occurrences
The company announced 2023 results: In 2023, the company achieved operating revenue of US$840 million (+34%), of which the non-cell therapy segment had external revenue of US$555 million (+9%); of these, the cell therapy sector had external revenue of US$285 million (+144%), including CARVYKTI's annual sales share of US$500 million and milestone payments of US$35 million.
In 2023, the company had an adjusted net loss of $298 million (loss of $359 million for the same period in 2022).
reviews
The commercial volume of CARVYKTI is in line with expectations, and the frontline treatment position is expected to advance smoothly. The cell therapy segment generated revenue of US$285 million in 2023, adjusted gross profit of US$144 million, and adjusted loss of US$395 million (loss of US$422 million for the same period in 2022). Europe and the US have extended the CARVYKTI label to frontline treatment status for multiple myeloma. We expect approval in the near future. The European CHMP gave a positive opinion on February 23, 2024. The company presented the positive patient-reported outcomes of phase 3 of the CARTITUDE-4 study at the 2023 ASH conference, while the CARTITUDE-5 and CARTITUDE-6 trials are progressing smoothly. The company quickly expanded production capacity through in-house construction and the search for external suppliers to ensure the commercialization and clinical supply of CARVYKTI products.
The non-cellular therapy sector is growing steadily, and the life sciences business is showing strong resilience.
(1) Kingsley Life Sciences Division: In 2023, revenue of US$413 million (+15%), adjusted gross profit margin of 54.4% (-1pct), adjusted net profit of 78.3 million dollars (+19%). The sector's revenue increased in 2023, and we believe it is mainly due to successful commercial operations in the European and American markets to meet the growing needs of customers, especially the molecular biology, protein and peptide businesses. The adjusted increase in operating profit is also, in our opinion, positively affected by the increase in operational efficiency.
(2) Kingsley Booming Biotech: In 2023, revenue was US$110 million (-12%), adjusted gross profit margin of 18.1% (-16pcts), and adjusted net loss was approximately US$29.7 million, an increase over the same period in 2022. The sector's revenue declined in 2023. We believe that it was mainly affected by global biomedical investment and financing, downward competition in market demand intensified, and also affected by fluctuations in the RMB exchange rate and the commissioning of new plants. The increase in losses, we believe, is mainly due to increased operating costs and continued investment in the global market. Boombio received its first 2000L large-scale production order in 2024. We believe that with the gradual improvement of global biomedical investment and financing in the future, Bobobio is expected to resume growth.
(3) Best J: In 2023, revenue was USD 43 million (+11%), adjusted gross profit margin of 38.5% (-5pcts), and adjusted operating profit was approximately USD 2.0 million (-16.7%).
We believe that the increase in revenue in the sector in 2023 is mainly due to the recovery in the feed market, the increase in demand for feed enzymes, and the continued increase in the competitiveness of the company's industrial enzyme products market. We believe that Baisjie's revenue growth rate exceeds the market growth rate (revenue growth of 22.6% in fixed exchange rates), and future profitability is expected to gradually increase as revenue continues to grow.
valuations
We use the segmented valuation method to value Kingsley:
(1) Non-cell therapy sector: We expect revenue of approximately US$650 million in 2024, a year-on-year growth rate of 14%.
(i) Life sciences sector: We expect revenue for the life sciences sector to be USD 480 million in 2024, a year-on-year growth rate of 17%, and adjusted operating profit of USD 92 million, a year-on-year growth rate of 17%. We gave the sector 18 times PE, and the corresponding equity value was US$1,649 million.
(ii) Boombio: We expect Boombio to earn $110 million in 2024, the same as compared to the previous year. Referring to comparable companies, we gave 9 times PS, and the corresponding shareholding ratio had an equity value of US$696 million.
(iii) Best Jay: We expect Baisjie's revenue of US$54 million in 2024, with a year-on-year growth rate of 25%. We use the PS valuation method. Referring to comparable companies, we give 6 times PS, and the equity value corresponding to the shareholding ratio is US$301 million.
(2) Cell therapy segment: We expect the cell therapy segment to generate US$8.2 billion in 2024. We used a fair equity valuation method. As of the close of trading on March 12, 2024, Legend Biotech had a market value of 11.9 billion US dollars on the NASDAQ exchange. The company held 47.86% of Legendary Biotech's shares, and the equity value corresponding to the shareholding ratio was US$5.695 billion.
In summary, we believe that the total equity valuation of Kingsley Biotech is US$8.289 billion, which is equivalent to HK$64.7 billion based on the company's total share capital of 2.123 billion shares, corresponding to a target price of HK$30.45, which is superior to the market rating.
risks
Geopolitical risks, legendary biotechnology commercialization progress falling short of expectations, legendary biotechnology production capacity building falling short of expectations, legendary biotechnology clinical trial failure risk, booming biological production capacity expansion falling short of expectations, risk of declining global biomedical investment and financing, and risk of falling demand in the gene synthesis industry.