Tonghua Dongbao Alert:Access China conference highlights

Reiterated guidance for 2017, expecting insulin glargine approval in 2H17Management maintained 20% sales growth and 30% net profit growthguidance for 2017. For approximately RMB400mn incremental revenue, 75%will be from insulin franchise, and the rest from derived products including teststrips and needles. THDB will file for insulin glargine production application inearly February, with approval expected in 2H17. On inventory destocking, theimpact on sales was approximately 2% in 2016, mainly from the distributorsend.

    Stable ASP, pipeline updatesTHDB registered only 1% overall price cut in 2016, with average tender price ofRMB45 for Ganshulin 30R. Additionally, 40R and 50R will be used to replace30R in provinces with extreme ASP competition, thereby protecting marketpresence in all provinces going forward. On insulin glargine, managementbelieve the competitive landscape to be unchanged and expect a smoothramp-up curve under its established sales team. For both insulin detemir andaspart, production approvals will be filed by YE17.

    Ramp-up of chronic disease management platformTHDB was among the first companies to invest in CDMP (chronic diseasemanagement platform). It has now over 100,000 registered patients and 6,000doctors under the mobile App. We highlight the total CapEx on CDMPamounted to RMB20mn, with RMB40-50mn additional investment expected in2017. The company intends to unlock long-term value creation via the mobileApp, with a target to reach 300k patients by YE17 and over 1mn patients in themedium-term.