Heyuan Biology (688238)
Cell gene therapy (CGT) has great potential, and the upstream cdmo industry is expected to usher in explosive growth
CGT can overcome the limitations of traditional small molecule and macromolecular antibody drugs in protein level regulation, and can realize the upgrading of existing therapies (such as car-t for acute lymphoblastic leukemia) or the treatment of “drug-free” diseases (such as the huge demand for the treatment of rare diseases) by means of gene expression, silencing or in vitro transformation at the molecular level. In principle, CGT belongs to a new generation of therapies. In recent years, investment and financing in the field of CGT have increased rapidly, and a large number of drugs under research have entered the clinic. As of October 2021, 1890 CGT projects have been under research (less than 400 in 2015 from preclinical to registration). With complex technical mechanism, high threshold process development and large-scale production, strict regulatory requirements and limited industrialization experience, CGT products are more dependent on cdmo, and its outsourcing penetration rate is more than 65% (35% of traditional biological agents). As the core, the production of virus vectors involves very complex processes, extremely difficult and long preparation cycle. It is expected that the outsourcing rate of CGT will remain high in the future.
It is estimated that in 2025, the global cgtcdmo market will reach US $10.1 billion (five-year compound 35%) and the Chinese market will reach US $1.7 billion (five-year compound 51%). As CXO giants such as Lonza and Wuxi Apptec Co.Ltd(603259) have relatively large production capacity and perfect GMP standards, it is expected that the dividends of the rapid development of cdmo market in the future will be shared by major giants.
The company has been grinding a sword for ten years, focusing on the difficulties of the industry and the development of carrier technology
The company started gene therapy cro business as early as 13 years ago, and built and improved the basic technology platform required for early research and development of gene therapy through basic and pilot research. Since then, taking advantage of the development of the industry, actively build cdmo process team and build GMP production capacity, layout the whole industrial chain business of CGT R & D and production, and form advanced production process development, quality control technology development and production and manufacturing level, as well as large-scale industrialization ability, so as to comprehensively ensure product quality and service ability, which is in the leading position in the industry.
Technological upgrading, capacity upgrading, economies of scale, and rapid growth in operating revenue and profits. Thanks to the first mover advantage of R & D and technology and the continuous improvement of project experience, the company’s order volume has increased year by year. Up to now, the company has implemented more than 100 projects with an amount of more than 650 million yuan; In recent years, the company’s revenue has maintained rapid growth. In 21 years, the company’s revenue reached 255 million yuan, with a three-year compound growth rate of nearly 80%.
Abundant orders on hand, rapid growth and strong driving force.
As of August 21, the company has 42 projects in hand, with orders of more than 300 million yuan, covering many fields such as oncolytic virus, AAV and Lv. Thanks to the accumulation of early-stage technology and the reserve of project resources, the company’s cdmo business, especially ind-cmc, has developed rapidly in recent years. Among them, the oncolytic virus projects serving Yinuowei and funuojian have entered phase II clinic, which will contribute to rich commercial order revenue in the future. In addition, thanks to the early layout of cro service business, in-depth grasp of the development direction of cutting-edge technologies and processes, and continuous accumulation of know-how, the company is expected to form a virtuous cycle of mutual transformation of cro and cdmo projects. At present, many cro and preclinical projects will become the potential source of rapid growth of the company in the future
For the first time, give a “buy” rating. The company is a pioneer in the cdmo industry of cell gene therapy in China. In recent ten years, it has developed and built a high-quality gene therapy carrier development, production process and quality control platform. Its business coverage is comprehensive. In recent years, the number of projects has expanded rapidly and there are abundant orders on hand. It is expected to achieve rapid development by taking the east wind of industry development. It is estimated that the company’s revenue in 22 / 23 / 24 years will be 352 / 611 / 957 million yuan and the net profit attributable to the parent company will be 85 / 114 / 241 million yuan respectively. Considering that the company’s profit in 22 years is temporarily affected by production capacity and the high prospect of cgtcdmo industry, the target PE for 22 years will be 130 times according to peg = 2 and the corresponding target price will be 30 yuan. It will be covered for the first time and rated as “buy”.
Risk tip: the customer expansion is less than expected, the order volume is less than expected, the development of new products is less than expected, and the price drop is more than expected.
