Core views:
The company released its three-quarter report for 2023: revenue for the first three quarters of 2023 was 769 million yuan (+35%), mainly contributed by Taitasip and RC48; net profit to mother - $1,031 million, net profit after deducting net profit from non-parent - $1,061 million. The year-on-year increase in losses was mainly due to continued increase in commercialization capacity building and R&D investment: sales, R&D, and management expenses for the first three quarters were 540 million yuan (+94%), 243 million yuan (+51%), and 858 million yuan (+30%), respectively. Looking at a single quarter, operating income was 347 million yuan (+58% YoY, +37% month-on-month), and net profit to mother was 327 million yuan. The results were generally in line with expectations.
The marketing team is basically perfect, and market entry is promoted efficiently. According to the 2023 Interim Report, as of June 30, 2023, the company has formed a commercial autoimmune and oncology team of about 600 people each, and each has been admitted to more than 600 hospitals. The dosage of verdicitumab was added to treat locally advanced or metastatic UC with HER2 expression and continued after inclusion in the national medical insurance catalogue.
Research and development continues, and many registered clinical trials are progressing smoothly. The company invested 858 million yuan in R&D in the first three quarters (+30% year over year), and is progressing smoothly in the research pipeline. Tetracip: ① SLE: The fully approved materials were submitted to the CDE at the end of 2022, and the international registration phase III was approved by the FDA; ② RA: domestic phase III clinical results were positive and NDA was declared; ③ MG: US phase III approved IND; ④ PSS and IgA nephropathy are in the domestic phase III clinical group. At the same time, the company is actively promoting RC48's frontline treatment potential, such as first-line or perioperative treatment in the UC and GC fields in combination with PD-1 monoclonal antibodies and chemotherapy, and new adjuvant therapies in the BC field. The company has also incubated various novel drugs such as mesothelin ADC, c-Met ADC, and IL-15/IL-15Rα fusion protein, and continues to consolidate the innovative product matrix.
Profit forecasting and investment advice. The company's revenue for 2023-2025 is estimated to be $1,225 million, $2,087 billion, and $3.142 billion respectively. Using the risk-adjusted DCF valuation method, the reasonable value of the company's A shares is about $80.62 per share and the reasonable value of H shares is about HK$54.00, giving A/H shares a “buy” rating, respectively.
Risk warning. Clinical progress has fallen short of expectations, medical insurance price cuts have exceeded expectations, market competition has exceeded expectations, etc.