Incident: 1) The company recently released its three-quarter report for 2024. In the first three quarters of 24, it achieved revenue of 1.271 billion yuan, a year-on-year increase of 28.9%; net profit loss to mother of 0.927 billion yuan, a year-on-year decrease of 0.48 billion yuan; net loss of 0.94 billion yuan after deducting non-attributable net profit, a year-on-year decrease of 0.42 billion yuan. Among them, Q3's revenue in a single quarter was 0.485 billion yuan, up 53.2% year on year; net profit loss due to mother was 0.282 billion yuan, a year-on-year decrease of 0.128 billion yuan; net loss after deducting net profit from non-mother net profit was 0.313 billion yuan, a year-on-year decrease of 0.075 billion yuan. 2) Recently, the marketing license application for treprilimab combined with cisplatin/gemcitabine as first-line treatment for adult patients with metastatic or recurrent locally advanced nasopharyngeal cancer and as a monotherapy for adult patients with recurrent, unresectable or metastatic nasopharyngeal cancer that progresses during or after treatment with previous platinum-containing treatment has been approved by the Hong Kong Pharmaceutical Industry and Poison Board (PPB).

Comment:

Treprilizumab continues to be dosed, and the effect of improving quality and efficiency is obvious. The company's core product, treprilizumab, achieved sales revenue of 1.068 billion yuan in the first three quarters of 24, an increase of about 60% year on year, and sales revenue of single Q3 was about 0.397 billion yuan, an increase of about 79% year on year. After treprilimab became the first and only tumor immunotherapy drug for nasopharyngeal cancer in Hong Kong, China, it helped the company further expand the commercial layout of the product. By the end of October 2024, 10 indications of treprilizumab had been approved in mainland China, and approved for marketing in Hong Kong, the United States, the European Union, India and other countries and regions. With the increase in the number of indications in the medical insurance list of treprimab, the successive data reading and approval of more indications, and the continuous expansion of the global market commercialization, the commercialization competitiveness of treplimumab will continue to improve.

R&D investment continues to be strong, and the pipeline is progressing in an orderly manner. As of the end of the third quarter of 2024, the total balance of the company's monetary capital and transactional financial assets was $3.045 billion, with sufficient capital reserves. The company's R&D investment reached 0.874 billion yuan in the first three quarters of 24, and R&D investment continued to be strong. The company will accelerate the development and marketing application of late-stage pipelines such as anti-tumor anti-BTLA monoclonal antibodies and anti-IL-17A monoclonal antibodies, and continue to explore early-stage pipelines including Claudin18.2 ADC drugs, PI3K-α oral small molecule inhibitors, CD20/CD3 bispecific antibodies, PD-1/VEGF bispecific antibodies, and anti-DKK1 monoclonal antibodies.

Profit forecast, valuation and rating: Considering the rise in sales of treprilizumab and the continued progress of core R&D projects to improve quality and efficiency, we raised the company's net profit forecast for 24-25 to -0.92/-0.38 billion yuan (previously -1.38/-0.77 billion yuan), and the net profit forecast for the next 26 years to 0.34 billion yuan. The company is a first-tier domestic innovative drug company. The internationalization process is accelerating, and maintaining a “buy” rating for A-share/H shares.

Risk warning: risk of drug development failure, risk of product sales falling short of expectations, risk of product price reduction.