FY23 product revenue is strong, and high 1H24 growth can be expected: 2023 revenue of 1,076 billion yuan (+40.2% year over year), of which product revenue was 1,049 million yuan (+42.1%), while vidicital and taitacip recorded 53 million/5.2 billion yuan (+56%/+32%) respectively. Net loss of 1,511 billion yuan (+51.3% year-on-year increase). As of the end of 2023, the company's bank balance and cash were $727 million, and bank credit was approximately $4 billion. Sales expenses of 775 million yuan (+75.9%), expense ratio of 72% (+15 percentage points); R&D expenses of 1,306 million yuan (+33.0%). Entering 2024, the company expects annual product sales to increase by more than 50% (that is, more than 1.57 billion yuan), and the climbing curve for the fourth quarter will be relatively flat. Considering that 1H23 has a low revenue base due to factors such as sales strategy adjustments, and that commercial team expansion and training optimization have basically been completed, we are optimistic about the company's month-on-month and year-over-year revenue growth momentum in 1H24. By the end of 2023, the self-immunization and oncology commercialization teams each had about 750/nearly 600 people. They will remain stable in 2024, while focusing more on reducing fees and improving human efficiency.
Core focus of the 2024 R&D/regulatory approval: 1) Titacip: Domestic RA indication 2H24 was approved, MG submitted SNDA before the end of the year, and SS/iGaN III completed enrollment in 1H24/3Q24, respectively. Indications such as IgG4-related diseases and membranous nephritis are continuing to be explored; overseas, enrollment in the second phase of SLE III was initiated in the middle of the year, and the second SLE III phase began soon. 2) Verdicital: China focuses on promoting early-line research using PD-1. Phase III of 1L UC will be enrolled in 3Q24, perioperative MIBC phase II data will be released soon. First-line HER2+ gastric cancer will complete phase II and phase III within the year; UC trial enrollment and other solid tumor exploration will continue to be promoted overseas. 3) RC88 (mesothelin ADC): ASCO disclosed preliminary data, and Phase II overseas is underway. 4) CLDN18.2 ADC and DR5 ADC are in the dose amplification and dose climbing stages, respectively.
Maintaining the purchase rating: According to FY23 results and the latest company guidelines, we adjusted the FY24 Taitacip/verdicitol sales forecast to $840 million/$8.2 billion and the FY25 forecast to 1.29 billion yuan (total product revenue increase 2%/3%); at the same time, based on changes in the overseas competitive landscape, we lowered Videcitol's overseas milestone receipt forecast adjusted by POS, and the final total revenue forecast decreased by 9%. At the same time, we have slightly raised our sales and R&D cost forecasts based on FY23 results. According to the DCF model, we slightly reduced our target price to HK$56 (previously HK$59), a potential increase of 106.3%. We continue to be strongly optimistic about the long-term market prospects of Taytacip, Verdicitol and the company's subsequent products, and maintain our buying ratings.