occurrences
Chi-Med announced 2023 full-year results: 2023 revenue of US$840 million, +97% YoY, of which comprehensive revenue from the oncology/immunization business was US$530 million, +223% YoY, including comprehensive revenue of US$160 million (+32%) from product sales, confirmed down payments and milestone revenue of US$310 million, and revenue of other R&D services of $52.4 million. Revenue costs of $380 million (+24%); R&D expenses of $300 million (-22%); and sales and management expenses of $130 million (largely flat). Net profit attributable to mother was $100 million, compared to -360 million US dollars in the same period last year. Overall it was in line with expectations. As of December 31, 2023, we had $890 million in cash on hand, and sufficient cash reserves.
reviews
Fruquintinib (FRUZAQLA) was successfully marketed in the US and has been recommended by the NCCN colon cancer guidelines. The company reached an overseas licensing agreement with Takeda for fruquintinib in early 2023.
Within 2023, the company and Takeda completed marketing declarations for fruquintinib in the US, Europe, and Japan, and were successfully approved in the US on November 8, 2023. Relying on Hutchison Pharmaceuticals's global supply chain and Takeda's extensive experience in commercializing drugs in the field of cancer and gastrointestinal medicine overseas, fruquintinib was first prescribed within 48 hours of approval in the US. It was included in the NCCN guidelines 1 week after marketing, with market sales of $15.1 million during the reporting period. Based on the positive results of regulatory approval and commercialization in the US, we expect fruquintinib to be approved and successfully commercialized in Europe and Japan in 2024. At the same time, considering the convenience, better safety and survival benefits of oral monotherapy, we believe that fruquintinib may become one of the important treatments for 3+ colorectal cancer internationally.
Savotinib's global registered SAVANNAH study expects to submit an NDA overseas by the end of 2024, and global cooperation with AstraZeneca and differentiated indications will enhance the competitiveness of savotinib products. The SAVANNAH study's new cohort for 2/3L osimitinib refractory, MET+ non-small cell lung cancer completed the enrollment of subjects in February 2024, with potential accelerated approval in the US. According to the company's guidelines, SAVANNAH Research expects to submit a new drug marketing application to the FDA at the end of 2024, so that sevolitinib is expected to become the company's second new drug to be marketed overseas. According to the Insight database, in the global development of MET inhibitors, sevolotinib differentiates the layout of EGFR mutations and MET+ non-small cell lung cancer indications, with a comprehensive layout and the fastest development progress. We believe that global cooperation and differentiated indications between sevolitinib and AstraZeneca will help enhance the competitive advantage of sevolitinib in China and overseas markets.
Solepinib was accepted by the NDA in China in January 2024 and is being prepared for a phase IB/II clinical trial in the US. Solepinib (SYK inhibitor) was successfully clinically successful in phase III clinical trials of ITP indications in China, reached all major and secondary clinical endpoints, and successfully received the NDA and priority review in China in January 2024. According to IQVIA analysis, there were about 260,000 newly diagnosed and followed up ITP patients in China in 2022, and more than 67% received 2L+ treatment. Solepinib is the BIC variety among SYK inhibitors. Early data showed a sustained remission rate similar to the current 2L standard treatment TPO-RA, and there was no risk of blood clots from TPO-RA in terms of mechanism of action. Therefore, we believe that ITP treatment in China has huge unmet clinical needs and considerable commercial opportunities, and the company's solepinib is expected to become an important treatment for ITP treatment. Overseas, solepinib has been approved by the US IND and is being prepared for phase IB/II clinical trials. Based on the company's existing domestic and overseas development capabilities, we expect the company to complete early clinical research on ITP indications in the US as soon as 2024.
The company is moving towards the 2025 sustainable development goals, reducing R&D costs, and achieving global commercialization through cooperation.
At the end of 2022, the company announced a new strategy to prioritize pipelines to control R&D costs while actively seeking international commercial cooperation. So far, the company's new strategy has paid off. R&D expenses in 2023 were $302 million, -22% year-on-year, supporting more than 15 registered R&D projects; of these, R&D expenses within China were 195 million US dollars (-10%), and R&D expenses outside of China were 107 million US dollars (-37%). In 2023, the overseas partnership with Takeda's fruquintinib resulted in $7.2 million in consolidated revenue from product sales, $312 million in down payments and milestone revenue recognition, and additional $400 million in cash. We expect that in 2024-25, overseas sales of furoquintinib will continue to drive the company's revenue growth, and overall R&D will maintain the trend of cost control, and continue to advance towards the goal of sustainable development in 2025.
Profit forecasting and valuation
Considering the positive overseas performance of fruquintinib at the end of 2023, as well as adjustments such as Takeda's down payment and milestone confirmation time, fruquintinib 2L gastric cancer indication approval time, Andilice registration path, and RMB exchange rate against the US dollar, we adjusted the 2024-26 revenue forecast to 637/789/1058 million dollars (pre-2024-25 value: 783/1071 million US dollars), -24/+24/ +34% year-on-year, with comprehensive product revenue of 227/385/616 million dollars, respectively 70/ +60%; 2024-26 net profit to mother was -217/-107/+51 million dollars (pre-2024-25 value: -7/+168 million dollars).
We used the DCF model and cash flow forecast for the 2024-2032 fiscal year to value the company, giving a weighted average capital cost of 9.2% and a sustainable growth rate of 3.0%. Based on the exchange rate assumption of USD:HDK=1:7.83, the target price was calculated to be 43.27HKD/share (previous value: 45.09HKD/share, adjusted: -4.0%).
risks
New drug development risk, new drug approval risk, risk of commercialization falling short of expectations, risk of technology iteration, risk associated with partners, risk of ongoing losses, and risk of not being able to pay cash dividends in the short term.