Incident 1
On March 28, 2024, the company released its 2023 annual report. The company achieved operating income of 1,083 billion yuan, +40.26% year over year; net profit to mother - 1,511 billion yuan, an increase of 51.30% year on year; net profit without return to mother - 1,543 billion yuan, an increase of 38.19% year-on-year loss. Among them, in 23Q4, the company's revenue was 313 million yuan, +54.83% year-on-year, and net profit to mother was 481 million yuan, an increase of 54.74% year-on-year losses.
Incident 2
On March 30, 2024, the company issued the “2024 Plan to Issue A Shares to Specific Targets”. The number of shares to be issued will not exceed 13% of the company's total share capital, totaling no more than 2.55 billion yuan, for R&D projects in the company's new drug product pipeline.
reviews
Investment plus financial pressure was put under pressure for a while, and the company's overall gross margin was 77.43%, +12.67 pct; the period expense ratio was 219.80%, +9.83 pct; of these, the R&D expense ratio was 120.62%, -6.57 pct; the sales expense ratio was 71.58%, +14.50 pct; the management expense ratio was 28.09%, -6.40 pct; the financial expense ratio was -0.50%, +8.29 pct; the net operating cash flow was- $1,503 million, +19.25% YoY. The company has been working on innovative drugs for many years and has grown into a platform-based ADC formulation company. It has maintained high R&D investment for many years. With the gradual enrichment of the research pipeline and the increase in R&D investment year by year, it is expected that it will continue to accumulate and weaken in the future. The total R&D expenses from 2020 to 2022 increased from 466 million yuan to 982 million yuan. The total R&D investment in 2023 was 1,306 million yuan, an absolute increase of 324 million yuan over the same period last year. In order to match the commercialization of core products, the company focused on developing the commercialization team in 2023, and sales expenses increased dramatically, from 441 million yuan in 22 to 775 million yuan in 23. Currently, the overall team is in place, and future sales expenses will be reduced to a reasonable level.
The two core products have been released significantly, and commercialization has made long-term progress. In the 2023 national health insurance negotiations, the company's two core products, Taiai? (Taytacip) and Edixi (viducitumab) continued to successfully renew their contracts and maintain their original sales prices. As of December 31, 2023, the company's autoimmunity commercialization team had about 750 people, and the oncology commercialization team had nearly 600 people. Tae Ai? It switched from conditional approval to full approval for listing in China in November 2023, and significant progress has been made in the treatment of diseases such as systemic lupus erythematosus (SLE), myasthenia gravis (MG), and primary dry syndrome (PSs), and sales volume continued in 2023.
ADC overseas clinical progress has actually progressed. The growing global innovative pharmaceutical company currently has eight molecules in the clinical development stage. The commercialized drugs tetracip (RC18, trade name: Taiai) and verdicitumab (RC48, trade name: Edisi) are undergoing clinical trials for various indications in China and the US, and have made many positive developments. In addition, other molecules such as RC28, RC88, RC118, RC148, RC198, and RC248 are progressing smoothly. In terms of large-scale production, the company has established a production system that meets global GMP standards, including production workshops and supporting facilities for cell culture, purification, formulation and canning, including 21 2,000-liter disposable bioreactors. The company is steadily advancing the construction of new biopharmaceuticals industrialization projects.
Targeted increases show confidence and strengthen the speed of advancing the company's product pipeline. The number of shares to be issued does not exceed 13% of the company's total share capital before the current issuance, that is, 70,763,170 shares (including shares). The final maximum number of shares to be issued is subject to the maximum number of shares issued by the China Securities Regulatory Commission. The total amount of capital raised after deducting relevant issuance expenses will be used to invest in new drug research and development projects to support the company's product pipeline research and development needs at home and abroad, and fully provide for the company's globalization process Financial support.
Investment advice
We expect the company's revenue for 2024-2026 to be 1,397 billion yuan, 2,213 billion yuan, and 3.09 billion yuan, respectively, up 29.0%, 58.4%, and 36.0% year-on-year; net profit to mother for 2024-2026 will be -1,285 billion yuan, -826 million yuan, and -680 million yuan, respectively, up 15.0%, 35.7%, and 17.7% year-on-year, respectively. We are optimistic about the continuous development and overseas development of the company's ADC platform, the expansion capabilities of Taytacip in the field of autoimmune diseases, and maintain a “buy” rating.
Risk warning
Risk of sales falling short of expectations; risk of R&D approval falling short of expectations; risk of failure in developing new drugs; risk of policy uncertainty.