Report summary
In this week’s weekly report, we discuss the business development of Heyuan biology.
Focusing on the difficulties of the industry, focusing on the vector development and production process and quality control technology, the company is one of the leading enterprises in the field of viral vector in China’s gene therapy industry. Based on cro / cdmo technology platform and GMP production platform, the company has formed 1) gene therapy vector development technology; 2) The two core technology clusters of gene therapy carrier production process and quality control technology provide new drug enterprises with cro / cdmo services covering a variety of mainstream therapies and throughout the drug R & D life cycle, and continue to grow into a comprehensive gene therapy comprehensive service platform. Cro services have grown steadily and cdmo business has developed rapidly. Ind-cmc has become a pillar business. Compared with cdmo business, gene therapy cro service stage focuses on preclinical and earlier research, and the service objects are mainly gene therapy new drug research and development and gene therapy pilot research. Cro services of the company can be divided into gene therapy vector development services and gene function research services. In recent years, as the research and development of new gene therapy drugs in China has increased, the number of clinical trials has continued to increase, driving the increase in the market demand for gene therapy cro, and the revenue scale of the company’s cro service business has also achieved rapid growth.
Gene therapy cdmo is mainly to provide customers with IND declaration, process development, amplification and verification of developed drugs, as well as clinical and commercial large-scale industrialized production services. Thanks to the accumulation of early-stage technology and project resource reserves, it has gradually grown into the company’s core business after the strategic layout of gene therapy cdmo. With the putting into use of Building 9 and building 8 (phase I) of the production base and the gradual improvement of capacity utilization in recent years, the number of cdmo orders of the company has increased rapidly. At present, there have been more than 90 cooperative cdmo projects, More than 50 cdmo projects are under implementation, covering a variety of gene therapy vectors, oncolytic viruses, car-t and other gene drugs.
The company ushered in the outbreak of newly signed orders in 2020, which is mainly due to the rapid rise of the company’s popularity due to the fact that the customer Yinuo microtubule line has obtained the clinical approval of FDA. As of August 2021, the outstanding amount of the company’s contract in hand has exceeded 300 million yuan. The company focuses on the ind-cmc phase project and the main advantage field is oncolytic virus with higher process difficulty. Among them, the oncolytic virus project cooperated with Yinuowei has carried out clinical phase II trials in China, the United States and Australia at the same time. It is the first one developed by a Chinese team and obtained the ind license of the United States, and the first one in China, the United States Oncolytic viral drugs in clinical trials in Australia and three places at the same time.
Market review: this week (February 28 – March 4), the biomedical sector rose 0.01%, outperforming the CSI 300 index by 1.69pct and the gem index by 3.76pct, ranking in the middle of the 30 CITIC primary industries. This week, the pharmaceutical circulation and chemical API sectors rose more, with an increase of 4.45% and 3.40% respectively; The medical services and medical devices sector fell.
Investment suggestions:
Recent view: the bottom trend of the sector is gradually clear. Considering that the relevant policy guidance on the fundamentals has not changed, it is still recommended to stick to the stocks with strong certainty of performance growth in the current annual report and the first quarterly report, grasp the valuation safety cushion, control the fluctuation risk and wait for the sector to pick up. In the short term, we should continue to suggest two ideas: no game policy, and on the premise that the policy is relatively immune, it is preferred:
1. Rapid growth, continuous improvement of performance and reasonable valuation range.
1) vaccine: Beijing Wantai Biological Pharmacy Enterprise Co.Ltd(603392) , Chongqing Zhifei Biological Products Co.Ltd(300122) ;
2) oral consumables: Yantai Zhenghai Bio-Tech Co.Ltd(300653) (active biological bone will be approved soon); Angel of the times (local invisible orthodontic leader)
3) life related upstream: Jenkem Technology Co.Ltd(688356) (PEG derivative), Nanjing Vazyme Biotech Co.Ltd(688105) (molecular enzyme), Acrobiosystems Co.Ltd(301080) (recombinant protein reagent).
2. Downside risk is limited, waiting for Fundamentals to catalyze.
1) blood products sector (leading enterprises are expected to benefit from the 14th five year plan of pulp stations in many provinces and further open the growth of pulp volume, including Beijing Tiantan Biological Products Corporation Limited(600161) and Hualan Biological Engineering Inc(002007) );
2) pharmacy sector ( Yifeng Pharmacy Chain Co.Ltd(603939) , Yixintang Pharmaceutical Group Co.Ltd(002727) , Lbx Pharmacy Chain Joint Stock Company(603883) , Dashenlin Pharmaceutical Group Co.Ltd(603233) , Shenzhen Mindray Bio-Medical Electronics Co.Ltd(300760) (short-term policy disturbance does not change long-term development logic),
3) auxiliary reproductive Service Leader: Jinxin reproductive;
4) China sublingual desensitization faucet Zhejiang Wolwo Bio-Pharmaceutical Co.Ltd(300357) .
