2023 and 1Q24 results are in line with our and market expectations
The company announced 2023 and 1Q24 results: revenue of RMB 2,456 million, YoY +3.3%; net profit to mother of RMB 348 million, corresponding to earnings of 0.83 yuan per share. The 23-year results are in line with market expectations.
1Q24 revenue was 736 million yuan, YoY +38.4%, net profit to mother 98 million yuan, YoY +90.9%. 1Q24 revenue was in line with market expectations.
Development trends
Revenue for '23 was in line with market expectations, and 1Q24 revenue and profit sides showed a marginal positive trend. The company's 1Q23-1Q24 revenue was 5.32/7.82/7.30/4.13/736 million yuan, respectively. The 4Q23 and 1Q24 revenue changes were mainly related to the decline in ectinib revenue and the acceleration of revenue volume of new products befutinib and enthatinib. 1Q24 revenue showed a year-on-year improvement over the quarter. We believe that revenue from Ensartinib and third-generation EGFR TKI Befotinib from 24-27 will enter a period of acceleration, focusing on the improvement in the company's performance on the revenue side and profit side in 24-27.
Various lung cancer products form a matrix-like layout. 1) First-generation ectinib forms a collaborative arrangement with third-generation befotinib. Due to the rapid increase in the penetration rate of domestic third-generation EGFR TKI in NSCLC, the revenue of ectinib showed a clear downward trend. Looking at the long term, in the field of adjuvant treatment of EGFR mutant NSCLC, the ectinib pattern is fair. The company's third-generation EGFR TKI befotinib was approved for second-line T790M+ NSCLC and first-line EGFRmut NSCLC in 23, and second-line NSCLC indications have been included in the medical insurance catalogue. We expect that Befotinib's 24-year revenue will mainly come from second-line use, which is expected to form a collaborative layout with the company's generation ectinib in the field of lung cancer. We believe that with Betta Pharmaceuticals' years of deep cultivation in the field of lung cancer, befotinib is still expected to occupy part of the market share. 2) We believe that the penetration rate of the domestic ALK inhibitor market is still low. Ensatinib is currently a commonly used ALK inhibitor in China. We expect sales of ensartinib to be about 600 million yuan in 23. In the future, with widespread use on the front line and potential approval of adjuvant treatment indications (the company expects to be approved for adjuvant treatment indications in 25 years), sales are expected to increase further.
Pay attention to the active layout of the company's other pipeline products. The company expects the partner to launch the EYP-1901 global phase III clinical trial on 2H24, and Betta Pharmaceuticals will join the Eyepoint Global Phase III clinical trial in the future. In addition, the early pipeline will actively deploy small molecule inhibitors such as TEAD and IDH1/2. We believe that the company is currently in a critical stage of R&D transformation, and it is recommended to actively pay attention to subsequent R&D trends.
Profit forecasting and valuation
Due to changes in the domestic EGFR TKI market pattern, we lowered the company's 24-year revenue forecast by 17.8% to RMB 3,045 billion. We expect the company's 24-year three-fee control to be reasonable, and basically keep the net profit forecast of RMB 473 million unchanged. For the first time, we introduced 25-year revenue and net profit forecasts of RMB 35.42 and 645 million yuan. Maintaining the outperforming industry rating, the target price was lowered by 7.7% to 60 yuan (48% upside) in accordance with the DCF valuation method.
risks
The pricing and sales of new drugs fell short of expectations after launch; progress in the development of new drugs fell short of expectations.