3Q23 sales volume accelerated markedly: 3Q23 revenue of 347 million yuan (RMB, same below, +58.3% YoY, +39.7% QoQ), in line with market expectations. Among them, tetacept and vidicitol exceeded 180 million/150 million yuan respectively, which was significantly faster than the 2Q release of tetacept, and vidicetol continued to grow steadily. We expect that with the end of the short-term adjustment of the company's sales strategy, 4Q product sales are expected to continue the month-on-month growth trend. 1-3Q23 had sales expenses of 540 million yuan (+94.4% YoY), and the cost rate increased by 45.7 pcts to 70.2%, mainly due to the company's expanded sales scale, team expansion and academic promotion activities; R&D expenses amounted to 858 million yuan (+29.5% YoY), and the cost rate decreased by 4.7 ppts to 111.6%. The net loss for the 1-3Q was 1,061 million yuan (the loss for the same period last year was 715 million yuan), of which the 3Q loss narrowed slightly compared to the 2Q (333 million vs. 396 million). As of the end of 3Q23, the company had cash reserves of 790 million yuan and bank loan credit of 4.9 billion yuan. Cash should be abundant in 2024.

Overseas clinical/cooperation is progressing smoothly: Tetaxip's overseas phase III of SLE is progressing smoothly, and it is expected that 90 people will be enrolled in 4Q; the MG overseas phase III trial is under way, and IgA nephropathy and dry syndrome will be submitted to the FDA for phase III at the end of the year. Verdicitol's partner Seagen recently initiated enrolment for the first overseas phase III clinical trial (UC with first-line HER2 expression in combination with K drugs). According to public information, the trial will be initially completed in June 2026. We believe this development reflects Seagen's determination to continue developing this product at UC, and we are more optimistic about the stability of future collaboration. In the early pipeline, mesothelin ADC RC88 will submit IND to the FDA in 4Q, Claudin 18.2 ADC RC118 has completed phase I in Australia, and IL-15/IL-5 Rα fusion protein RC198 is climbing in phase I in Australia. Considering the highly differentiated layout of these products in terms of targets and indications, we are optimistic about the future of these varieties' subsequent shipping/BD.

Increased profit forecast and target price: 3Q performance strengthened our confidence in the company's quarterly release of core products after the sales strategy adjustments were completed, especially Tetasip. Therefore, we raised the company's 2023-25 revenue forecast to 1.21 billion /1.82 billion /2.76 billion yuan, of which the sales revenue forecast for Tetaxip was raised to 60 million/888 million/1.25 billion yuan. At the same time, we slightly raised our gross margin and sales and R&D expense forecasts based on 1-3Q financial data. According to the DCF model, we raised our target price to HK$59 (previously HK$52), with a potential increase of 32.4%. We continue to be firmly optimistic about the long-term market prospects of Tetaxip, Verdicetol and the company's subsequent products, and maintain our buying ratings.