Cilta-cel 4Q23 sales were in line with expectations: Johnson & Johnson, a partner of Kingsley's subsidiary LEGN US (LEGN US), announced 4Q23 results before the market today. Among them, cilta-cel recorded sales of US$159 million (+5% month-on-month, +194% year-on-year), in line with our previous expectations ($162 million). Among them, the US sold 145 million (+4% month-on-month in 3Q23), and the rest of the world sold 13 million. Cilta-cel sold a total of $500 million throughout the year. At the results meeting, Johnson & Johnson reiterated the expectation that cilta-cel's 2024 sales will increase quarterly and peak at more than $5 billion, and stated that the Belgian site has begun the first batch of clinical production this month. Based on the 2023 sales results and subsequent pace of production capacity release, we slightly lowered cilta-cel's global sales by 3-5% to 2024/25 to $1.01 billion/$1.86 billion, of which the US contributed more than 85%, and the final sales peak is expected to reach US$6.4 billion. Additionally, the company completed an authorized DLL3 CAR-T transaction with Novartis earlier this month and will receive a $100 million down payment.

Amid fluctuations in the financing environment, the non-cell therapy business has shown strong resilience: the company continues to increase investment in new technology and new production capacity in the CDMO business, especially in GCT related businesses. We continue to be optimistic about the global GCT CDMO market size and the long-term growth potential of the company's order volume. The company will launch the Zhenjiang GMP plant in April 2024 for commercial production of antibody protein drugs and viral vectors. The annual production capacity of the viral vector production center can reach 42 batches. As the overseas financing environment improves marginally (charts 1 and 2) and plasmid and lentivirus business expansion progresses rapidly, we expect the revenue growth rate of the company's non-cellular therapy business to return to 15-20% in 2024-25 from around 10% in 2023.

Maintaining a buying rating: Based on Legendary Biotech's latest sales and licensing revenue forecasts and more cautious non-cellular therapy business growth forecasts, we adjusted the company's overall revenue forecast for 2023-25E -2%/+6%/-3% to $840M/1.33 billion/ $1.75 billion. Based on our latest SOTP valuation, the company's target price was lowered to HK$27.60 (previously HK$28.43), corresponding to a potential increase of 70% over the next 12 months. We believe: 1) The current investment sentiment in the CXO sector of Hong Kong stocks has yet to recover significantly. Compared with traditional biomacromolecules, the order growth prospects and long-term prosperity of GCT outsourcing services are highly visible, and there are currently large differences in expectations; 2) Legendary Biotech's current valuation of US$111 billion (48% of Kingsley's shares) and Cilta-cel's indications expansion and sales volume expectations are still not fully reflected in Kingsley's stock price. We continue to be optimistic about the company's scarcity in the Chinese pharmaceutical industry, the efficient collaboration between the four major businesses, and the potential for all sectors to achieve break-even within the next three years, and maintain the purchase rating.