20221104-招银国际-荣昌生物-B-09995.HK-A_pioneer_biopharma_in_innovative_ADC_and_fusion_protein_medicines_49页_3mb

RemeGen (9995 HK) Summary

Core Content

RemeGen is a leading biopharmaceutical company based in China, specializing in the development of innovative ADC (Antibody-Drug Conjugates) and fusion protein medicines. Founded in 2008 and listed on the HKEx in November 2020, the company has evolved into a fully integrated biopharma with two internally developed innovative biological drugs, RC18 and RC48, already approved in China. The company is currently initiating its equity research coverage with a "BUY" rating and a target price of HK$79.13, indicating strong growth potential.

Main Points

• Innovative Drug Pipeline: RemeGen has developed over 10 drug candidates, with 7 in clinical stages targeting more than 20 indications. RC18 and RC48 are its two commercial-stage drugs.
• RC18 (Telitacicept): A TACI-Fc fusion protein, potentially best-in-class for SLE treatment. Approved in China in March 2021, it demonstrated a significant 44.5% increase in SRI-4 response rate in its Phase 3 trial compared to the control group. It is also being evaluated for multiple autoimmune diseases, including IgAN, pSS, MG, and RA.
• RC48 (Disitamab vedotin): The first-to-market domestic HER2-targeting ADC in China, approved for GC and UC in 2021. It is being developed for front-line treatment and has a favorable safety profile. RemeGen has out-licensed RC48 to Seagen, securing up to US$2.6bn in upfront and milestone payments, along with future sales royalties.
• RC28: A VEGF/FGF dual-targeting fusion protein with potential FIC status. It is being developed for ophthalmic diseases like wet AMD and DME, offering a differentiated approach with a long half-life and reduced dosing frequency.
• Proprietary R&D Platforms: RemeGen operates on three specialized platforms: (1) Antibody and fusion protein platform, (2) ADC platform, and (3) Bifunctional antibody (HiBody) platform, enabling the development of a variety of BIC/FIC biologics.
• Talent and Manufacturing: The company has a strong R&D team led by Dr. Fang Jianmin, and a total of 2,500 employees as of June 2022, with 44% involved in R&D. Manufacturing capacity is expanding, with current annual output of 2.3 million vials for antibodies and 1.5 million for ADCs, projected to increase to 80,000L by 2025.
• Financial Outlook: Revenue is expected to grow significantly from FY22E to FY24E, with estimates of RMB860mn, RMB1,344mn, and RMB2,189mn respectively. Despite net losses in FY22E and FY23E, the company is anticipated to see strong sales ramp-up.
• Investment Risks: Potential failure in clinical trials or regulatory approvals, and competition from established and emerging biologics in both China and overseas markets.

Key Information

• RC18: Approved for SLE in China (March 2021), included in the National Reimbursement Drug List (NRDL) in January 2022. Demonstrated strong efficacy and safety in clinical trials, with an 82.6% SRI-4 response rate in its Phase 3 trial.
• RC48: Approved for GC (June 2021) and UC (December 2021) in China. Out-licensed to Seagen, securing substantial financial incentives. Targets HER2-low tumors, addressing a large unmet medical need.
• RC28: A dual-targeting fusion protein for ophthalmic diseases, with the potential to reduce dosing frequency and treatment costs.
• Valuation: Target price of HK$79.13 is derived from a DCF model with a WACC of 10.25% and a terminal growth rate of 3.0%.
• Catalysts: Sales ramp-up, data readouts from Phase 3 trials of RC18, indication extensions for RC48, and potential out-licensing of RC18.

Financial Analysis

Company Overview

• Founded: 2008
• Headquartered: Yantai, Shandong, China
• Locations: Research labs and offices in Beijing, Shanghai, San Francisco, and Washington
• Market Cap: HK$30,478.7 million
• Employees: 2,500 as of June 2022, with 44% in R&D
• Shareholding Structure:
  • HKSCC nominees limited: 33.6%
  • Yantai Rongda: 18.8%

Conclusion

RemeGen is positioned as a key player in the development of innovative biologics, particularly in the areas of autoimmune diseases and oncology. With a robust pipeline, strong R&D capabilities, and strategic collaborations, the company is well-equipped to expand its market presence both domestically and internationally. The "BUY" rating and target price reflect the positive outlook on its future growth and commercialization potential.