Description of the event
On October 30, 2023, Rongchang Biotech released its three-quarter report: In 2023, the company achieved operating income of 347 million yuan (+58.28% year-on-year) and net profit of 327 million yuan (-199 million yuan in the same period last year). The first three quarters of 2023 achieved operating income of 769 million yuan (+35.08% year-on-year) and net profit of 1,031 million yuan (-688 million yuan in the same period last year).
Incident comments
Revenue has maintained steady growth, and core products have been released smoothly. In 2023, the company achieved revenue of 347 million yuan in the third quarter (+58.28% year-on-year) and achieved revenue of 769 million yuan (+35.08% year-on-year) in the first three quarters of 2023. Revenue continued to grow rapidly, mainly due to the continued increase in sales of the company's two core products, titacip and vidicetumab. In 2023, the company achieved net profit of 327 million yuan (-199 million yuan in the same period last year), and net profit for the first three quarters was -1,031 million yuan (-688 million yuan in the same period last year). Losses increased year-on-year, mainly due to the sharp increase in R&D expenses due to the continued advancement of the company's subsequent R&D pipeline and continued investment in sales expenses for core product commercialization.
As of June 30, 2022, the company has set up a sales team of around 1,200 people. The commercial team has basically been set up, and subsequent sales expenses are expected to be controlled.
R&D investment continues to increase, and the pipeline is progressing smoothly. In the third quarter of 2023, the company's R&D investment was 318 million yuan (+49.16% year-on-year), R&D investment accounted for 91.49% of revenue, and R&D investment for the first three quarters of 2023 was 858 million yuan (+29.5% year-on-year), and R&D efforts continued to increase.
RC18: Four phase III clinical trials for myasthenia gravis (MG), primary dryness syndrome (PSS), IgA nephropathy, and neuromyelitis optic spectrum disease (NMOSD) are progressing normally in China. In September 2023, RC18's application for a new indication for rheumatoid arthritis (RA) was accepted by the NMPA and is expected to be approved by the end of 2023 or 2024. Overseas, global multi-center phase III clinical trials for SLE are progressing smoothly; phase III clinical studies have been approved by the FDA for MG, PSS, and IgA nephropathy indications.
RC48: Phase III clinical trials with treprilizumab combined with chemotherapy 1L for HER2-positive UC, phase II clinical trials with PD-1 for perioperative muscular-invasive bladder cancer (MIBC), and phase I/II clinical trials with gemcitabine bladder perfusion to treat non-muscle-invasive bladder cancer (NMIBC) have all been initiated; phase II/III clinical application studies for HER2-positive GCs in combination with PD-1 and chemotherapy or Hercetine 1L have been approved for HER2-positive GC; 2 Low Clinical recruitment for phase III expressing BC is progressing smoothly.
Furthermore, RC28 has entered phase III clinical trials for wet senile macular degeneration (WaMD) and diabetic macular edema (DME); clinical trials of candidate products such as RC88 (MSLN ADC), RC108 (c-Met ADC), and RC118 (Claudin18.2 ADC) are well underway.
Profit forecast and investment recommendations: The company's net profit for 2023-2025 is expected to be -976 million yuan, -542 million yuan and -686 million yuan respectively, corresponding to EPS of -1.79, -1.00 and -1.26 yuan, respectively, maintaining the “buy” rating.
Risk warning
1. Product commercialization falls short of anticipated risks;
2. R&D progress falls short of anticipated risks;
3. Policy risks in the innovative pharmaceutical industry.