Oncology products have become a leading revenue growth driver
- NBP is one of CSPC’s major nervous system disease products, and its sales have remained steady since the price cut in 2020. The lower price significantly improved its penetration in lower-tier cities, which helped offset the price cut impact.
- CSPC’s oncology products have become a leading revenue growth driver with a resilient growth rate despite a high base of Rmb7.7bn in 2021. Mitoxantrone liposome, a new oncology drug, was approved in Jan 2022. Since mitoxantron is a broad antitumor drug, and its liposome formulation has shown increased efficacy and reduced cardiotoxicity, we believe it will see rapid growth, and we maintain our estimation for mitoxantron liposome’s peak sales to exceed Rmb2bn. Duvelisib and BPI-1178 are expected to be approved this year, which will also contribute to revenue growth in the coming years.
- CSPC has established a leading position in nano-formulation. Amphotericin B liposome is expected to be approved in 2023. We are optimistic about the market potential of CSPC’s approved Anfulike (amphotericin B cholesteryl sulfate complex for injection) and amphotericn B liposome. We believe they will lead revenue growth in the antiinfective product sector. CSPC is also leveraging its existing nanotechnology platform to carry out research on mRNA vaccines. CSPC’s COVID-19 mRNA vaccine is expected to be approved in 2022. We recommend a follow-up to its clinical results readout.
- Given CSPC’s deep innovative pipeline portfolio, which will create new revenue growth momentum, along with steady growth of its major existing drugs, we adjusted our 2022E, 2023E and 2024E EPS forecasts to Rmb0.507, 0.559, 0.611, respectively, similar to our previous projections. We reiterate our ADD rating with a new target price of 15.13, based on 25.5x 2022PER (CSPC’s historical average PER).
Sales of nervous system disease products remain steady
NBP (butylphthalide soft capsules and butylphthalide and sodium chloride injection) is one of CSPC’s major products. Sales of NBP have remained steady since the price cut through NRDL price negotiations in Dec, 2020. Owing to a 55.6% price cut for NBP capsules and a 51.3% price cut for NBP injections, its penetration into lower-tier cities significantly improved, so in 2021, NBP revenue still reached about Rmb6.5bn (26% of total revenue), similar to that in 2020. In 1Q22, sales of NBP saw high single-digit growth qoq. However, we expect sales of NBP to have been affected by the COVID-19 outbreak and city lockdowns. Therefore, we decreased our NBP 2022E sales forecast by 30%, and we expect 2022E NBP sales to remain at a similar level to that in 2021. The patent for NBP injections expired in Jun 2022, and the patent for NBP capsules will expire in Dec 2023. Because butylphthalide has achieved annual sales of Rmb6.5bn, several pharmaceutical companies are planning to produce generic versions. So far, no reference drug for butyphthalide has been released by the Center for Drug Evaluation (CDE). We estimate that it will take about two years for a generic drug to pass the quality and efficacy consistency evaluation after the CDE releases a reference drug for butyphalide in the future. Thus, we don’t expect generic drug competition for NBP in the next three years to be a significant threat.