Matters:

On August 23, 2024, Sansheng Guojian announced the results for the first half of 2024. The company achieved operating income of 0.597 billion yuan (+24.87%), and net profit attributable to shareholders of listed companies was 0.13 billion yuan (+36.68%). R&D investment accounted for 35.02% of revenue (+0.46pp). Cash reserves increased by 0.03 billion yuan compared to 2023H1 to 2.83 billion yuan.

Commentary:

Sales of the 3 listed products increased steadily, maintaining the annual target of double-digit revenue growth for the full year 2024.

In the first half of 2024, Yisaipu achieved sales revenue of 0.33 billion yuan (+9.4%). Among them, pre-filled injections increased patients' compliance due to easy administration, and accounted for about 20% of sales revenue. Septin achieved sales revenue of 0.16 billion yuan (+48.9%), and Genippe achieved sales revenue of 0.03 billion yuan (47.8%). Additionally, CDMO's business achieved revenue of 0.07 billion yuan.

Five Phase III projects are about to be declared for NDA one after another. In the first half of 2024, drug candidates, which are in the advanced stages of development, progressed smoothly. The 608 (IL-17A) phase III clinical treatment for moderate to severe plaque psoriasis has reached all major and secondary endpoints, and is expected to be declared for NDA in the fourth quarter of this year; both axial spondyloarthritis and ankylosing spondylitis are in phase II enrollment. The 611 (IL-4r) phase III study to treat moderate to severe specific dermatitis in adults is being enrolled; phase II clinical indications for chronic sinusitis with nasal polyps have reached the clinical end, and phase III has already been initiated. The phase II study of 610 (IL-5) treatment for eosinophilic asthma has reached an end, and phase III enrollment is currently underway. The 613 (IL-1beta) phase III study for acute gout arthritis is being enrolled and is expected to be declared for NDA next year. Based on its outstanding performance in reducing the number of recurrences of gout, 613 has also conducted a phase II trial for the intermittent phase of gout arthritis. It is expected that data will be obtained in the fourth quarter, and phase III research is expected to begin next year.

BDCA2 monoclonal antibody 626 completed the Sino-US IND application, of which China IND has been accepted by the CDE. SLE patients have a large population and complex pathogenesis. 626 in the company's pipeline is a bifunctional monoclonal antibody targeting BDCA2, which can simultaneously regulate the two main pathogenesis mechanisms of SLE, namely inhibiting IFN-mediated downstream of the BDCA2 pathway and B cells secreting their own antibodies. Currently, 626 has completed the Sino-US IND application for the treatment of SLE and cutaneous lupus erythematosus (CLE), China's IND has been accepted by the CDE, and is expected to enter phase I by the end of the year. Currently, the company's BDCA2 target development progress is second in the world, and it is the only biopharmaceutical company other than Biogen to advance BDCA2 monoclonal antibodies to the clinical stage.

Investment advice: It is expected that 1-2 products will be declared for NDA every year for the next 3 years. In the future, I am optimistic about the company's R&D strength, clinical execution, and commercialization promotion capabilities. Based on various product indications and adjusted profit forecasts, we expect the company's revenue for 2024-2026 to be $1,182, 14.34, and 1,785 million yuan, respectively, up 16.6%, 21.3%, and 24.5% year-on-year; net profit to mother of $2.90, 3.54, and 466 million yuan ($1.46 and $254 million before 24-25). According to the innovative drug product pipeline valuation method (cash flow discount method based on risk adjustment), the company was given an overall valuation of 16.68 billion yuan, and the corresponding target price was 27.0 yuan, maintaining the “recommended” rating.

Risk warning: Clinical progress falls short of expectations, commercial performance falls short of expectations, and changes in the competitive landscape.