Guiding for 30% net profit growth in 2018

Management guided for revenue growth of 20% and net profit growth of 30% in2018. On insulin glargine, production approval is expected in 4Q18 while reachingRMB300-400m sales in 2019 is likely. For insulin needles, the company is aimingat over 30% growth. Management continues to expect margin expansion, drivenby improving product mix and SG&A ratio.

Insulin glargine to reach RMB300-400m sales in 2019

Management believes insulin glargine is likely to reach RMB300-400m sales in2019, and over RMB2bn sales in 2020. Market penetration of insulin glarginewill be driven by existing sales team. According to management, the coveragenetwork for 40R already reached 1000 hospitals in 2017, on track to exceed2018 target of 2000 hospitals. Similarly for insulin glargine, coverage can reach1000 hospitals by YE20, likely growing comparable with Ganli within 3-4 yearsof launch. Though hospitals usually work with only 2 suppliers for each drug,management expects maximum of 20-30% hospitals to be affected with regardsto promoting insulin glargine.

Margins and other key updates

Management expects continued margin expansion given higher gross marginsof third generation insulin products, though substantial volume growth maytake time. In addition, the company plans to utilize existing sales team forpromoting insulin glargine, leading to lower SG&A ratio going forward. Sales perrepresentative ranged widely at RMB3-10m in 2017, and the company would becautious in incremental hiring in 2018 given expansion of the team in 2017.

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