2021 revenues in line with our forecast, net profit beats
　　Ocumension Therapeutics announced 2021 results: Revenue rose 328.6% YoY to Rmb56.15mn, which is in line with our forecast. The net profit attributable to shareholders was -Rmb260mn, and adjusted net profit was -Rmb187mn, which beats our forecasts due to the one-time gains related to the transactions with EyePoint and Alimera.
　　Trends to watch
　　Pipeline continues to be enriched, R&D spending up. As of December, 2021, the firm had 20 drug assets in the portfolio. In December 2021, the on-site clinical review of OT-401 ended, and the firm expects it will be on sale in 2022. A Real World Study of OT-101 launched in October, 2021, and the first patient enrollment for phase III clinical trials in the US, UK and Chinese mainland are complete. In August, 2021, the firm said it had entered an asset purchase agreement with Novartis to acquire the drugs Emadine and Betoptic S in the Chinese mainland. Adjusted R&D spending in 2021 rose 27.9% YoY to Rmb455mn.
　　Enriched pipeline leads to progress in sales, channel expansion. The firm reported gross hospital end-sales of Rmb900mn （unaudited）， representing a 466.5% YoY increase. The products went to 1,024 hospitals in China （incl. 59 Grade III hospitals）。 In our view, Emadine and Betoptic S enrich the portfolio, and may further help the firm to rapidly broaden sales channels to public hospitals and Grade III hospitals.
　　Suzhou factory complete; to start production. The firm’s 2021 gross profit rose 224.8% to Rmb36.93mn. The new Suzhou factory was inaugurated in October 2021 and has commenced trial production. The factory is 30,000sqm and its production capacity is expected to produce 455mn doses a year, meeting China, US and EU standards of Good Manufacturing Practice of Medical Products. The new plant will reduce production costs and increase GM of the firm’s products, in our view.
　　Financials and valuation
　　As COVID-19 may delay the progress of clinical trials and evaluation of new drugs, we lower our revenue forecast for 2022 by 22.5% to Rmb171mn, and for 2023 by 16.2% to Rmb397bn. But, as expenses may decline with the effects of scale, we ease our forecast for net losses in 2022 from Rmb438mn to Rmb181mn, and for 2023 from Rmb429mn to Rmb135mn. Considering the potential approval of new drugs in the pipeline, we maintain OUTPERFORM and our DCF-based TP of HK$16.60, offering 72.7% upside from the current price.
　　Risks
　　New launch disappoints; sales of drug candidates disappoint.