Fosun Pharmaceuticals acquired 74% equity of Gland74 to build an international platform for preparations

Today, the company announced that it signed the Third Amendment with the existing shareholders and related parties of India Gland, adjusting the transaction to: the company invested no more than US $1091.3 million to acquire about 74% of Gland's equity, including the contingent consideration paid for the listing and sale of Gland Enoxaparin in the United States, which did not exceed US $25 million. The termination date of this transaction is extended to October 3, 2017.
It is expected that the transaction will be completed in the near future. Gland is expected to start consolidation in the fourth quarter, which will increase the company's performance. According to relevant policies on foreign investment in India, this transaction adjustment plan does not need to be submitted to the FIPB and CCEA for review and approval. According to the agreement, the parties will conduct the delivery on the 17th day after the completion of the delivery preconditions. Gland is expected to consolidate in the fourth quarter of 2017. Gland's revenue in fiscal year 2017 (2016Q2-2017Q1) was about 1.492 billion yuan, up 9.88% year on year; The net profit was about 414 million yuan, up 31.92% year on year. We expect that Gland's net profit for the whole year (natural year) of 2017 is expected to reach 500 million yuan. In the future, with the continuous approval and listing of new varieties, it is expected to maintain a growth rate of about 25%.
Gland is a high-level pharmaceutical export enterprise and has never received a warning letter from FDA. Gland has rich product reserves to ensure rapid growth in the future, and the heavy weight enoxaparin is applying for listing in the United States. Gland has a rich product reserve, including 100 ANDA varieties under review and 71 ANDA varieties under preparation. We do not expect to take into account the net profit of enoxaparin of 500 million in 2017 (natural year). If enoxaparin is approved, the performance will exceed expectations. There are 4 manufacturers of enoxaparin in the United States. In the first year of the launch of Teva biological analogues in November 2014, the sales revenue exceeded 1.3 billion dollars. Gland Enoxaparin is applying for listing in the United States. We conservatively predict that it is expected to obtain a market share of more than US $100 million in the first year of listing, with a net profit of US $15 million to US $20 million. Gland's performance growth is expected to accelerate significantly.
Gland is good at drug registration, declaration and sales in regulatory markets mainly in the United States, and will become an important international drug production, manufacturing and registration platform of the company. We believe that the company and Gland's products have strong synergistic and complementary effects. In the future, the company's products (especially McAb and other varieties) are expected to enter the global market with the help of Gland's mature system; At the same time, Gland's products certified by FDA and other institutions are expected to expand the domestic market through the company's channels.
Profit forecast and investment suggestions: we estimate that the net profit attributable to the parent company in 2017-2019 will be 3.211 billion yuan, 3.959 billion yuan and 4.665 billion yuan respectively, with year-on-year growth of 14.45%, 23.29% and 17.83%; Non net profits deducted were 2.411 billion yuan, 3.159 billion yuan and 3.865 billion yuan, up 15.22%, 31.02% and 22.35% year on year respectively. The main business of the company has maintained stable and rapid growth. The research and development investment in monoclonal antibody biological analogues has entered the cashing period for seven years. Through the acquisition of Gland, it has entered the standardized national market, and the valuation is expected to continue to increase. At present, the corresponding overall valuation in 2018 is 19.5 times, with 24 times of non valuation deducted. We will deduct 30 times of PE in 2018, corresponding to the target price of 37.98 yuan, and maintain the "buy" rating.