【行业研究报告】荣昌生物-Awaiting the fruition of overseas BD collaborations

2Apr20242Apr2024CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdateRemeGen(9995HK)AwaitingthefruitionofoverseasBDcollaborationsRemeGenrecordedRMB1.08bnofrevenueinFY23,includingRMB1.05bnfromproductsales(+42%YoY),contributedequallybyRC18andRC48.InFY23,GPmargin(vsproductsales)increasedto76.9%(vs63.4%inFY22).Sellingexpenseratio(vsproductsales)increasedfrom60%inFY22to74%inFY23,mainlyduetoanincreaseinsalesheadcount.InFY23,R&Dexpensesroseby33%YoYtoRMB1,306mn,duetothespendinginlate-stagetrials.RemeGenrecordedawiderattributablenetlossofRMB1,511mninFY23(vsRMB999mninFY22).Asofend-2023,RemeGenhadacashbalanceofRMB727mn,andmgmt.claimedaboutRMB4.4bninbankcredit.Mgmt.believesthatthecurrentfundinglevelswillsustainbusinessoperationsforaminimumoftwoyears.Additionally,RemeGenrecentlyannouncedplanstoraiseuptoRMB2.55bnbyissuingadditionalA-shares.Expectsalestoramp-upquicklyin2024.RemeGensetaFY24productsalestargetofatleasta50%YoYincrease.Weremainpositivetowardtheguidancebecause:1)salesofbothRC18andRC48haveperformedstronglyYTDaspermgmt;2)thenewlyaddedsalesforcein2023maystarttocontributesignificantlytosalesin2024;and3)theinclusionofRC18inover300newtop-gradehospitalsandRC48inover200newtop-gradehospitalsin2023shouldboostproductsales.WeexpectRC18andRC48toexperienceanuptakeinFY24,withRC18takingaslightlead.LookingforwardtonextstepofRC18’sglobaldevelopment.ThefirststageofRC18’sPh3globalSLEtrialhascompletedenrolmentof90patients.RemeGenisinternallydiscussingwhethertounblindthefirst-stagestudyorkeepitblindedaspartofthesecondstage.ThecompanyexpectstostartenrollingforthesecondstageofthePh3studybymid-2024,whichwillbefollowedbyanotherPh3studyasrequiredbytheFDA.Ifthedatafromthefirst-stagestudyarereleased,webelieveitcouldserveasastrongcatalystforRC18'sglobaldevelopmentstrategyandpotentialout-licensingdeals.Ifkeptblinded,itcouldexpediteRC18'sglobaldevelopment.Additionally,aPh3trialofRC18inMGisongoingintheUSwithaPh3pSStrialinplanning.AwaitingoverseasBDcollaborations.WebelievethatRC18remainstheforemostcandidateforinternationalBDpartnerships.WethinkRC18couldstillbethetoppriorityofoverseasBDcollaboration.RC88(MSLNADC)receivedafasttrackdesignationfromtheFDA,withPoCdatatobereleasedatASCOinJun.RemeGenplanstostartaPh2MRCTstudyintheUS,EU,China,etc.TheprospectsforRC88tosecureanout-licensingagreementarepromising.WethinkthatrevenuestreamsfromsuchBDcollaborationswillplayacrucialroleinunderpinningRemeGen'srobustgrowthtrajectory.MaintainBUY.WeexpectRC18andRC48toregainstrongsalesmomentumin2024andbeyond.WereviseourDCF-basedTPfromHK$57.65toHK$41.72(WACC:11.33%,terminalgrowthrate:2.0%).TargetPriceHK$41.72(PreviousTPHK$57.65)Up/Downside53.7%CurrentPriceHK$27.15ChinaHealthcareJillWU,CFA(852)39000842jillwu@cmbi.com.hkAndyWANG(852)36576288andywang@cmbi.com.hkStockDataMktCap(HK$mn)14,778.6Avg3mthst/o(HK$mn)69.252wHigh/Low(HK$)52.00/15.22TotalIssuedShares(mn)544.3Source:FactSetShareholdingStructureHKSCCnomineeslimited34.8%YantaiRongda18.8%Source:HKExSharePerformanceAbsoluteRelative1-mth21.5%21.8%3-mth-27.5%-25.3%6-mth-32.6%-27.5%Source:FactSet12-mthPricePerformanceSource:FactSetEarningsSummary(YE31Dec)FY22AFY23AFY24EFY25EFY26ERevenue(RMBmn)7681,0761,6012,6953,954YoYgrowth(%)(46.1)40.248.868.346.7Netprofit(RMBmn)(998.8)(1,511.2)(1,451.0)(1,069.8)(361.6)EPS(Reported)(RMB)(1.88)(2.80)(2.67)(1.96)(0.66)R&Dexpenses(RMBmn)(982)(1,306)(1,306)(1,250)(1,384)Adminexpenses(RMBmn)(273)(314)(400)(512)(633)Source:Companydata,Bloomberg,CMBIGMestimates