Summary of Qianhong Pharmaceutical Conference Call Company Overview - **Company**: Qianhong Pharmaceutical - **Industry**: Pharmaceutical, specifically focusing on heparin raw materials and formulations Key Points and Arguments 1. **Impact of Gansu Price Decline**: From Q2 2023 to Q2 2024, the price of heparin in Gansu dropped from 50,000 yuan per 100 million units to 20,000 yuan, severely affecting the company's performance [2][3] 2. **Innovative Drug Pipeline**: Qianhong's innovative drug pipeline is entering a harvest phase, with two key projects: - Project 106 for acute ischemic stroke, expected peak sales of 4 billion yuan, with Phase III clinical trials starting in September 2024 and potential market entry in early 2027 [2][5] - Project 107 for refractory acute myeloid leukemia, noted for its efficacy and rapid development [2][5] 3. **Main Business Focus**: The primary business remains heparin raw materials and formulations, with a slowdown in Gansu market growth leading to price stabilization at historical lows [2][6] 4. **Financial Recovery from Trust Losses**: The company faced impairment losses due to trust product failures but is gradually recovering these funds, expecting to restore apparent profits by 2025 [2][7] 5. **Dividend Policy**: Average cash dividends from 2018 to 2023 were 135 million yuan, with an average dividend yield exceeding 3%, indicating a stable dividend policy [2][7] 6. **Gross Margin Recovery**: Qianhong's gross margin recovery is faster than competitors due to a low inventory policy, allowing the company to benefit from lower raw material costs [2][8] 7. **Market Challenges**: The low degree of industrialization in China's pig farming poses traceability challenges for heparin production. Qianhong has partnered with Muyuan to establish traceability for Gansu products, with production expected to start in July 2025 [4][9] 8. **Expected Profit for 2025**: Projected profit for 2025 is 440 million yuan, with 400 million yuan as regular profit after trust recovery adjustments [4][12] 9. **Valuation Estimates**: - Raw materials valued at 2 billion yuan (15x PE) - Formulations valued at 5 billion yuan (20x PE) - Innovative drug pipeline valued at 15 billion yuan, leading to a target market cap of 20 billion yuan [4][12] 10. **Growth in Enzyme Preparations**: The enzyme preparation business is expected to double in revenue from 2023 to 2024, although its overall contribution to profits remains limited [11] Additional Important Information - **Market Dynamics**: The heparin market is maturing with slow natural growth, and any changes in supply-demand dynamics could lead to price increases [6] - **Clinical Applications**: The market for acute ischemic stroke treatment is significant, with approximately 4.6 million new patients annually, growing at 8.7% per year [5] - **Regulatory Compliance**: Qianhong's products are participating in national procurement, enhancing market share despite previous setbacks in obtaining necessary approvals [10]