Investment highlights
For the first time, it covered Biotech (688177) to give it an outperforming industry rating. The target price was 33.20 yuan, based on the DCF valuation method. The company is a biopharmaceutical company centered on the development of innovative drugs and biosimilar drugs. The reasons are as follows:
There are many major varieties in the global biopharmaceutical market, and there is plenty of room for biosimilar drugs to go overseas. According to Frost & Sullivan: The global biopharmaceutical market reached $363.8 billion in 2022, and is expected to reach $783.2 billion by 2030. As more original biopharmaceutical patents in Europe and the US expire, we believe that the biosimilar market space has opened up, bringing opportunities for domestically produced biosimilar drugs to go overseas.
The company is a pioneer in domestic biosimilar drugs going overseas to Europe and America. The company's biosimilars Geleride, Prbeshi, and Schrelli have been commercialized in China. In 2023, companies TOFIDANCE (peak sales of 3.6 billion Swiss francs) and Avzivi (peak sales of 7.1 billion Swiss francs) were approved for listing in the US. Among them, the company announced that TOFIDANCE was the first monoclonal antibody drug independently developed and produced by a local Chinese pharmaceutical company approved by the US. In addition, the companies usinumab (original research sales of 10.9 billion US dollars in 2023), golimumab (original sales of US $2.2 billion in 2023), and scotiumab (original research sales of 5 billion US dollars in 2023) are in international phase III clinical trials. We believe that the company's strength lies in its international vision and strategic focus, and future biosimilar drug pipelines are expected to be reaped.
An innovative platform for autonomous antibody-conjugated drugs (ADC) has been built, and the preliminary clinical data of BAT8006 is impressive. The company has independent single-function and multi-function antibody and ADC drug technology platforms, and multiple innovation pipelines have entered the clinical stage. Among them, the phase I post-line treatment data for advanced solid tumors revealed by the folic acid receptor α (FRα) ADC BAT8006 showed impressive single-agent efficacy, and we think it is expected to further show potential in subsequent clinical trials.
What is our biggest difference from the market? The market believes that the barriers to the biosimilar circuit are relatively low. We believe that the company's barrier lies in the development of large-scale single-product similar drugs against Europe and the US at home and globally, and has now gained several product portfolios that are in the first tier of international progress. Subsequent companies are expected to obtain considerable revenue through an external licensing+sales share model.
Potential catalysts: TOFIDANCE and Avzivi are expected to further advance the commercialization process in the US and begin contributing a share of revenue to the company.
Profit forecasting and valuation
We expect the company's 2024/2025 EPS to be -0.64 yuan and -0.34 yuan respectively. Based on DCF's estimate of the company's forward cash flow, we gave the company a target price of 33.2 yuan, which has 19.8% upside compared to the current stock price.
risks
The risk of R&D failure, domestic and international entry and commercialization falls short of expectations, and collection pressure exceeds expectations.