Medium and long term perspective: pay attention to the invariance in change and look for opportunities with relative certainty. The impact of centralized mining continues to expand. The opportunity at the investment level lies in that the establishment of centralized mining is based on “multiple enterprises supply mutually replaceable varieties, and the production capacity can be supplied indefinitely in theory”. The basis for enterprises to maintain product price and profit space is the competition pattern, and the dynamic excellent competition pattern lies in the ability to continuously develop products and product iteration, which remains unchanged.
Start DRG / Dip reform in 2022. As a means of payment, the core role of DRGs is to achieve a balance between improving the efficiency and quality of diagnosis and treatment and ensuring the sustainability of medical insurance through refined medical insurance management. Hospitals that can not actively adapt to the rules of the game will be eliminated. The opportunity at the investment level lies in: excellent private medical institutions have paid more attention to cost control for a long time and have higher operation efficiency, More competitive advantage. The general trend of industrial development is: China Meheco Group Co.Ltd(600056) industrial manufacturing is upgraded, the competitiveness is continuously improved, and moves upstream in the global production value chain.
The competitiveness of upstream raw materials is prominent:
1) biological “core” – life science support industrial chain: domestic enterprises have developed rapidly, reagent quality has reached the international leading level, and their competitiveness has been continuously improved. Entering the overseas market through global comparative advantage, China benefits from domestic alternative logic, with high growth and great development potential.
2) IVD raw materials and consumables: covid-19 epidemic opens the window for the transfer of global IVD raw materials and consumables production and supply chain to China.
Accelerated internationalization process: with the breakthrough of key technologies of Chinese enterprises, not only the localization rate of the Chinese market is accelerating, but also some high-quality enterprises have the strength to compete with international giants.
1. Manufacturing upgrading of pharmaceutical industry and continuous improvement of Competitiveness:
Upstream: life science support industry chain, IVD raw materials and consumables, related targets: Nanjing Vazyme Biotech Co.Ltd(688105) , Sino Biological Inc(301047) , Acrobiosystems Co.Ltd(301080) ;
High end medical devices: endoscope and sequencer, related subjects: Shenzhen Mindray Bio-Medical Electronics Co.Ltd(300760) , Qingdao Novelbeam Technology Co.Ltd(688677) , Sonoscape Medical Corp(300633) , Aohua endoscope, Micro-Tech (Nanjing) Co.Ltd(688029) ; Huada Zhizao (IPO application in progress); International layout of medical devices, related subjects: Shenzhen Mindray Bio-Medical Electronics Co.Ltd(300760) ;
Others: Jenkem Technology Co.Ltd(688356) , Shandong Pharmaceutical Glass Co.Ltd(600529) .
2. Pay attention to the supply pattern: blood products, related subjects: Beijing Tiantan Biological Products Corporation Limited(600161) , Boya Bio-Pharmaceutical Group Co.Ltd(300294) and Pacific Shuanglin Bio-Pharmacy Co.Ltd(000403) ; Desensitization preparation, related subject matter: Zhejiang Wolwo Bio-Pharmaceutical Co.Ltd(300357) .
3. Private medical service sector with differentiated competition. Ophthalmology, Aier Eye Hospital Group Co.Ltd(300015) ; Dentistry, Topchoice Medical Co.Inc(600763) ; Assisted reproduction, Jinxin reproduction; Cancer treatment services, Hagia.
4. Pharmacy sector. Related objects: Yifeng Pharmacy Chain Co.Ltd(603939) , Dashenlin Pharmaceutical Group Co.Ltd(603233) , Lbx Pharmacy Chain Joint Stock Company(603883) and Yixintang Pharmaceutical Group Co.Ltd(002727) .
5. Aging and consumption upgrading.
Class II vaccine, related targets: Chongqing Zhifei Biological Products Co.Ltd(300122) , Beijing Wantai Biological Pharmacy Enterprise Co.Ltd(603392) and Changchun Bcht Biotechnology Co(688276) ; Invisible orthodontics, related subjects: Angel of the times;
Risk tips: policy risk, price risk, performance risk less than expected, product R & D risk, expansion progress risk less than expected, medical accident risk, uncertainty of overseas covid-19 virus epidemic, M & A integration risk less than expected, etc.
