Incident 1: The company published its 2023 annual report, with annual revenue of 1,083 billion yuan, an increase of 40.26% year on year. Sales of the two core products, RC18\ RC48, grew rapidly year on year. Non-net loss of 1,543 billion yuan was deducted from the mother, mainly due to the company's increased R&D investment in research projects and increased commercialization promotion efforts. The company currently has eight molecules in clinical development. On the production side, a production system that complies with global GMP standards has been established, including 21 2,000-liter single-use reactors.

Incident 2: The company issued the “2024 Plan to Issue A Shares to Specific Targets”. It plans to raise no more than 2.55 billion yuan in capital, and the number of shares to be issued should not exceed 13% of the company's total share capital before this offering, for research and development of innovative drugs, including pre-clinical research and clinical research on products such as RC18, RC48, RC88, RC148 and RC198. This fund-raising project will further enrich the company's pipeline of pharmaceutical products under development, rapidly advance clinical trials of the company's products at home and abroad, and speed up the marketing registration process for products under development.

In the field of self-immunity: The treatment of moderate to severe SLE with taitacip was approved for marketing in March 2021 and included in medical insurance in the same year. By the end of 2023, the commercial team had about 750 people, covering 2,200 hospitals, and completed drug admission for more than 800 hospitals.

Tetacept (RC18) clinical development:

Phase II of active lupus nephritis is ongoing, and the phase III international multi-center clinical trial of SLE is recruiting patients;

Myasthenia gravis (MG): Patients have been enrolled in phase III clinical trials, and the FDA has approved the IND application.

Primary dry syndrome (PSs): Phase III clinical progress. In December 2023, the IND application to conduct a phase III clinical trial for the treatment of pSS in the US was approved;

Immunoglobulin A nephropathy (IgAN): Phase III clinical trials are ongoing, and the FDA has agreed to conduct phase iGANIII clinical treatment in the US;

Rheumatoid Arthritis (RA): The company submitted an NDA to the CDE in August 2023;

Neuromyelitis optic spectrum disease (NMOSD): A phase III clinical trial was initiated in September 2017, and patient recruitment is ongoing.

Oncology field: The indications for treating gastric cancer (GC) and urothelial cancer (MuC) with conditions were approved for marketing in China in June and December 2021, respectively. By the end of 2023, the oncology commercialization team had nearly 600 people, covering more than 2,000 hospitals, and had completed drug admission to more than 650 hospitals.

Clinical development of verdicitumab (RC48):

1) Urothelial carcinoma (UC): Phase III clinical trials of first-line HER2 expression UC are ongoing. The phase II clinical trial of perioperative muscle-invasive bladder cancer (MIBC) is recruiting patients. Seagen has launched Phase II critical clinical trials for second-line UC in the US in the first half of 2022. Pfizer/Seagen is conducting a phase III clinical study of verdicitumab combined with PD-1 to treat first-line UC.

2) Gastric cancer (GC): First-line HER2 expression GC phase II/III completed the enrollment of the first patient in the third quarter of 2023. In December 2023, a phase II/III clinical trial application for patients with HER2-expressing GC who failed first-line treatment with cardonilizumab was approved by the CDE.

3) Breast cancer (BC): Stage III of locally advanced or metastatic breast cancer with low HER2 expression is still being recruited as patients.

4) Cervical cancer: Recurrent or metastatic cervical cancer with HER2 expression phase II clinical progress. On March 8, 2024, the company released study data in ESGO 2024. Among 22 patients whose efficacy could be assessed, ORR was 36.4%, DCR was 86.4%, MdOR was 5.52 months, and mPFS 4.37 months.

His pipeline:

RC28 (VEGF fusion protein): wet senile macular degeneration (WamD) phase III clinical patient recruitment is ongoing; diabetic macular edema (DME) phase III clinical patient recruitment is ongoing, and patients have been enrolled in diabetic retinopathy (DR) phase II clinical trials; RC88 (MSLN ADC): Phase II clinical trials with RC88 for patients with various advanced solid tumors are ongoing; in December 2023, RC88 was used to treat platinum A phase II clinical trial application for drug-resistant recurrent PROC patients was approved by the CDE. In December 2023, RC88's phase II clinical trial IND for ovarian cancer was approved by the US FDA; RC118 (Claudin 18.2 ADC) combined with PD-1 to treat tumors in phase I/IIa clinical trial is ongoing.

RC148 (PD-1/VEGF double antibody), RC198 (IL-15 fusion protein), RC248 (DR5 ADC) have entered clinical stages.

Reviews and profit forecast: Despite the many challenges faced by the company in 2023, we believe that the company's two core products are clearly differentiated, rapidly deployed, and have broad prospects for carrying out a number of overseas clinical trials at the same time. The company issued a fixed increase plan, which will serve as a basic guarantee for the acceleration of R&D after supplementing cash. We expect the company's 24-26 revenue to be 16.85, 25.02, and 37.42 billion yuan. Maintain a “buy” rating.

Risk warning: risk of sales falling short of expectations, risk of clinical progress falling short of expectations, risk of policy changes