The Zhitong Finance App learned that according to a research report released by Tianfeng Securities, Fuhong Hanlin (02696)'s total revenue for 2023-2025 is estimated to be RMB 50.26/60.57/7.522 billion, respectively, with net profit to mother of $519/6.59/793 million, with a target price of HK$19.43. The company's performance has entered a period of rapid growth, and the first half of 2023 has achieved a historic break-even balance. Considering that subsequent companies' innovation pipeline and overseas layout are expected to usher in a harvest period: (1) differentiated PD-1 slulilizumab in the innovative drug sector has significant curative advantages in small cell lung cancer indications, and the potential for subsequent commercialization of potential indications is worth looking forward to; (2) it has many varieties with differentiated potential in the research pipeline and enters the ADC circuit quickly and efficiently; (3) biosimilar drugs and innovative drugs are expected to be launched intensively in 2024-2025, which is optimistic about the company's development.

Tianfeng Securities's main views are as follows:

Fuhong Hanlin was the first domestic company to deploy biosimilar drugs.

With the launch and rapid release of differentiated PD-1 slulimab, the company's innovation and transformation continued to achieve profit for the first time, maintaining a rapid volume trend in the third quarter: 2023Q1-3 achieved revenue of 3,928 billion yuan (yoy +84.0%), and net profit of 408 million yuan.

Leading by biosimilars, obvious first-mover advantage, international quality

As of December 2023, Fuhong Hanlin has 4 marketed biosimilar drugs: rituximab, trastuzumab, adalimumab, and bevacizumab. Among them, trastuzumab continued to be released with the advantage of first-mover and differentiated dosage forms. As of August 2023, trastuzumab had already benefited about 140,000 patients in China and achieved revenue of 2,014 billion yuan (yoy +55.00%) in 2023Q1-3.

Innovation and transformation continue to advance, and differentiated PD-1 slulimab has significant advantages

The company continues to promote innovation and transformation with the idea of “differentiation targeting that does not meet clinical needs”: in the field of small-cell lung cancer, the ASTRUM-005 study showed that the same target (PD-1/PD-L1) single-agent non-head-to-head optimal data in 1LES-SCLC, so after the indication was marketed, the 2023Q1-3 achieved sales revenue of about 870 million yuan; in terms of research indications: PD-1 achieved sales revenue of about 870 million yuan; in terms of research indications: PD-1 is first-line small-cell lung cancer and adjuvant gastric cancer in the perioperative period Both adjuvant and first-line colorectal cancer indications It is expected to be the world's first immunotherapy.

Focus on differentiation and advance efficiently in the research pipeline

Fuhong Hanlin is efficiently promoting innovation and transformation, and has many potential innovative varieties in the research pipeline. Among them, HLX22 is expected to change the first-line standard treatment for HER2 positive gastric cancer, and has great potential for commercialization. In addition, the company introduced the Yilian Biotech ADC technology platform. Two potential FIC/BICADCs, including HLX42 (EGFRADC) and HLX43 (PD-L1ADC), have shown good potential efficacy, which is expected to drive the company's long-term performance growth.

We have mature overseas experience, and the results of internationalization will soon be realized

At the beginning of the company's establishment, “globalization” was an important part of the company's development strategy. As of November 2023, trastuzumab has been approved for marketing in more than 40 countries and regions, including China, the United Kingdom, Switzerland, Australia, Singapore, Argentina, and Saudi Arabia, making it the largest number of domestically produced biosimilar drugs in approved marketing countries and regions. (1) In terms of biosimilar products going overseas: With the potential of pertuzumab as the world's first imitation, in 2022, Organon's approval set a new record for the highest number of external biosimilar licenses in the world. Pertuzumab plus desumab is expected to be declared for BLA in 2024. (2) In terms of innovative drugs going overseas: Slulizumab 1LES-SCLC indications are expected to be approved for marketing in Europe in 2024, and we expect the company's overseas revenue to gradually expand from 2024.

Risk warning: exchange rate risk, market risk, R&D risk, operating risk, measured subjective risk.