Incident: The company released its 23rd annual report, achieving revenue of US$840 million (YOY +34.2%) and achieving an adjusted net loss of approximately US$298 million (year-on-year loss reduction). Among them, the cell therapy business generated revenue of US$285 million (YOY +144.2%), and the product Cilta-cel entered the marketing period.
Comment:
The life sciences business is growing steadily. In '23, the company's life sciences business achieved revenue of approximately US$413 million (YOY +14.5%), adjusted gross margin of 54.4%, and adjusted operating profit of US$78 million (YOY +19.4%). Despite weak global demand and market slowing in 2023, the company's life sciences business continued to grow steadily, and the adjusted operating profit margin increased by 2pp to 21% year over year. The company expects the business to maintain a steady growth rate of 15-20% in 24 years.
CDMO business revenue declined slightly. Biopharmaceutical CDMO achieved revenue of US$109 million (YOY -12%) and adjusted gross profit of US$0.2 billion (YOY -53.7%) in 2012, mainly affected by capacity utilization, service prices, inventory and contract asset impairment. However, the company has always maintained high-quality development, helping customers obtain 13 IND approvals for protein antibody drugs and 18 CGT IND approvals in '23, and is expected to start the first commercial production in '24, and will strive to keep the CDMO business revenue flat.
Cilta-cel sells well. The legendary biological cell therapy product CILTA-cel, a 23-year subsidiary, achieved sales of $500 million, an increase of 273% over the previous year. Kingsley received a total sales share and licensing revenue of US$285 million (YOY +144.2%), and Cilta-cel sales entered a period of rapid growth. The company is actively promoting frontline clinical trials of CILTA-CEL and continues to expand production capacity, which is expected to support 10,000 users by the end of 2025. By the end of the year, Legendary Biotech had $1.3 billion in cash and equivalents, deposits, and short-term investments to support the company's clinical operations and capacity expansion.
Profit forecasting, valuation and ratings: Considering the rapid increase in product sales of Legend Biotech, we raised 24-25 year net profit to -1.06 billion US dollars (previous value was -2.27/ -0.07 billion US dollars) and added 26-year net profit to 381 million US dollars, maintaining the “buy” rating.
Risk warning: Capacity expansion falls short of expectations, product sales fall short of expectations, industry regulatory risks.