Event: On April 28, 2024, Heyuan Biotech released its 2024 quarterly report. The company's revenue in 2023 was 205 million yuan, down 29.69% year on year, net profit to mother - 128 million yuan, down 425.9% year on year, after deducting non-net profit - 134 million yuan, down 476.11% year on year. The company achieved operating income of 60 million yuan in Q1, an increase of 93.48% over the previous year, net profit to mother - 42 million yuan, after deducting non-net profit - 47 million yuan.
CRO grew steadily, CDMO projects continued to advance, and new orders improved in Q1. 1) The gene therapy CRO segment generated revenue of 79 million yuan in 23 years, an increase of 20.56% over the previous year. It actively expanded service scenarios and expanded new fields. It has served more than 10,000 R&D laboratories, further increasing its market share. 2) The gene therapy CDMO sector's revenue in 23 years was 107 million yuan, a year-on-year decrease of 50.64%, mainly affected by the slowdown in financing progress for downstream customers in the industry. The company actively responded to phased difficulties. In 2023, it obtained 13 implied IND clinical licenses, 3 IND clinical trial applications accepted, and 3 US FDA approvals, and served more than 330 CGT CDMO projects. At the same time, it actively developed new domestic and foreign customers in various segments such as oncolytic viruses, AAV gene therapy, CAR-T/NK cell therapy, and mRNA, adding more than 250 million yuan in new orders in 23 years.
In the first quarter of 2024, CGT CDMO achieved revenue of 38.212,000 yuan, an increase of 146.50% over the previous year. New orders exceeded 80 million yuan, and CDMO business orders and revenue are expected to gradually recover.
The Lingang production base is officially put into operation, which will further expand CGT CDMO production capacity. The company is actively promoting the construction of new production capacity. After the official operation of the GMP production base in Lingang, the company has a gene vector R&D and production platform of nearly 5,000 m2 and a precision medicine industry base of nearly 5,000 m2, with 20 production lines for cell therapy of various types, with a culture scale of up to 200L for allogeneic cell products; and 15 GMP carrier production lines with a fixed bed production scale of up to 600m2 and a maximum suspension production scale of 2000L. It is expected that the GMP carrier production line will be further expanded to 26 in 2025 to meet cell gene therapy Customer DNA-IND-NDA full-process service requirements.
Strengthen the construction of the intellectual property system, and promote the improvement of core competitiveness through R&D innovation. In 2023, R&D expenditure was 509.17 million yuan, up 46.20% year on year, with 159 R&D personnel, up 17.8% year on year. The company continues to strengthen its layout in fields such as optimization of viral packaging systems, development of novel viral vectors, development of cutting-edge non-viral vectors such as mRNA and exosomes, cell culture technology process development, and platform detection technology development. It has built seven core technology platforms, including molecular biology technology platforms and experimental viral vector packaging technology platforms, to continue to improve the company's core competitiveness.
Investment advice: As a high-quality domestic gene therapy CRO/CDMO enterprise, the company gradually increases production capacity utilization. We expect the company's net profit to be -1.03/-0.14/0.18 billion yuan in 2024-2026, respectively, maintaining the “Cautious Recommendation” rating.
Risk warning: Risk of changes in demand from downstream gene therapy customers, risk of increased competition in the domestic market, risk of commercialization of new drug development falling short of expectations, risk of iterative technology upgrades, and risk of regulatory policy changes.