Kaitani's full-year sales slightly exceeded expectations, and net loss narrowed markedly after deducting one-time revenue: the company's revenue in 2023 was 4.53 billion yuan, +440% over the same period last year. Among them, Cardonil's sales were 1.36 billion yuan (660 million in the first half of the year, 750 million in the second half of the year, +24% month-on-month), +149% year-on-year, slightly exceeding our expectations of 1.31 billion yuan. The company anticipates sales of Kantani in 2024. Annual R&D expenses were 1.25 billion yuan, -5% year-on-year, accounting for 78% of product revenue (vs. 159% in 2022). The decrease in expenses was mainly due to reduced reliance on CRO in clinical team building. The company achieved annual profit for the first time in 2023 (1.94 billion yuan). After deducting the impact of one-time technical licensing, or cooperative revenue, the net loss was 790 million yuan, which is a significant narrowing compared to the loss of 1.43 billion yuan in 2022. By the end of 2023, the company's cash reserves reached 4.90 billion yuan, laying a solid foundation for subsequent global clinical research and development.
A year in which major catalysts were concentrated: In 2024, the company is expected to receive approval for three innovative drugs: evosimab (PD-1/VEGF double antibody), iroximab (IL-12/IL-23), and inucimab (PCSK9). It is important for evosimab. In addition to being approved for the first time in China, important clinical catalysts include: 1) The AK112-303 study (single-drug head-to-head K drug first-line treatment of PD-L1+NSCLC) is expected to be analyzed around the middle of the year, which has certain indicative effects on other PD-1 head-to-head tests and overseas; 2) the data will be released after the AK112-301 study is approved. We also recommend focusing on the data readout of ketanil for 1L gastric cancer and 1L cervical cancer, the NDA declaration for the second self-exempt variety gumocimab (IL-17), and PoC data for various combination therapies.
Early pipeline focus: 1) Global multi-center MDS phase II and China AML phase II progress of potential best-in-class CD47; 2) clinical promotion or IND application for a variety of potential first-of-its-kind double/multiple antibodies (PD-1/LAG-3, TIGIT/TGF-beta, IL-4R/ST2, macrophage-regulating triple antibodies, etc.); 3) ADC platform debut. The company expects the first ADC to enter clinical trials by the end of 2024.
Target price increase: Our 2024/25E net loss/net profit forecast was narrowed/raised slightly to reflect the higher profit margin forecast. For the first time, we introduced profit forecasts for 2026 and revenue forecasts for gumocizumab (PoS adjusted peak sales of 1.1 billion yuan). Based on the DCF model, we raised our target price to HK$70 (previously HK$67). Considering the company's industry-leading R&D and commercialization execution, the visibility of a major catalyst launch, and a 40% potential share price increase, we maintain our buy rating and continue to select the company as one of our industry's top tenders.