Multiple heavyweights are lagging behind their peers, can OCUMENSION-B(01477) successfully turn losses around?

During the intensive disclosure period of the annual report, the improvement in performance did not bring significant upward momentum to OCUMENSION-B (01477). As of the close on April 16th, the company's stock price has declined for two consecutive days, closing at 4.78 Hong Kong dollars, with a market value already below the HK$40 billion "gem" threshold. Public information shows that OCUMENSION-B is a Chinese ophthalmic pharmaceutical platform company, dedicated to identifying, developing, and commercializing innovative or best-in-class ophthalmic therapies. Not only is it positioned in the "golden track" of ophthalmology, but it also has over thirty drugs in its product pipeline, with several already entering commercialization, driving nearly 70% of the company's annual revenue growth. Although the company is still incurring losses, the management has provided a clear timetable in a recent performance meeting: it is expected to achieve operating level profitability in 2025, financial statement profitability in 2026, and positive cash flow in 2027. At the point when the company is about to achieve a balance between profits and losses, the question arises: what is the true value of OCUMENSION-B and is it worth entering the market early? This will be analyzed in the following section. Significant improvement in losses, core products included in medical insurance Recently, OCUMENSION-B released its 2024 performance, with an annual revenue of approximately 417 million yuan, a year-on-year increase of 69.38%; a gross profit of 225 million yuan, an increase of 55.9%; a loss of 268 million yuan for the year, a decrease of 29.36%; and an adjusted loss of 184 million yuan, further narrowing by 24.5%. During the reporting period, the company's core product Optinol (fluorouracil vitreous implant) and main products, including Eurin (sodium hyaluronate eye drops), Amedin (imeecidine eye drops), and Sulidad (latanocystein eye drops), all maintained rapid growth. The introduction of multiple eye drop products from Alcon Group also contributed to revenue growth, collectively driving the company's comprehensive gross profit margin to approximately 53.9%. As of now, OCUMENSION-B already has 34 drug resources covering all major eye front and back segments, with 21 products in the commercial sales stage, 3 products in phase III clinical trials, and 2 products in the commercial registration stage, making it one of the innovative drug companies with the highest number of eye drugs in the III clinical stage and market registration stage in China. Among them, the company's core product Optinol (0.18 mg fluorouracil vitreous implant) has been formally approved by the National Medical Insurance Administration and included in the national medical insurance directory. Optinol is a fourth-generation high-efficiency sustained-release fluorouracil vitreous implant, belonging to a long-acting safe anti-inflammatory formula for treating chronic non-infectious uveitis, and is also the first and only ultra-long-acting sustained-release implant in the field of uveitis worldwide. The innovative drug, the potent and highly selective histamine H-1 receptor antagonist OT-1001 (trade name: Zhiweitai), was approved for marketing in September 2024. It has already been approved by the Food and Drug Administration in the United States for use in patients aged two and above. This drug had already been on the market in the United States and received positive feedback. In March 2019, the company obtained exclusive development and commercialization rights for OT-1001 in the Greater China region from Nicox and extended this right to eleven Southeast Asian countries in March 2020. The rapid progress of the product pipeline and rapid development pipeline can be attributed to the company's dual-drive strategy of "self-development + introduction". In August 2024, OCUMENSION-B reached an agreement with the global ophthalmic giant Alcon, obtaining the rights related to the research, development, manufacturing, and commercialization of Alcon's 8 products in China, including 7 mature products and 1 innovative drug in the clinical development stage, further enriching the product portfolio. In a recent performance meeting, the company's management also indicated that the company's internationalization strategy will mainly rely on partners and will not independently carry out international business. It was revealed that in July 2024, OCUMENSION-B successfully started the first batch production of 0.3% sodium hyaluronate eye drops (0.4ml: 1.2mg) for commercial purposes, and it is expected that the core product "Optinol" will begin production in mid-2025 at the Suzhou factory. Currently, the company's commercial coverage network already includes over 20,000 hospitals nationwide, with 2765 tertiary hospitals and a commercial team of over 270 employees. Heavyweight product layout, lagging commercial progress? In recent years, as the aging population increases and the