Strong product sales growth continued. In 1H24, Innovent recorded total revenue of RMB3.95bn, including RMB3.81bn product sales (+55% YoY, +17% HoH), representing 53% of our previous full-year estimate, surpassing our expectations. The strong product sales growth was mainly driven by the sintilimab and other new products. According to Eli Lilly, sales of sintilimab in 1H24 reached US$240mn (or RMB1.71bn), +46% YoY, bolstered by expanded NRDL coverage and stable pricing. We forecast sales of sintilimab to reach RMB3.55bn in 2024E (+29% YoY).
EBITDA loss significantly narrowed thanks to improving cost efficiency. The non-IFRS EBITDA loss narrowed significantly from RMB267mn in 1H23 to RMB161mn in 1H24. With fast-growing product sales and consistently improving operating efficiency, mgt. is confident to achieve breakeven on EBITDA in 2025E. Under IFRS, Innovent's gross margin on product sales increased by 3.5ppt to 82.2% in 1H24 (vs 79.5% in 1H23). SG&A ratio dropped to 55.6% in 1H24 from 63.5% in 1H23. R&D expenses were RMB1.40bn in 1H24, +7% HoH. The mgt. expects steady R&D expenses in 2H24. As of Jun 2024, Innovent reported a strong cash balance of RMB10.11bn.
To establish a strong CVM portfolio. Innovent's portfolio now includes 10 marketed products, recently bolstered by the approval of fulzerasib, a KRAS G12C inhibitor for 2L NSCLC. We anticipate approval for taletrectinib (ROS1 TKI) in 2H24 for 2L NSCLC, with an NDA for the 1L indication submitted in Mar 2024. In the cardiovascular and metabolic (CVM) space, we expect mazdutide (GLP-1R/GCGR) to receive approval for obesity in 1H25 (NDA in Feb 2024) and for diabetes in 2H25 (NDA in Aug 2024). We are optimistic about mazdutide's further development in adolescent obesity, MASH, OSA, and heart failure. The NDA for IBI311 (IGF-IR) for thyroid eye disease is currently under review. We expect Innovent to establish a strong portfolio in CVM sector, with its marketed product Sintbilo (PCSK9) and late- stage pipelines including mazdutide, IBI311 (IGF-IR), IBI128 (XOI), etc.
IBI363 has global blockbuster potential. IBI363, a potential FIC PD-1/IL-2 bsAb, has demonstrated encouraging signals in IO-failed and cold tumors, especially in IO-resistant sq-NSCLC. For later-line IO-treated sq-NSCLC patients (n=37) receiving IBI363 at ≥0.3mg/kg, the ORR reached 35.1% and the mPFS reached 5.5 months, much better than the SoC docetaxel's 12.7% ORR and 3.9 months of mPFS (link). We anticipate updated data to be presented at the upcoming WCLC meeting in September, particularly for the 3 mg/kg Q3W dosing regimen. Updated data in CRC will be presented at the coming ESMO meeting. Innovent also started a Ph2 basket trial of IBI363 in the US. Additionally, IBI343 (CLDN18.2 ADC) demonstrated encouraging signals in the highly underserved PDAC, with 40.0% ORR observed in the 10 CLDN18.2 positive (≥60%) PDAC patients at the 6mg/kg dose. IBI343 has received a fast track designation from the FDA. A Ph3 trial of IBI343 in 3L GC is in preparation, and Innovent plans to start Ph1 trials of IBI343 in the US. Furthermore, Innovent has multiple ADC assets at early clinical stage, targeting EGFR/B7H3, B7H3, TROP2, HER3, etc.
Maintain BUY. We are confident towards Innovent's EBITDA breakeven target in 2025 and see FIC potential of the innovative PD-1/IL-2 asset. We revise our DCF- based TP from HK$55.75 to HK$55.21 (WACC: 10.0%, terminal growth rate: 3.5%).