time, through independent development, external introduction and project cooperation, the company focuses on the R & D layout of innovative drugs and high-tech barrier generic drugs in the three core treatment fields of anti-tumor, endocrine and autoimmunity. The company's performance has grown steadily in recent four years. In terms of operating revenue, it maintained stable growth from 2017 to 2019, with CAGR of 13%. In 2020, affected by covid-19 epidemic and national centralized drug purchase, the revenue decreased by about 5% year-on-year; In terms of net profit attributable to the parent company, it maintained an increase of more than 20% from 2017 to 2019, with a CAGR of 26%. In 2020, affected by the epidemic and centralized mining, the net profit attributable to the parent company increased slightly by 0.24% year-on-year. In the first three quarters of 2021, the net profit attributable to the parent company was 1.895 billion yuan, a year-on-year decrease of 20.74%, affected by the price reduction of centralized purchase and medical insurance negotiation, but the decline was narrower than that in the first quarter and the first half of 2021 (the growth rates of net profit attributable to the parent company in 2021q1 and 2021h1 were - 33.90% and - 24.89% respectively).
The market for diabetes drugs is wide, and the market share expansion of the company's innovative mechanism is very good. According to the report of frost Sullivan, the number of diabetic patients in the world has reached nearly 500 million in 2020, and it is expected to exceed 600 million by 2030. China is the world's largest diabetic country. The number of patients in 2020 ranked the first in the world, reaching 130 million people, and will continue to grow rapidly. It is expected that 170 million people will be reached in 2030. The global market for diabetes drugs is nearly $70 billion in 2020 and will reach US $109 billion 100 million in 2030. The scale of China's diabetes drugs market reached 63 billion 200 million yuan in 2020 and reached 167 billion 500 million yuan in 2030. The company is deeply ploughing the field of diabetes medicine, covering three dimensions: imitation + Innovation + biological macromolecule. The existing and subsequent upgrading products cover α- Glycosidase inhibitors, dpp-4i, sglt-2i GLP-1R (human glucagon like peptide-1 receptor) agonists and GLP-1R and GIPR (Glucose dependent insulin-like polypeptide receptor) dual agonists, insulin and its analogues and other mainstream clinical targets. The impact of national mining on acarbose products has declined more, but with the change of China's diabetes prevention guidelines, the status of innovative mechanism of hypoglycemic drugs will continue to improve, and its role in clinical treatment will also become increasingly prominent. The company will fully benefit from the market share expansion of innovative mechanism hypoglycemic drugs.
The tumor drug market is changing towards targeting and immunotherapy, and the company's ovarian cancer ADC drugs are worth looking forward to. Frost Sullivan predicts that the growth path of China's tumor drug market is similar to that of the global tumor drug market, and will focus on targeted and immunotherapy in the future. According to its data, chemotherapeutic drugs accounted for the largest share of China's tumor drug market in 2020, accounting for 63.40% of the total market share in terms of revenue. It is expected that from 2020 to 2030, the market scale of chemotherapeutic drugs will decrease in absolute amount, while the market scale of other treatments will increase in absolute amount. By 2030, Tumor targeted therapy and tumor immunotherapy will account for about 85.8% of China's tumor drug market. In recent years, the company has actively distributed the anti-tumor field through independent research and development, external introduction, cooperative development and other ways. At present, the company's two main cancer drugs under development are mehuatinib for the treatment of advanced non-small cell lung cancer and the world's first target for fr α ADC drugs for positive ovarian cancer. The company's key single arm clinical trial of ovarian cancer ADC drugs in the United States has reached the main research end point, the confirmed objective response rate is 32.4%, and the median response duration is 5.9 months. The clinical trial results show that it is well tolerated. It is expected to submit a biological product licensing application (BLA) in the United States in the first quarter of 2022. As the first in the world for fr α Mirvetuximab, an ADC candidate for positive ovarian cancer, is expected to be fr α Ovarian cancer patients with high expression and platinum resistance bring new precision treatment options. Meanwhile, the company is actively promoting the clinical preparation of the drug in China. At present, the first subject has been enrolled and administered.
Build an international medical beauty platform, and the company's medical beauty business can be expected in the future. The company focuses on the global high-end medical and American market and takes Sinclair, a wholly-owned subsidiary in the UK, as the global operation platform of medical and American business. Since the successful acquisition of Sinclair in 2018, the company has actively introduced high-tech new products and technologies in the field of medical beauty around the world through equity investment, external cooperation and other means. The existing product portfolio covers non-surgical mainstream medical beauty fields such as facial fillers, body shaping, wire embedding, energy source machinery, whitening and freckle removal, and has formed a comprehensive product cluster, It has realized the full layout of non-invasive + minimally invasive medical and American product pipeline. Especially in the field of medical beauty fillers, the company has a variety of commercial core products, including hyaluronic acid, collagen stimulant and botulinum toxin. Among them, girls' needle was listed and sold in China in August this year. By the end of the third quarter, the advance collection had reached 100 million yuan. With the reduction of epidemic restrictions, the company's medical and American business continues to show a rapid growth trend. Sinclair achieved an operating revenue of £ 53.06 million (including high tech in Spain) in the first three quarters of 2021 (about RMB 473 million), a year-on-year increase of 127.4%, of which Sinclair's own revenue increased by 79.24%, and its annual revenue is expected to reach the best level in history. In the future, as the company continues to accelerate the progress of clinical registration and market promotion of core medical and American products outside China, a variety of potential products are expected to be listed and sold at home and abroad before 2025, which will serve the company's global market Chemical medicine and beauty business brings new growth momentum.
R & D investment has maintained growth and created an R & D ecosystem in East China. In recent years, the company has continued to increase R & D investment. The year-on-year growth rate of R & D expenditure in 2018 and 2019 has reached more than 20%. Affected by the epidemic in 2020, the growth rate has declined. In the first three quarters of 2021, the company's R & D expenditure was 904 million yuan, basically the same as that in 2020, with a year-on-year growth rate of 8.9%. Since 2020, the company has gradually built an R & D ecosystem of Huadong Medicine Co.Ltd(000963) through investment, holding and incubation of a number of biotechnology companies with leading technologies at home and abroad: including Chongqing paijin biology, a polypeptide technology platform enterprise, Quanxin biology, an antibody company focusing on immune diseases, norling biology with ADC linker and coupling technology, Hunda biology, which has developed the whole product line of ADC drug toxin raw materials, has incubated, controlled Doyle biology, a multi antibody platform company, and invested in ashvattha, the only hydroxyl dendrimer platform capable of producing highly selective drugs in the world.
Investment suggestions:
We estimate that the total operating revenue of the company from 2021 to 2023 will be 35.733/39.541/43.363 billion yuan respectively, the net profit attributable to the parent company will be 23.61/31.76/3.629 billion yuan respectively, the corresponding EPS will be 1.35/1.81/2.07 yuan respectively, and the corresponding P / E of the current stock price will be 26.84/20.02/17.51 times. Taking into account the company's deep ploughing diabetes drug market for many years, the pipeline layout of related products is rich and comprehensive, which will benefit from the expansion of the market share of innovative mechanism diabetes drugs. At the same time, the company has actively invested in R & D, and now has the R & D capacity of all ADC parts, and the varieties under research in the innovative drug sector are progressing smoothly; Sinclair's annual revenue is expected to reach the best level in history, and the company's medical and American business can be expected in the future. Therefore, the company is given a "buy" rating for the first time.
Risk tips:
Pharmaceutical policy risk, the progress of new drug R & D and listing is less than expected, and the risk of product price reduction.
