Key points of investment
We believe Rongchang Biotech is a leading company in the field of local ADC and self-protection. Verdicitumab continues to develop many clinical trials in combination with immunotherapy at home and abroad, and it is expected that product performance growth and valuation flexibility will continue to open up.
Taytacip is expected to continue to meet a large number of unmet needs in the field of self-immunity. Mature clinical data have been read out one after another, and it is hoped that the company's international position will be further strengthened. We are optimistic about the company's high performance growth potential and the progress of overseas clinical trials or cooperation, driven by both verdicitol and tetracip, and covered and given a “buy” rating for the first time.
Highlights: Outstanding independent research and development capabilities. Based on the company's innovative technology platform, ADC and recombinant proteins have developed the first local ADC drug, verdicitumab. Differentiated UC and GC indications gave it a rapid lead. Many important indications, such as low expression of HER2 and use in combination with PD-1, are progressing steadily and have more potential. With excellent clinical data and leading layout in self-defense fields such as NMOSD, RA, IgAN, SS, and GmG, the world's first FIC's innovative fusion protein Titacip has great potential to become a leader in the field of self-immunity. We are optimistic about the company's core product deployment trends and investment opportunities as global competitiveness continues to improve.
Verdicital: UC and GC lead the market in differentiation, PD-1 combined use is worth looking forward to 1) Differentiation: UC and GC lead the market, and health insurance and guidelines help launch. Verdicitol is the first HER2-ADC to be marketed in China, with significant differentiation advantages. 2) Combined use: The potential of immunotherapy combo is worth looking forward to. The company's verdicital has several clinical trials in combination with immunotherapy in the middle to late stages of development. Safety and efficacy data for HER2 positive and HER2 low expression gastric cancer patients and LA/muc in combination with treprilimab have been well verified, and it is expected that subsequent commercialization will help improve competitiveness. 3) Cooperation: Join hands with ADC leader Seagen to actively advance global clinical trials. According to Insight data, verdicitril+K combination 1L UC has already conducted phase III clinical trials, and 2L HER2+UC is also in critical phase II clinical trials. The partnership with Seagen (on December 14, 2023, Pfizer announced that it had completed the acquisition of all of Seagen's common shares with cash of $229 per share, for a total price of about US$43 billion) reflects that the company's ADC technology platform has been recognized, and we look forward to further overseas commercialization breakthroughs. 4) According to our estimates, domestic sales of verdicitrile are expected to peak at 1,579 billion yuan.
Tetasepam: FIC dual target, free from large space
1) The SLE pattern is good and there is plenty of room for growth. Only two biopharmaceuticals, Rongchang Biotech Titacip and GSK Beyulizumab, have been approved for marketing in SLE in China. Based on the superior clinical efficacy and safety data of Titacip (not head-to-head data), as well as a huge patient base and unmet clinical treatment needs, it is expected to dominate the domestic and even international markets. 2) Pipeline: 5 domestic phase III projects, a large number of unmet demand, and strong deliverability. SLE has been approved for marketing and medical insurance. Rheumatoid arthritis (phase III) has submitted an NDA, and multiple lines of neuromyelitis optic (NMOSD), IgA nephritis (IgAN), Sjogne syndrome (SS), and myasthenia gravis (GmG) are in phase III clinical trials in China. SLE indications are in MRCT clinical phase III, US iGaN is in clinical phase II, and phase III clinical trials such as iGaN indications and primary dry syndrome have also been approved by the FDA. 3) According to our estimates, Taitaxip's domestic sales peak is expected to reach 5.648 billion yuan.
RC28: VEGF/FGF dual targeting, pursuing higher efficiency
1) Advantages: RC28 can simultaneously block VEGF and FGF family angiogenic factors, thereby inhibiting abnormal blood vessel growth more effectively. The ergonomic design of RC28 can effectively prolong its half-life, reduce the frequency of administration, and reduce patient discomfort. 2) Market: The domestic anti-VEGF drug market may exceed 4 billion, and it is expected that it will continue to expand. 3) According to our estimates, the peak domestic sales of RC28 is expected to reach 1,375 billion yuan.
Profit forecasting and valuation
The current value of the core product DCF is 39.830 billion yuan: According to the DCF valuation model, we calculate that the reasonable valuation of the core products of Vedicital, Taitacip, and RC28 is estimated to be 23.483 billion yuan, and the overseas licensing of verdicital and titacip (the company Taitacip is already in phase III clinical trials overseas, but considering the higher overseas sales costs, we assume that Taitacip also sells overseas in an authorized manner) and sales share correspond to a reasonable valuation of 16.347 billion yuan, with a total reasonable market value of 39.83 billion yuan. The sensitivity test results showed The reasonable market capitalization range is 371-43 billion yuan. The corresponding target price was 68.14-79.05 yuan/share, which covered and gave a “buy” rating for the first time.
Risk warning
Product development failure/sales falling short of expectations risk, regulatory risk, calculation risk.