1Q24 product sales continued to rise, with month-on-month fee cuts and losses: According to A shares (688331 CH) disclosure, the company recorded revenue of 330 million yuan (RMB, same below), a year-on-year increase of 96.4%, and an increase of 5.4% over 4Q23. Among them, Tetasip and Verdicitol sold 170 million yuan and 160 million yuan respectively, which basically met our expectations. 1Q24 deducted non-net loss of 350 million yuan, which was significantly narrower than 4Q23's 480 million yuan, partly due to the month-on-month decline in sales and R&D expenses (-20%/-26% QoQ). Looking ahead to 2024, management will maintain the guideline of revenue growth of at least 50%, while R&D and sales expenses will decline further, requiring annual capital requirements of approximately $15-20 billion. As of 1Q24, the cash on the company's account reached 620 million yuan. Currently, there is still a bank credit line of 4 billion yuan, and additional A-share issuance is already on the schedule. We expect that subsequent capital injections will be sufficient to guarantee the company's operations to break-even.
ASCO data has been read intensively. Follow RC88's debut: The company will announce 16 clinical study results at the ASCO conference (summary announced on May 23). We recommend focusing on: 1) mesothelin ADCRC88's first human phase I/II study data, covering indications such as ovarian cancer, NSQ-nsCLC, and cervical cancer, and its comparison with FRα ADC (ELAHERE? Registered clinical ORR 32%); 2) Two UC phase II studies with verdicitol were the new adjuvant treatment of MIBC in combination with treprilizumab and the single adjuvant/salvage treatment of NMIBC, respectively. The company and CDE have initiated discussions on RC88 registration pathways in the mainland and initiated a single-arm phase II study on platinum-resistant recurrent ovarian cancer.
Going overseas is getting better: 1) Titacip SLE Phase III will be launched in June, and Phase II of SLE Phase III and MG III will also be launched soon. This month, Vertex acquired Alpine ImmuneSciences for US$4.9 billion (the latter core product has the same target as Tetasepam, 2H24 enters Phase III), which clearly confirms the huge value of Titacip in overseas markets. 2) Verdicitol is expected to be submitted to the BLA in the US on 1Q25 and is expected to be approved on 2H25. 3) RC88's overseas development and cooperation is the next priority. Recently, Immunogen, which has the world's first FRα ADC, was purchased by AbbVie at a consideration of US$10.1 billion. If RC88's data is excellent, the prospects for going overseas are also very promising.
Maintain the target price of HK$56: We keep the company's profit forecast unchanged: revenue for 2024-26 reached 1.66 billion/2.50 billion/ $3.73 billion respectively, net loss gradually narrowed, and breakeven was achieved in 2027. The company has many catalysts in product commercialization, clinical data readout, mainland regulatory approval, overseas travel in 2024, etc. We maintained our purchase rating and target price of HK$56.