Incident: On March 28, 2024, the company released its 2023 annual report: annual revenue of 705 million yuan, up 54.86% year on year; net profit to mother - 395 million yuan, a decrease of 86 million yuan compared with the same period of the previous year; net profit after deducting non-return to mother - 472 million yuan, a decrease of loss of 51 million yuan over the same period of the previous year; basic earnings per share - 0.95 yuan.

Among them, the company achieved operating income of 244 million yuan in the fourth quarter, an increase of 232.32%; net profit to mother of -12 million yuan, a decrease of loss of 213 million yuan over the same period of the previous year; net profit after deducting non-attributable net profit of -52 million yuan, a decrease of loss of 178 million yuan over the same period last year.

Self-immunity and anti-tumor drugs have led to rapid revenue growth.

The company is actively expanding domestic and foreign markets, and the revenue of autoimmune and anti-tumor drugs has been steadily increasing.

(1) Autoimmune drugs: Achieved sales revenue of 490 million yuan in 2023, an increase of 54.09% over the previous year, accounting for 69.52% of revenue. BAT1406 (adalimumab) is an adalimumab biosimilar drug independently developed by the company. By the end of 2023, it had been approved for eight domestic indications, and cooperation was reached with more than 1,000 prescription hospitals and more than 1200 pharmacies. Sales in 2023 increased steadily over the same period last year; BAT1806 (tocilizumab) was approved for domestic marketing in January 2023, further expanding autoimmune varieties.

(2) Antitumor drugs: Achieved sales revenue of 209 million yuan in 2023, a year-on-year increase of 67.59%, accounting for 29.62% of revenue. BAT1706 (bevacizumab) was approved for domestic marketing in November 2021. Drug sales commission revenue and sales milestone revenue increased, driving the growth of anti-tumor drug revenue.

Multiple biosimilar drugs going overseas contribute to income elasticity.

(1) BAT1806 (tocilizumab): In September 2023, the US FDA approved the listing of BAT1806. BAT1806 is the first monoclonal antibody drug independently developed and produced by a local Chinese pharmaceutical company and approved for marketing by the US FDA. It is also the first toclonal antibiotic similar drug approved by the US FDA. In April 2021, the company signed a licensing and commercialization agreement to license BAT1806's exclusive product rights in the global market other than China to Biogen for a fee.

(2) BAT1706 (bevacizumab): In December 2023, the US FDA approved the listing of BAT1706. The company has licensed the development and commercialization of BAT1706 in the Chinese market to BeiGene, and has licensed commercial rights in international markets such as the US, Europe, and Canada for a fee to Sandoz.

(3) BAT2506 (golimumab), BAT2206 (usinumab), and BAT2306 (scuchiumab): BAT2506 and BAT2206 have completed global phase III clinical trials, and BAT2306 is in the global phase III clinical trial. The company has reached cooperation with Pharmapark on BAT2506 in Russia and other CIS countries; it has successively licensed the exclusive commercial rights of BAT2206 to Hikma for a fee in the US market, and distributed and sold BAT2206 in Russia and other CIS countries to Pharmapark for a fee. We expect that in 2024, the company will intensively license the above three varieties to further expand the overseas markets of the company's biosimilar sector.

The innovative drug pipeline is progressing smoothly.

The PCI perioperative antithrombotic drug BAT2094 (batifiban) is a peptide-based beta3 integrin receptor inhibitor that blocks fibrinogen, Von Willebrand factor, and other adhesion ligands from binding to the glycoprotein receptor αIIBβ3, thereby blocking platelet crosslinking and platelet aggregation. It is currently in the domestic marketing application stage.

BAT8006, an antibody-drug conjugate (ADC) targeting folic acid receptor α (FRα) developed by the company, consists of a recombinant humanized anti-FRα antibody and a toxic small molecule topoisomerase I inhibitor connected through a shear connector developed independently by the company. Early data on dose escalation in phase I/II clinical studies was read in August 2023. It progressed third in the domestic FRα ADC circuit, and the efficacy data of the small sample was superior to the two varieties progressing faster.

Profit forecast and investment rating: The company's approved new products are expected to continue to be released. Going overseas contributes to revenue flexibility, and future revenue will grow rapidly. We estimate that in 2024-2026, the company's revenue will be 1,420 million yuan/2,059 billion yuan/3.137 billion yuan, with year-on-year growth rates of 101.47%/45.01%/52.36%, respectively, and net profit to mother of -39 million yuan/138 million yuan/535 million yuan respectively, maintaining the “buy” rating.

Risk warning: Overseas licensing and approval progress falls short of expectations, overseas partner sales capacity falls short of expectations, risk of failure in clinical trials of new drugs.