RemeGen recorded RMB1.08bn of revenue in FY23, including RMB1.05bn from product sales (+42% YoY), contributed equally by RC18 and RC48. In FY23, GP margin (vs product sales) increased to 76.9% (vs 63.4% in FY22). Selling expense ratio (vs product sales) increased from 60% in FY22 to 74% in FY23, mainly due to an increase in sales headcount. In FY23, R&D expenses rose by 33% YoY to RMB1,306mn, due to the spending in late-stage trials. RemeGen recorded a wider attributable net loss of RMB1,511mn in FY23 (vs RMB999mn in FY22). As of end-2023, RemeGen had a cash balance of RMB727mn, and mgmt. claimed about RMB4.4bn in bank credit. Mgmt. believes that the current funding levels will sustain business operations for a minimum of two years. Additionally, RemeGen recently announced plans to raise up to RMB2.55bn by issuing additional A-shares.
Expect sales to ramp-up quickly in 2024. RemeGen set a FY24 product sales target of at least a 50% YoY increase. We remain positive toward the guidance because: 1) sales of both RC18 and RC48 have performed strongly YTD as per mgmt; 2) the newly added salesforce in 2023 may start to contribute significantly to sales in 2024; and 3) the inclusion of RC18 in over 300 new top-grade hospitals and RC48 in over 200 new top-grade hospitals in 2023 should boost product sales. We expect RC18 and RC48 to experience an uptake in FY24, with RC18 taking a slight lead.
Looking forward to next step of RC18's global development. The first stage of RC18's Ph3 global SLE trial has completed enrolment of 90 patients. RemeGen is internally discussing whether to unblind the first-stage study or keep it blinded as part of the second stage. The company expects to start enrolling for the second stage of the Ph3 study by mid-2024, which will be followed by another Ph3 study as required by the FDA. If the data from the first-stage study are released, we believe it could serve as a strong catalyst for RC18's global development strategy and potential out-licensing deals. If kept blinded, it could expedite RC18's global development. Additionally, a Ph3 trial of RC18 in MG is ongoing in the US with a Ph3 pSS trial in planning.
Awaiting overseas BD collaborations. We believe that RC18 remains the foremost candidate for international BD partnerships. We think RC18 could still be the top priority of overseas BD collaboration. RC88 (MSLN ADC) received a fast track designation from the FDA, with PoC data to be released at ASCO in Jun. RemeGen plans to start a Ph2 MRCT study in the US, EU, China, etc. The prospects for RC88 to secure an out-licensing agreement are promising. We think that revenue streams from such BD collaborations will play a crucial role in underpinning RemeGen's robust growth trajectory.
Maintain BUY. We expect RC18 and RC48 to regain strong sales momentum in 2024 and beyond. We revise our DCF-based TP from HK$57.65 to HK$41.72 (WACC: 11.33%, terminal growth rate: 2.0%).