Medicine and science and technology are the two main lines this year.
In terms of science and technology, in addition to the recently popular SORA concept, which has driven AI**, the first large model of the communications industry released by Huawei at the Mobile World Expo in Barcelona on February 26, 2024 has also set off a new round of scientific and technological revolution.
The large model is a 5G-A related product, and the understanding of 5G-A can be simply compared to the process from 4G to 5G, where 5G-A has higher speed and lower latency than 5G.
This has also aroused widespread attention from the market to related industry chain companies such as China Information Technology, Huali Chuangtong, Zhenlei Technology, etc. The pharmaceutical sector has also been in the near future. For example, Tasly and Tailong Pharmaceutical in the field of traditional Chinese medicine, Changshan Pharmaceutical, Allist, Sunshine Guojian in the field of innovative drugs, etc. We believe that there are two main reasons for the recent ** of the pharmaceutical sector: on the one hand, due to the large number of ** sectors in the early stage, the valuation of the sector is at the bottom of history; On the other hand, the recent positive news of the pharmaceutical industry has been frequent.
For the good of medicine, on the policy side, the state has issued a series of relevant documents in order to encourage the "real innovation" of drugs, while the benchmark pharmaceutical companies are "striking iron still needs their own hardness", and the innovation and research and development of domestic pharmaceutical companies are progressing rapidly.
From the perspective of the catalysis of innovative drugs going overseas, the data shows that as of December 24, 2023, 75 domestic new drugs have gone overseas, with a total transaction value of 39 billion US dollars, a record high.
It can be said that the quantity and quality of domestic innovative drug research and development have been continuously improved, and the commercial ceiling has been further opened.
In the field of innovative drugs, the hottest track at present is the best drug.
What is interesting is that companies with the concept of first-class drugs, such as Huadong Medicine, Changshan Pharmaceutical, Shuanglu Pharmaceutical, etc., are all chemical drug companies, and in the market, there are also traditional Chinese medicine companies actively laying out first-class drug-related concept tracks, and good progress has been made. Through the investigation, we found that there are only two Chinese medicine companies in the market with the concept of ** medicine: Zhongsheng Pharmaceutical and Huasen Pharmaceutical. 
Although only one drug is approved for use in obese or overweight patients, its weight loss effect is limited, and due to the adverse reactions caused by its mechanism of action, such as oily stool and steatorrhea, the clinical application of orlistat is limited.
In other words, although Huasen Pharmaceutical has relevant concepts, from the current news, its listing and research progress products have little to do with the current GLP-1 drugs that are hot on the top drug track.
Zhongsheng Pharmaceutical is different, it is the only traditional Chinese medicine company that really has the potential of first-class medicine, and has received a total of 80 surveys from 78 institutions in the past year.
So, what is GLP-1?
GLP-1 is an incretin whose receptor is widely distributed in the human body. When GLP-1 binds to its receptors, it can stimulate the secretion of insulin, inhibit the secretion of glucagon, promote glucose metabolism, reduce blood sugar, increase satiety, and reduce appetite.
Compared with orlistat, GLP-1 drugs have a stronger weight loss effect and no reduction in safety.
Zhongsheng Pharmaceutical's product under development, RAY1225 injection, is a long-acting GLP-1 drug, a GLP-1 GIP dual-target drug, with global independent intellectual property rights, and is clinically intended for patients with type 2 diabetes and overweight and obesity.
At present, the company has recently completed the enrollment of the first subject in two phase clinical trials for patients with overweight** and type 2 diabetes.
In preclinical studies, RAY1225 has demonstrated good efficacy and safety in test animals, and its pharmacokinetic properties are significantly better than those of the same target compound, tirpatide. Tirpatide is one of Eli Lilly's products, which has been approved by the FDA for marketing, and its weight reduction effect is more than 20%, and the phase 3 clinical trial of China's ** indication has also been successful.
Although the progress of tirpatide R&D and marketing is leading, the better pharmacokinetic properties of RAY1225 will mean that once it is successfully developed, it will quickly replace tirpatide in China, which is like in the field of mobile communication technology, 4G meets 5G, which can only be "hanged".
In addition, from the perspective of the market structure, although the competition in the domestic GLP-1 drug market is fierce, Huadong Medicine, Gan & Lee Pharmaceutical, Tonghua Dongbao and other companies have laid out, but from the scale of domestic diabetic patients and obese patients, RAY1225 is expected to contribute higher revenue to the company if it is successfully listed.
In fact, in addition to RAY1225 injection, Zhongsheng Pharmaceutical Co., Ltd. has innovative chemical drugs for influenzaOnladivir tabletsIt's also a highlight.
At present, the phase III clinical trial enrollment of onladivir tablets has been completed, and the results show that onladivir tablets can significantly shorten the time to remission of influenza symptoms and fever, and it is more effective against influenza A virus than the current high-selling peer competitor oseltamivir capsules.
In the first half of 2023, the sales of oseltamivir in the three major terminals of public medical institutions, physical institutions, and online pharmacies will be 594.6 billion yuan. Benchmarking oseltamivir, once onladivir tablets are listed, the market space is promising.
As a traditional Chinese medicine company, we also need to look at the performance of the traditional Chinese medicine products offered by the owners of Zhongsheng Medicine.
In the traditional Chinese medicine sector, we mainly look at the first major variety of compound thrombotong, which is used for fundus vascular diseases such as ophthalmic retinal vein occlusion and cardiovascular diseases such as angina.
According to the data, in 2021, the sales revenue of compound thrombotong in the three major terminals of public medical institutions, physical pharmacies and online pharmacies will be about 90.4 billion yuan, with a share of 81 in domestic public medical institutions78%, with a market share of 96 in brick-and-mortar pharmacies01%；In 2022, the sales revenue will be 97.5 billion.
In the first half of 2023, affected by centralized procurement, product sales will be 44.6 billion yuan, although a slight decline year-on-year, but the magnitude is not large.
We believe that the impact of centralized procurement on the company's products is small, and the company will take advantage of the opportunity of winning the bid in the future to strive for more market share, and it is expected that the sales of compound thrombotong will remain stable in 2023.
In the long run, with the increase of the elderly population, the company's compound thrombotong series products are expected to maintain stable growth.
Finally, let's take a look at the performance of Zhongsheng Pharmaceutical.
In 2020, affected by the mask factor, the company's performance suffered a waterloo, and then after adjustment, the performance has grown steadily in recent years. In 2022, the company achieved revenue of 267.6 billion, achieving a net profit of 322.1 billion, surpassing the peak level in 2019.
Although from the perspective of profit quality, Zhongsheng Pharmaceutical's operating cash flow is more dangerous in the first three quarters of 2022 and 2023, less than 100 million, far lower than 622.8 billion. This is mainly due to the increase in the company's notes receivable and accounts receivable. Data shows that in 2022 alone, the company's notes receivable increased by nearly 500 million yuan compared with last year.
However, it is more optimistic that, on the one hand, the notes receivable have a clear payment date, amount and payment method, and enterprises can choose to transfer them to the bank for discounting before the maturity of the notes to reduce the financial burden; On the other hand, Zhongsheng Pharmaceutical's accounts receivable turnover ratio has shown an overall improvement trend in recent years, and its ability to recover cash has been continuously improved.
To sum up, Zhongsheng Pharmaceutical has developed steadily in recent years, actively carried out drug research and development innovation, and the progress is gratifying, and it is expected to usher in a Davis double click of performance and valuation in the future.