Pharmaceutical Syndication is the world's leading one-stop contract research, development and manufacturing organization (CRDMO) platform for antibody drug conjugates (ADC) and a wider range of bioconjugated drugs (XDC), serving major global pharmaceutical companies and innovative biotechnology companies. Based on 2022 revenue, Yao Ming Joint's market share was second in the world and number one in China, respectively, with market shares of 9.8% and 69.5%, respectively.
The ADC drug market is growing rapidly, and R&D and external licensing transactions are active. Benefiting from the more accurate targeting of ADC drugs compared to traditional small molecule drugs and a wider treatment window compared to monoclonal antibodies, the ADC drug market is expected to grow rapidly. According to Frost & Sullivan, the global ADC drug market grew from $2 billion in 2018 to $11.4 billion in 2023, with a compound growth rate of 42%. The global ADC drug market is expected to grow to US$64.7 billion by 2030, with a compound growth rate of 28% between 2023 and 2030. Due to the clear technical path of ADC drugs and the high degree of certainty in commercialization, the number of global ADC drug licensing transactions has grown rapidly since 2022. According to Lilac Garden data, the number of ADC drug licensing transactions worldwide in 2022 was 75, an increase of 34% year over year. In addition, the total transaction amount also increased significantly, from about 20 billion US dollars in 2022 to more than 100 billion US dollars in 2023, an increase of 440% over the previous year.
Rich coupling technology platform, integrated production capacity and supply chain capabilities. The company has a rich ADC drug coupling technology platform, including the patented WuXiDAR4 technology platform. Through technology platform optimization, project experience accumulation, and supply chain efficiency improvement, the company was able to reduce the time from the industry average of 24-30 months to less than 15 months for bioconjugated drugs, further saving costs while serving customers efficiently. In terms of production capacity, the company has facilities in Wuxi, Shanghai and Changzhou (three bases within about a two-hour drive). Among them, the Wuxi base has a dual-function production line designed exclusively in the world, which accelerates production while reducing costs and increasing flexibility of use. The company plans to establish an overseas production base in Singapore to meet global customer demand for bioconjugated drug CRDMO services. It is expected that the Singapore site will begin GMP operations in 2026.
Benefiting from the booming ADC pharmaceutical industry, commercialization projects can be expected. Through the “Empower, Follow, and Win Elements” strategy, the number of projects at all stages of the company continues to grow. By the end of 2023, the company had 59 ongoing post-IND projects, including 21 projects in phase 2 and 3 clinical trials, and five process performance assessment (PPQ) projects. It is expected that a new drug marketing application (BLA) will be submitted in 2024. The post-phase projects are expected to drive the company's recent business growth. Benefiting from active ADC drug development and external licensing transactions, the company's total revenue increased from 96 million yuan in 2020 to 2,124 billion yuan in 2023, with a compound growth rate of 180% in 2020-2023. In addition, the company's adjusted net profit in 2023 was $412 million, up 112% year over year. The post-IND service revenue contribution increased from 45% in 2020 to 56% in 2023 as the project enters an advanced stage.
The first coverage gives a buy rating. We expect adjusted earnings per share for 24/25/26 to be $0.51, $0.80, and $1.09, respectively, up 27%/56%/37% year over year, respectively. Based on the DCF model, our target price is HK$23.6. The target price corresponds to a 31% upward space and covers the first time a buy rating is given.
Risk warning: Competition in the ADC CDMO industry at home and abroad increases risk; loss of core employees; risk of overseas production capacity expansion.