REMEGEN(9995.HK)：WIDE CLINICAL STUDIES TO UNLOCK GLOBAL POTENTIAL

机构：招银国际
研究员：Jill WU/Andy WANG

　　In FY22, RemeGen recorded revenue of RMB768mn, including RMB738mn product sales from RC18 and RC48, compared to RMB131mn product sales in FY21. The Company improved its product gross profit margin from 48.9% in 2021 to 63.4% in 2022. The SG&A expenses in FY22 were RMB713mn, +47.7% YoY, due to the significant expansion in salesforce and increasing marketing activities following the approvals of RC18 and RC48 in 1H21. The R&D expenses increased 38.1% YoY to RMB982mn in FY22, mainly driven by the increase in clinical trial spending and employee benefit expenses. In FY22, the Company recorded net loss of RMB999mn compared to net profit of RMB276mn in FY21. Recall that, in FY21, RemeGen received collaboration income of RMB1,291mn for out-licensing RC48 to Seagen. As of end-2022, the Company has a healthy cash balance of RMB2.07bn.
　　Development of RC18 for multiple autoimmune diseases moved to the　next stage. Conditionally approved for SLE in China, the confirmatory Ph3 trial of RC18 in SLE has released promising efficacy data and the full approval is currently under CDE review. The Company is also exploring RC18 for the treatment of child SLE and lupus nephritis. RemeGen has released positive Ph2 study results for IgA, pSS and MG, all of which are highly underserved patient populations in China. Thus, RemeGen will all start patient enrolment of Ph3 trials for the above-mentioned three indications in 2Q23 in China. In the overseas markets, the MRCT trial of RC18 for SLE is enrolling patients across the US, Europe, APAC and other regions. The Company will start a Ph3 trial of RC18 for MG in the US in 2H23. Additionally, the Ph3 trials of RC18 for IgA and pSS have also been approved by the FDA. With promising PoC data released, we see large potential of RC18 for these underserved autoimmune diseases, and expect potential blockbuster out-license deal.
　　RC48 to explore frontline treatment and underserved HER2-low　market. The NRDL added RC48 for treatment of 2L UC with stable pricing, which will drive the product sales remarkably. To explore RC48’s potential in earlier lines of UC treatment, RemeGen is conducting several studies, including a Ph3 trial of RC48+toripalimab for 1L HER2-expressing UC, a Ph2 trial for perioperative MIBC, and planning to start a trial for NMIBC. For GC, RemeGen received the IND approval to initiate an investigational study assessing RC48 + toripalimab + chemo/trastuzumab for 1L HER2- expressing GC. For BC treatment, a Ph3 trial for HER2-low BC is ongoing with 279 patients enrolled by end-2022. RemeGen also received IND approvals recently to explore RC48 for BC neoadjuvant treatment, including HR+/HER2-low (+Tuoyi/letrozole), HER2+ (+pertuzumab+/-Tuoyi), and HR- /HER2-low (+Tuoyi/chemo). In the US, Seagen plans to start a Ph3 trial of RC48+Keytruda for 1L HER2-expressing UC in 2H23.
　　Maintain BUY. We revised our DCF-based TP from HK$79.13 to HK$71.89 (WACC: 10.95%, terminal growth rate: 3.0%).