use of electronic products deepens, eye health issues have evolved from simple vision problems to national, all-age health issues. The "2024 National Eye Health Annual Report" shows that the incidence of dry eye syndrome in the 18-35 age group has reached 63%, an increase of 400% compared to ten years ago, with prolonged use of electronic devices making dry eye syndrome a common problem among the younger generation; the detection rate of glaucoma in the 35-45 age group increases by 15% annually, and eye diseases in the middle-aged and elderly population are becoming younger. In addition to the huge potential market size, the ophthalmology industry is also favored in the investment market due to its consumer medical attributes, with a wide audience and a smaller impact from medical insurance payments often able to effectively support the long-term growth prospects of ophthalmic enterprises. However, recent performance indicates that the listed companies in various ophthalmic sub-sectors have shown differentiation in performance. In the first half of 2024, Huaxia Eye Hospital Group, Chengdu Bright Eye Hospital Group, and Liaoning He Eye Hospital Group all experienced significant declines in net profit, with decreases of 25.15%, 81.56%, and 69.29% respectively, with only Aier Eye Hospital Group achieving revenue and profit growth. Specifically for OCUMENSION-B, as an ophthalmic drug company, its valuation not only needs to consider the weakening overall demand and price reductions of the industry, but also depends on the market prospects and competitiveness of its core products in the pipeline. Currently, OCUMENSION-B's product pipeline covers uveitis, retinal diseases, refractive correction, dry eye syndrome, glaucoma, and keratitis.In the field of ophthalmic surgery and postoperative inflammation, the most attention is undoubtedly focused on OT-702 (Bogu Jing, Apixip eye intravitreal injection solution). Data shows that in the 2023 TOP20 ranking of ophthalmic drugs, Apixip eye intravitreal injection solution ranks in the top three, with annual sales exceeding 1 billion yuan.It was understood that Avasop was known as the "eye drug king", not only has it consistently ranked in the top 10 best-selling drugs globally, but it has also dominated the entire ophthalmic anti-VEGF drug market since 2015, becoming an important player in the treatment of retinal diseases such as wet age-related macular degeneration (nAMD), diabetic retinopathy (DR), diabetic macular edema (DME). However, with the expiration of Avasop's patents, the competition from generic drugs is increasing. In December 2023, Qilu Pharmaceutical had its Avasop biosimilar approved for sale, becoming the first domestic product, and in the same month, Faricimab was also approved domestically, with a treatment cycle extended to once every 4 months as compared to Avasop, significantly reducing injection frequency and becoming a strong competitor. It was disclosed that OT-702 (Boyingjing, Avasop intravitreal injection solution) from Ocumension/OT-702 (Bosifinger ), a hydrochloride atropine eye drop) has also attracted attention due to its effectiveness in slowing down the progression of myopia in adolescents, with the drug scheduled to complete Phase III clinical trials in 2026. However, the road to market for this drug has been bumpy in China, with only Shenyang Xingqi Pharmaceutical's atropine eye drops approved domestically, and in the first half of 2024, Shenyang Xingqi Pharmaceutical's revenue from eye drops, including atropine eye drops, totaled 512 million RMB, far below market expectations. In addition, Ocumension's OT-202 (tyrosine kinase inhibitor) is a drug for dry eye syndrome, with Phase III clinical trials expected to begin in 2025; while OT-502 (DEXYCU, dexamethasone implant) is used to treat postoperative inflammation after cataract surgery and is expected to be commercially approved this year; and OT-301 (NCX 470) for the treatment of glaucoma and high eye pressure is expected to complete Phase III clinical trials this year. It is worth noting that in addition to the slightly lagging commercialization progress and fierce market competition of its two core drugs, group purchasing will also become an important factor affecting the company's performance. Currently, the company's products sodium hyaluronate eye drops, levofloxacin eye drops, and moxifloxacin hydrochloride eye drops have been included in national procurement, and OT-303 Odissay (brimonidine tartrate eye drops) also meets the threshold for group purchasing and may be included in the future. Overall, with the intensive commercialization of its products, Ocumension/OT-702 has the potential to improve its performance and bring positive news to its stock price, but the commercialization progress of the company's key products lags behind its peers, and it is expected to face intense competition after going public. Looking ahead, market investors should focus on the approval and marketing of Avasop, group purchasing of ophthalmic drugs, and the timing of the company's turnaround in performance.