Incident: On August 21, 2024, Yao Ming Biotech released its 2024 semi-annual report. In the first half of the year, the company achieved revenue of 8.574 billion yuan, a year-on-year increase of 1.0%, non-COVID-19 revenue growth of 7.7%, net profit to mother of 1.499 billion yuan, a year-on-year decrease of 33.9%, and adjusted net profit of 2.545 billion yuan, a year-on-year decrease of 13.0%.
The number of new projects has grown rapidly, and non-COVID-19 and commercialization revenues have increased steadily. In the first half of 2024, the company added 61 new projects. About half of the newly signed projects came from the US and won 9 external projects under the molecular strategy, bringing the total number of comprehensive projects to 742. Pre-clinical revenue in the first half of the year was 3.068 billion yuan, up 9.2% year on year, and global investment and financing gradually picked up; early clinical revenue was 1.893 billion yuan, down 2.9% year on year, mainly due to the small number of new 23H1 projects affecting revenue growth this year; late clinical and commercial revenue was 3.434 billion yuan, with non-COVID-19 revenue growth reaching 11.7%, of which 56 and 16 clinical phase III and commercial projects will contribute more revenue in the future.
Demand for commercialization of the Irish base is strong, and it is actively investing in the construction of new global production capacity. 1) The first PPQ of the MFG6 phase of the Irish base was completed in the first half of the year. Batch production of the MFG6 phase of the MFG6 project is expected to be carried out this year. The MFG7 has already begun commercial production. The schedule for production in the Irish base in 2025 is close to full, and the balance of profit and loss is expected for the first half of 2025. 2) The Hangzhou base installed 3 sets of 5,000 liter disposable bioreactors. It is expected that GMP will be released by the end of 2024, and the total production capacity of the base will increase to 23,000 liters. 3) The integrated CRDMO base in Singapore is under construction, with a planned design capacity of 0.12 million liters. 4) The Cranbury base in the United States is promoting more than 30 integrated projects and independent projects, with a production success rate of 100%. In the first half of 2024, the company's capital expenditure was about 1.9 billion yuan, mainly for the expansion of the US base and the construction of production capacity of the Pharmaceutical Federation in Wuxi and Singapore. The annual capital expenditure will reach 4.8 billion yuan. It is expected that 40% of the company's production capacity will be distributed in North America, Europe and Singapore by 2027.
The customer retention rate remains high, and leading technology platforms continue to export high-quality molecules. From a geographical perspective, North America's revenue in the first half of the year was 5.01 billion yuan, up 27.5% year on year; European revenue was 1.863 billion yuan, which achieved high single-digit growth after excluding COVID-19 and big order milestones; and China's revenue was 1.418 billion yuan, down 20.9% year on year due to sluggish domestic financing. As of the first half of 2024, the company's total outstanding orders were $20.11 billion, and orders of $3.64 billion were not completed within 3 years, which is still at an all-time high. Recently, the company's customer Tongrun Biotech reached an acquisition agreement with MSD for the potentially best-in-class CD3/CD19 dual-antibody CN201, with a down payment of up to 0.7 billion US dollars. CN201 was discovered, developed, and produced through WuxiBodyTM, TCE, and WuxiUpTM, the company's customers retained more than 95% after being acquired, and obtained more new projects from multinational pharmaceutical companies and acquirers, which will contribute considerable service revenue and sales share in the future.
Investment advice: Pharmaceutical Biotech has the world's leading open, integrated biopharmaceutical capabilities and technology enabling platform, and CRDMO drives the company's business to continue to grow. We expect the company's revenue in 2024-2026 to 18.014/20.256/22.833 billion yuan, an increase of 5.7%/12.4%/12.7% year over year, and net profit to mother of 3.325/3.842/4.454 billion yuan, corresponding to PE of 12/10/9 times, maintaining the “recommended” rating.
Risk warning: Overseas regulatory risks, regulation-related risks, investment and financing recovery falling short of expectations, industry competition risks, exchange rate risks, etc.