Key points of investment:
A leader in domestic self-defense and ADC. The company was founded in 2008, listed on the Hong Kong Stock Exchange in November 2020, and listed on the Science and Technology Innovation Board in March 2022. It is an A+H listed company. The company is committed to the discovery and development of first-in-class and best-in-class biopharmaceuticals. The core product, taitacip, is the world's first BLYS/APRIL dual-target fusion protein, and viducitumab is the first ADC drug produced in China. The company's management team is experienced in innovative drug development and has an international perspective. Many projects have carried out overseas clinical research one after another, and have global competitiveness. The company continues to increase investment in large-scale production, R&D investment, and commercial construction. In 2023, it achieved operating income of 1.08 billion yuan and net profit of 1.51 billion yuan to mother.
Taytacip: The world's first BLYS/APRIL dual-target fusion protein, and its indications in the field of self-immunity continue to expand. Tetracip is the world's first, first-in-class, injectable recombinant Blys/April dual-target novel fusion protein product. Compared with a single target, it shows better pharmacodynamic effects and curative effects. Currently, there are only two SLE biologics, GSK's belliumab and the company's taitacip, in China, and the competition pattern is good. Domestic SLE has been fully approved, and the contract was simply renewed at the end of 2023.
The new indications for rheumatoid arthritis (RA) were submitted for NDA in August 2023 and are expected to be approved in the second half of 2024.
Phase III clinical trials for myasthenia gravis (MG), primary dry syndrome (PSS), IgA nephropathy, and optic neuromyelitis spectrum disease (NMOSD) are progressing smoothly. Overseas, SLE is promoting international multi-center phase III clinical research globally. The three major indications of MG, PSS, and IgA nephropathy have all been approved by the FDA to conduct global phase III clinical studies, and MG and PSS have been granted fast-track accreditation by the FDA. The market space for autoimmune system diseases is broad, and the huge drug group lays a good foundation for the continued release of taitacip.
Verdicital: A pioneer in domestic ADCs, with obvious competitive advantages in differentiation. Verdicitumab is the first ADC drug in China to receive dual certification as a breakthrough therapy by the FDA and NMPA. It has been approved for two major indications in China: gastric cancer (GC) and urothelial cancer (UC). For GC, third-line treatment was recommended at level I. For UC, verdicitol is the only approved HER2-ADC, and it has received full recommendation. The company is actively carrying out research on the combined use of verdicitumab and immunotherapy, continuously expanding the number of drug users, and continuing to advance phase II/III clinical studies of phase III clinical and first-line HER2 expression GC in combination with PD-1 for first-line UC patients. The phase III clinical results of verdicitumab in treating advanced HER2 positive breast cancer with liver metastases were positive. A marketing application was submitted recently. At the same time, the company is also promoting differentiated competition for products in the field of breast cancer with low HER2 expression.
Overseas, cooperation has been reached with Seagen in the United States, and the phase II critical clinical trial of verdicitol monotherapy for second-line UC and phase III clinical trials for first-line UC combined with PD-1 treatment are continuing. Pfizer acquired Seagen in 2023, benefiting from the accelerated advancement of Pfizer's clinical and commercialization strengths.
The company has a rich research pipeline and continues to strengthen long-term competitiveness. The company has built three core technology platforms with independent intellectual property rights, and has developed more than 20 drug candidates, covering more than 20 indications in the fields of autoimmunity, oncology, and ophthalmology. The company continued to increase R&D investment, and R&D expenses increased from RMB 216 million in 2018 to RMB 1,306 million in 2023.
RC28 is a VEGF/FGF fusion protein. It targets ophthalmologic diseases wet senile macular degeneration and diabetic macular edema in phase III clinical trials. There are also three ADC drugs. RC88 was approved by the FDA for phase II clinical trials to treat ovarian cancer and obtained fast-track qualification; RC118 is in phase II clinical stage for various malignant solid tumors; and RC248 is in phase I clinical stage. RC148 (dual antibody) and RC198 (fusion protein) are in Phase I clinical trials. The company's pipeline gradient structure is reasonable. As the pipeline under development continues to advance, the company's product range is expected to continue to enrich.
Investment advice: The company currently sells two innovative drugs, which are in the rapid release stage, and the indications are expanding one after another.
Many of the company's products under development have entered the clinical stage. As the pipeline progresses smoothly, the variety of products will continue to be enriched. We predict that in 2024-2026, the company will achieve operating income of 1,586 billion yuan, 2,175 billion yuan and 2,952 billion yuan, respectively, and net profit attributable to the parent company will be -1,138 million yuan, -989 million yuan, and -358 million yuan, respectively, maintaining the “buy” rating.
Risk warning: Drug development progress falls short of expectations; risk of commercialization falling short of expectations; risk of market competition.