Key points of investment

R&D investment continues to increase. The company released its 2023 performance report. In 2023, the company expects to achieve revenue of 1,211,500 yuan (+154.92%, same increase below), mainly technical service revenue; expected loss of 801 million yuan, up 39.03% year on year; after deducting unanticipated losses of 813 million yuan, loss increased 25.97% year on year. The company expects the increase in losses mainly due to the entry of various products into clinical practice and core products entering key registered clinical trials, and R&D expenses continue to increase. R&D expenses are expected to be 620 million yuan (+36.50%) in 2023.

GR1501 is expected to become the first domestically produced IL-17A monoclonal antibody with excellent clinical efficacy. The GR1501 (IL-17A) moderate to severe plaque psoriasis NDA was accepted in March 2023, and domestic companies are leading the way in research progress with the same target and are expected to be approved in 2024; the radial spondyloarthritis indication has submitted an NDA and was accepted in January 2024, and is expected to be approved in 2025. The positive results of the GR1501 moderate to severe plaque psoriasis indication phase III were published in the authoritative international dermatology journal BJD in February 2024. The results showed that GR1501 had remarkable efficacy, durability, and good safety. In terms of efficacy, patients achieved rapid efficacy 2 weeks after using GR1501. The proportion of participants in the FAS group who reached PASI 75 in 12 weeks was 90.7% (placebo 8.6%), and the proportion of subjects who reached PGA0/1 in 12 weeks was 74.4% (placebo 3.6%); the PASI 90 response rate in week 12 was 74.4%, and PGA0/1 and PASI 75/90 responses continued until the 52nd week; the PASI 75 response rate at week 52 was 96.5%, and the PASI90 response rate was 84.1 %, PGA 0/1 response rate 83.7%; 52nd week recurrence rate 0.4%, low recurrence rate.

In terms of safety, very common adverse reactions (≥ 10%) were observed clinically. The most commonly reported adverse drug reactions were upper respiratory tract infections and reactions at the injection site, and there was no reactivation of hepatitis B tuberculosis; at the same time, there were fewer upper respiratory infections and hyperlipidemia compared to IL-17A drugs already marketed in China (non-head-to-head comparison).

The research pipeline is being promoted efficiently, and positive progress is being made in the fields of self-prevention and infection. In the field of self-immunization, GR1802 (IL-4Rα) has 4 clinical indications. Among them, phase III clinical trials for moderate to severe atopic dermatitis have been initiated, chronic spontaneous urticaria and chronic sinusitis with nasal polyps have all completed phase II clinical enrollment. Allergic rhinitis was approved for clinical use in February 2024; GR2002 (TSLP dual antibody) has been approved for clinical use. In the field of infection, GR1801 (RABV double antibody) rabies passive immunization completed phase III enrollment; GR2001 (tetanus toxin) tetanus passive immunization completed phase II clinical enrollment; and GR2102 (RSV) to prevent respiratory syncytial virus infection was clinically approved in February 2024.

Investment suggestions: The company is advancing efficiently in the research pipeline, leading the progress of core products; forward-looking commercial construction is expected to start the first year of commercialization in 2024. We maintain our original profit forecast. We expect the company's revenue for 2024-2025 to be 90/309 million yuan, respectively, an increase of 243% over the previous year. Maintain a “buy-B” rating.

Risk warning: industry policy risk, risk of R&D progress falling short of expectations, risk of uncertainty about product launch under development, risk of falling short of expectations in commercialization, etc.