1H23's performance met our expectations
The company announced 1H23 results: revenue of 80 million yuan, mainly due to the company receiving milestone payments of befortinib from Beida Pharmaceuticals, net profit of 168 million yuan, 1H23 performance was in line with expectations.
Development trends
Befortinib was approved for marketing, and the product has entered a new stage of commercial release. NSCLC, the second-line treatment T790M+ with befortinib, was approved for marketing by the NMPA on May 29, 2023. Befortinib is the fourth third-generation EGFR inhibitor approved for marketing in China. Second-line treatment for NSCLC clinically shows superior PFS data compared to competing products. Furthermore, the first-line treatment for NSCLC with befortinib was accepted by the NMPA in January 23, and the company expects this indication to be approved for marketing within the year. We believe that as befortinib enters a new stage of commercialization and new indications are approved, the company will receive sales shares and milestone payments, and the proceeds will help improve the company's financial situation.
KRAS G12C inhibitor D-1553 has been authorized for domestic rights, and domestic progress is leading.
On August 4, 2023, the company announced that it would authorize D-1553 domestic equity with an initial payment of up to RMB 260 million and R&D milestone payments of up to RMB 260 million, sales milestone payments of no more than RMB 290 million, and future license royalties for the product to Zhengda Tianqing. D-1553 is leading the domestic progress. The company expects D-1553 to submit a new drug marketing application for NSCLC, which treats the KRAS G12C mutation, by the end of 23, and the product is expected to be approved for marketing in 2024. In addition, the company will announce phase 2 clinical data of D-1553 plus cetuximab treatment of CRC and single-drug treatment of pancreatic cancer at the 2023 ESMO conference. We think we can focus on reading the product's subsequent clinical data.
A variety of products have been registered clinically, and clinical trials have progressed smoothly. Another SERD small molecule inhibitor, D-0502, is being clinically tested simultaneously in China and the US in the company pipeline, and domestic registration phase 3 clinical trials for HR+ HER2-breast cancer are being carried out in an orderly manner; in addition, the URAT1 inhibitor D-0120 is undergoing phase 2b clinical trials domestically and phase 2 clinical trials in the US. The clinical trials of many of the company's products are progressing steadily.
Profit forecasting and valuation
Since the company authorized D-1553 to Zhengda Tianqing, the company expects to receive a certain amount of initial payment within 23 years and a certain amount of milestone payment after D-1553 is approved. Therefore, we raised our 23/24 revenue forecast by 44%/222% to 2.62/116 million yuan, respectively, and raised the 23/24 net profit forecast from -463/-590 million yuan to -278/-458 million yuan, respectively. The 23/24 revenue and profit adjustment is mainly due to payments related to product business cooperation. In the future, the company will mainly obtain product sales share. In the long run, the internal value of authorized products remains unchanged. We maintain our outperforming industry rating and target price of 20.0 yuan unchanged. Using the DCF valuation method, there is 53.3% upward space compared to the current stock price.
risks
New products are launched; clinical trial data and sales fall short of expectations; competition intensifies.