occurrences

Cinda Biotech announced 2024 H1 results: total revenue of 3.95 billion yuan (+46.3%), of which product revenue was 3.81 billion yuan (+55.1%). Gross profit margin 82.9% (+1.6pct); R&D expenses 1.4 billion yuan (+51.6%), R&D expenses rate 35.4% (-27.1pct); sales expenses 1.88 billion yuan (+39.5%), accounting for 49.3% (-5.5pct) of product revenue; management expenses 0.32 billion yuan (-13.2%), management expenses ratio 8.1% (-5.5pct). A loss of 0.39 billion yuan during the period and a loss of 0.14 billion yuan in the same period last year. LBITDA during the period was 0.39 billion yuan, an increase of 0.18 billion yuan over last year's 0.22 billion yuan. The adjusted LBITDA for the period was 0.16 billion yuan, a decrease of 39.9% compared with 0.27 billion yuan last year. As of June 30, 2024, the company's total cash and short-term financial assets were $10.11 billion ($10.97 billion as of December 31, 2023).

reviews

The diversification of the company's listed products has obvious advantages, and operational efficiency is constantly improving. The company's H1 revenue grew strongly in '24, with product revenue of 3.81 billion yuan (+55.1%), or +16.5% month-on-month.

We believe that the rapid increase in product revenue is mainly due to the excellent sales performance of dabershu (PD-1 monoclonal antibody) and three biosimilar drugs, while the rapid release of new products such as Xiranze (VEGFR-2 monoclonal antibody) and Ruituo (RET inhibitor) added impetus to revenue growth. In 2016 H1, the company's gross margin continued to increase (82.9%, +1.6pct), and sales and management expenses continued to decline, reflecting the continuous improvement of the company's operating efficiency. An adjusted LBITDA of 0.16 billion yuan was achieved in H1 in '24. We believe that with the continuous enrichment of the company's commercial product portfolio and improvement in marketing output, the company is expected to achieve the goal of turning losses into profits after 25 years of adjusted EBITDA.

Early pipeline catalysis in the field of oncology was abundant, and the construction of commercial teams in the non-oncology field was progressing steadily. Oncology field: In August 2024, Dabert (KRAS G12C) was approved for marketing by NMPA; tarretinib (ROS1) is expected to be approved in H2 in '24. The two products will help the company grow sustainably in the medium to long term. In terms of early pipeline, IBI363 (PD-1/IL-2α-Bias) will update NSCLC phase 1 (including 3 mg/kg), CRC partial combination treatment group phase 1, and melanoma phase 1 study data; IBI343 (CLDN18.2 ADC) will update pancreatic cancer phase 1 research data; and IBI354 (HER2 ADC) will update phase 1 research data such as breast cancer in H2 in '24. We believe IBI363 (PD-1/IL-2α-Bias), IBI343 (CLDN18.2 ADC), and IBI389 (CLDN18.2/CD3) are highly competitive and reflect the company's ability to innovate. It is recommended to focus on subsequent clinical data readings.

Non-oncology field: An NDA has been submitted for 6mg dose reduction with Maxidu peptide (GLP-1R/GCGR), and it is expected that H1 will be approved for marketing in 25 years. The indication for treating thyroid eye disease with tetuumab (IGF-1R) has been submitted for NDA and is expected to be approved for marketing in 25 years. The phase 3 clinical trial of picontibalizumab (IL-23p19) for psoriasis has reached the end point, and it is planned to submit an NDA in H2 in 24 years. The company's preparations for the launch of new drugs and the expansion of the commercialization team are expected to collaborate with other sales teams that have already commercialized the pipeline to lay the foundation for the company's medium- to long-term revenue growth.

valuations

In line with the company's strong growth in H1 revenue in 2024, we adjusted the total revenue for 2024-26 to 7.86/10.25/13.39 billion yuan (2024-26 previous value: 7.33/9.65/12.06 billion yuan), +26.7/30.3%/30.7% year-on-year.

We expect the company as a whole to turn a loss into profit in 2026, achieving a net profit of 0.76 billion yuan to mother. We used the DCF model to value the company using FY24-32 cash flow. Based on WACC 9.8% (unchanged) and a sustainable growth rate of 4.0% (unchanged), assuming an exchange rate of RMB: HKD= 1:1.10, the target price was adjusted to 67.8 HKD/share (previous value: 59.9HKD/share) to maintain the “superior to the market” rating.

risks

New drug review risks, new drug development risks, new drug commercialization risks, product iteration risks, etc.