Description of the event
On February 24, 2024, Rongchang Biotech released the 2023 annual results report: The company achieved revenue of 1,083 billion yuan (+40.26% year-on-year) for the full year of 2023, and net profit attributable to owners of the parent company was -1,540 million yuan (-999 million yuan for the same period last year).
Incident comments
The release of core innovative drug products went smoothly, but net profit was still negative due to high cost pressure. In 2023, the company achieved revenue of 1,083 billion yuan, an increase of 40.26% over the previous year, mainly due to the rapid sales volume of the company's two core commercial products, taitacip and verdicitumab. In 2023, the company achieved net profit of 1.54 billion yuan (same period last year - 999 million yuan) and net profit deducted from non-return to mother of 1,572 billion yuan (-1,117 billion yuan in the same period last year), which is a further increase compared to last year's loss. Mainly due to the continuous advancement of the company's new drug research and development pipeline, many innovative drugs are in the critical testing and research stage, and R&D investment is still at a high level. At the same time, in order to expand the market, the company commercialized a lot of team building expenses and academic promotion activities.
As a result, the company had a net loss in 2023, after deducting losses before and after excluding non-recurring profit and loss.
The pipeline is progressing smoothly, and the FDA has approved three phase III clinical studies with Tetracip. Four phase III clinical trials for myasthenia gravis (MG), primary dry syndrome (PSS), IgA nephropathy, and optic neuromyelitis spectrum disease (NMOSD) are progressing normally in China. In September 2023, RC18's new application 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, and the three major indications of MG, PSS, and IgA nephropathy have all obtained FDA approval to conduct global phase III clinical studies within 2023. In addition, in 2023, data on phase IIb of SLE, phase II of PSS, and phase III clinical trials of RA were released, respectively, and the potential of the product was further verified.
Phase III clinical trials of verdicitumab plus treprilizumab plus chemotherapy 1L for HER2-positive UC, phase II clinical trials with PD-1 for perioperative muscle-invasive bladder cancer (MIBC), and phase I/II clinical trials with gemcitabine bladder infusion to treat non-muscle-invasive bladder cancer (NMIBC) have all been carried out; phase II/III clinical applications for combination with PD-1 and chemotherapy or combination of PD-1 and hesetin 1L for HER2-positive GC have been approved by the CDE; Targeting low HER2 Phase III clinical recruitment for BC expression is progressing smoothly.
Clinical development of other products is also progressing smoothly: 1) RC28 has entered phase III clinical trials for wet senile macular degeneration (wAMd) and diabetic macular edema (DME); 2) RC88, an ADC candidate product targeting mesothelin, was approved by the US for phase II clinical trials and fast track qualification in December 2023; 3) candidate products such as RC108 (c-Met ADC) and RC118 (Claudin18.2 ADC) have all entered phase II clinical trials.
Profit forecast and investment advice: The company's net profit for 2024-2025 is estimated to be -875 million yuan and -190 million yuan respectively, corresponding to EPS of -1.61 and -0.35 yuan, respectively, maintaining a “buy” rating.
Risk warning
1. Commercialization falls short of the expected risk;
2. The R&D progress falls short of the expected risk;
3. Market competition increases risk;
4. Policy risks in the innovative pharmaceutical industry.