On 2014 growth: 20% revenue growth highly likely
Management highlighted 2014 sales targets for individual drugs. Even at lower end of the range, the combined sales of top 10 drugs would be RMB2.6bn in 2014, representing 19% growth. This excludes contribution from all other smaller products. Additionally, management indicated that cost control was in place and expense lines should be inline with that of 2013.
Stock option program is likely to boost morals significantly
In September 2013, Shineway issued stock options to cover most senior and mid management, especially in sales. The entire number of shares represents about 2.6% of the total shares outstanding according to CFO, with an exercise price of HKD11.8. We remind investors that was the first option program in place since IPO about a decade ago. After more than 2 years of re-structuring and significant turnover on sales teams, this option program is likely to boost morals of the sales force in 2014. Additi onally, Shineway has set internal sales target for sales to cash out these options.
Other key take-aways: marching into high end market
Other key take-aways include 1) Shineway is marching into high end hospitals with several new drugs, as Chairman changed his mind-set to focus on both high end and low end markets; 2) Shineway is conducting large scale clinical studies with safety as endpoints for Shenmai and QKL, with an objective to acquire approvals for new dosage/formulations in order to gain premium pricing; 3) on pipeline, the JC capsule fo r influenza is likely to be a first-to- market generic; however, management declined to release its name. Its code does not sound like either Tamiflu or Namenda. Additionally, management clarified that its tenofovir has not ente red phase 3; 4) the stock option program is associated with 40m expenses in 2014, with 14m in 2013; 5) there is a 50bps spread for the 500m debt on balance sheet, which is positive to Shineway and shareholders; 6) Shenmai and Shuxueling are likely to face pricing pressure in the incoming tenders.