Matters:
On February 28, 2024, Chi-Med announced its 2023 full-year results. Total revenue of $838 million (+102% at a fixed exchange rate), of which the combined revenue from the oncology/immunization business was $528.6 million (+228%).
Cash and cash equivalents and short-term investments totaled $886.3 million at the end of 2023.
Commentary:
Listed products are growing steadily, and commercialization strength is strong. Sales of the company's listed products grew steadily, with sales of US$213.6 million (+35%) for the full year of 2023. Fruquintinib's sales volume was US$107.5 million (+22%), and its share in the third-tier colorectal cancer market increased steadily. It reached 47% in the second quarter of 2023, showing strong competitiveness. Sevotinib's sales volume of $46.1 million (+19%) was covered by health insurance in early 2023, further improving patient accessibility, and sales increased 19% despite a 38% price cut. With sales of $43.9 million (+43%), surufatinib's market share in neuroendocrine tumors has surpassed Soltan and Phenittal, ranking second, reaching 21% in the fourth quarter of 2023. At present, the company has established a commercial team of more than 900 people in China. The number of hospitals and dual-channel pharmacies covered continues to increase, and the commercial operation capacity has been further enhanced.
Fruquintinib successfully went overseas, and sales in the US exceeded expectations. On November 9, 2023, fruquintinib was approved by the US FDA for third-line treatment of colorectal cancer patients. It became the first targeted therapy approved by the US to treat metastatic colorectal cancer in more than ten years, and can be used regardless of the patient's biomarker status or previous treatment type. The FDA's approval this time passed the priority review process, more than 20 days earlier than the target review date of the original prescription drug user payment law, making up for unmet clinical needs overseas. Fruquintinib is expected to gain a competitive advantage due to its good safety and outstanding efficacy. Sales in less than two months after launch reached US$15.1 million, and the release rate exceeded expectations. Fruquintinib's marketing applications in Europe and Japan are under review and are expected to be approved this year.
Clinical research and development continues to accelerate, and the second model is expected to go overseas next year. The overseas registration study of sevolitinib completed the enrollment of all patients in February 2024. It is expected that overseas marketing applications will be submitted by the end of this year to fill the gap in the treatment of drug-resistant NSCLC with Teresa. Domestically, the supplemental marketing application for fruquintinib for second-line gastric cancer was accepted in April 2023. MPFs combined with paclitaxel and paclitaxel were 5.6 and 2.7 months, showing significant clinical benefits. The registered clinical registration of fruquintinib and cindilizumab for the treatment of endometrial cancer has been completed and will be declared for marketing at the beginning of this year. The marketing application for the company's fourth self-developed innovative drug, solepinib, was accepted in January 2024. Over the next 3 years, the company will have more than 15 potential new drug marketing applications and supplementary application applications, and research and development will continue to make new progress, demonstrating the company's efficient clinical execution.
Investment advice: Optimistic about the company's strong R&D strength, clinical execution and commercialization promotion capabilities. Based on product development progress and sales, we expect the company's revenue for 2024-2026 to be US$6.42, 8.01, and US$922 million (6.28 and 7.43 before 24-25), respectively, with year-on-year growth of -23.4%, 24.8%, and 15.0%; net profit to mother of -1.00, 0.3, and 119 million US dollars (24-25 years ago -0.31 and 0.2). Based on DCF model estimates, the company was given an overall valuation of HK$30.8 billion, and the corresponding target price was HK$35.38, maintaining the “Recommended” rating.
Risk warning: Clinical progress falls short of expectations, commercialization performance falls short of expectations, competitive landscape changes, and foreign cooperation falls short of expectations.