Key points of investment:

Incident: The company released its three-quarter report for 2024. In the first three quarters, the company achieved total operating income of 19.136 billion yuan (+48.63%) and a net loss to mother of 3.687 billion yuan. The net loss to mother for the same period last year was 3.878 billion yuan. After deducting the impact of non-cash items such as share payments, depreciation, and amortization expenses, the adjusted operating loss for the first three quarters was $0.052 billion, compared to $3.489 billion for the same period last year. In the third quarter of 2024, the company's adjusted operating profit reached 0.644 billion yuan, compared to -0.147 billion yuan in the same period last year. Thanks to rapid revenue growth and continuous improvement in operating efficiency, losses continued to narrow quarter by quarter, and performance was in line with expectations.

Product revenue continued to grow at a high year-on-year rate in the third quarter of the single quarter, and the net cash inflow from operating activities corrected. According to the company's announcement, in the first three years of 2024, product revenue was 18.986 billion yuan (+72.9% YoY); in the third quarter, product revenue was 7.079 billion yuan, compared to 4.287 billion yuan in the same period last year. Product revenue continued to grow rapidly in the third quarter, thanks to sales growth of zebutinib, PD-1 monoclonal antibodies, and Amgen authorized products. By product, the total global sales volume of zebutinib in the third quarter of 2024 was 4.914 billion yuan (+91.1% year over year). Among them, US sales totaled 3.584 billion yuan (+85.0% YoY), European sales totaled 0.693 billion yuan (YoY +212.7%), and Chinese sales totaled 0.485 billion yuan, up 41.1% year over year.

In the third quarter of 2024, sales of PD-1 monoclonal antibodies totaled 1.169 billion yuan (+11.7% year-on-year). In the future, the company will also continue to promote the commercialization process of PD-1 monoclonal antibodies in overseas markets, which is worth looking forward to. The net cash inflow from the company's operating activities turned 1.261 billion yuan in the third quarter. On the one hand, it benefited from rapid revenue growth, and also from the company's continued implementation of a cost reduction and efficiency strategy.

Vigorously promote the global clinical layout and progress of a new generation of self-developed pipeline products. According to the company's announcement, clinical trials of BCL2 inhibitors will continue to be promoted in the field of hematologic oncology. The company expects to complete the global phase III clinical trial with zebutinib for first-line treatment of CLL patients and the global phase II clinical trial for the treatment of WM patients in the first quarter of 2025. BGB-16673 (BTK CDAC) has been approved by the US FDA for the treatment of R/R CLL/SLL patients. The company expects to launch a phase III clinical trial of BGB-16673 for the treatment of R/R CLL patients in the first half of 2025. In the field of solid tumors, 4 new molecular entities entered the clinical development stage in the third quarter (8 so far this year), and it is expected that the goal of entering clinical trials of more than 10 new molecular entities will be achieved throughout the year. In the field of inflammation and immunotherapy, BGB-43035 (IRAK4 CDAC), the second targeted degradation agent developed by the company on its own CDAC platform, has begun clinical development.

Maintain a “buy” rating. Commercial varieties are growing rapidly, and the solid hematoma pipeline is constantly being enriched. The profit forecast for 2024-2026 remains unchanged. The net profit for 2024-2026 is expected to be -4.078 billion, 1.178 billion, and 3.893 billion yuan, respectively, maintaining a “buy” rating.

Risk warning: risk of R&D failure or schedule delays, product sales falling short of expectations, risk of ongoing losses