Sales of core products continued to grow. Rongchang Biotech achieved revenue of 1,083 million yuan (+40.3%) in 2023, revenue of 313 million yuan (+54.8%) in the fourth quarter, and maintained rapid revenue growth; the company maintained a net loss of 1,511 billion yuan for the whole year (net loss of 999 million yuan for the same period last year). The company's revenue growth was mainly driven by sales growth of its two core products, tetracip and verdicitumab. The company's R&D expenses for 2023 were 1,306 million yuan (+33.0%); sales expenses were 775 million yuan (+75.9%), sales expenses rate of 71.6% (+14.5pct), and the sales expenses rate for Q1-Q4 in a single quarter was 94%/76%/55%/75%, respectively. As the company's sales team matures, we expect the sales expenses rate to decline in 24 years; the annual management expenses were 304 million yuan (+14.2%), and the management expense ratio was 28.1% (-6.4pct).
Multiple indications of titacipr are being promoted clinically in both China and the US. The SLE indication for titacipr was fully approved in China in November 23, and global multi-center phase 3 clinical trials are progressing smoothly. The MG Indication Phase 3 clinical trial in China has completed patient enrollment. It is expected that they will apply for an NDA this year, and the global multi-center phase 3 clinical trial is also in the process of starting. PSS and iGaN indications are being enrolled in phase 3 clinical trials in China and approved by the US FDA for phase 3 clinical trials. The RA Indication has submitted a marketing application in China and is expected to be approved for listing this year.
Verdicitumab indications extended to frontline treatment. In urothelial carcinoma (UC), the company is actively exploring the possibility of combined treatment: patients are being enrolled in a phase 3 clinical trial of verdicitumab combined with treprilizumab and first-line chemotherapy for HER2 expressing UC, and phase 2 clinical trials of MIBC with treprilizumab are also ongoing. In the US, key phase 2 clinical trials with verdicitumab monotherapy for 2/3L UC are also underway. In gastric cancer (GC), patients are being enrolled in phase 2/3 clinical trials of combination therapy with verdicitumab for first-line HER2-expressing GC, and phase 2 clinical trials with second-line treatment of HER2-expressing GC with cardonilizumab. In addition, verdicitumab has a clinical layout in breast cancer and other gynecologic tumors.
Investment advice: Maintain an “increase in holdings” rating.
Affected by production capacity and industry events, the company's sales for 23 were slightly lower than expected. We slightly lowered the company's revenue forecast to be 16.29/22.73/3,097 billion yuan (24-25 years ago value: 18.37/2,810 billion yuan); due to the company's large R&D investment, we lowered the company's net profit forecast, and the net profit forecast for 24-26 is -9.16/-4.65/-0.71 billion yuan (24-25 years ago value of -6.09/148 million yuan). The company's domestic sales continue to grow, and overseas clinical trials are progressing smoothly. The two core products, tetracip and verdicitumab, both have differentiated competitive advantages and maintain an “gain” rating.
Risk warning: Innovative drug development has failed or is progressing below expectations; innovative drug sales fall short of expectations.