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Biocytogen (2315 HK) Summary

Core Content Overview

Biocytogen, a biotechnology company listed on the Hong Kong Stock Exchange, is expected to experience continued revenue growth in FY22E and beyond, despite persistent net losses. The company is leveraging its RenMice platform and in vivo efficacy screening methodology through Project Integrum, which has driven numerous business development (BD) deals with biotech and biopharma companies. This strategic initiative is anticipated to be a key driver for future revenue growth.

Financial Performance and Forecasts

Revenue Growth

• FY20A: RMB254mn
• FY21A: RMB355mn (+49.3% YoY)
• FY22E: RMB533mn (+50.2% YoY)
• FY23E: RMB782mn (+46.9% YoY)
• FY24E: RMB1,098mn (+40.3% YoY)
• 2025E: Expected to turn profitable.

Net Profit and EPS

• FY22E: Net loss of RMB566.5mn, EPS of RMB-1.42
• FY23E: Net loss of RMB357.3mn, EPS of RMB-0.89
• FY24E: Net loss of RMB203.5mn, EPS of RMB-0.51
• 2025E: Expected to be profitable.

ROE

• FY20A: -89.8%
• FY21A: -40.3%
• FY22E: -46.8%
• FY23E: -36.1%
• FY24E: -28.7%

R&D Expenses

• FY20A: RMB276mn
• FY21A: RMB558mn
• FY22E: RMB656mn
• FY23E: RMB626mn
• FY24E: RMB659mn

Business Development (BD) Deals

Project Integrum

• Launched in March 2020, this project focuses on generating and screening antibodies against over 1,000 potential targets.
• As of August 2022, the project has completed 980+ target knock-outs, with 280+ entering the antibody immune stage and 40+ in the molecular screening stage.
• Expected to complete 200-300 antibody molecule selections annually.

Key BD Partnerships

• 28 co-development deals as of June 2022, with 11 achieved in 1H22.
• Additional partnerships in 2H22 include ADC Therapeutics, Finelimmune, Hansoh, ISU, Syncromune.

Out-License Deals

• YH008 (PD-1/CD40): Out-licensed to Chipscreen with total payments up to RMB596mn.
• Other in-house assets with out-license opportunities: YH003 (CD40 mAb), YH006 (CTLA-4/OX40), YH012 (bsAb ADC), YH013 (bsAb ADC).
• YH008 is in Phase 1 trials in the US and China, which may facilitate future ex-China deal discussions.

Valuation and Investment Outlook

• Target Price (TP): HK$40.51 (revised from HK$43.85), based on a 14-year DCF model with a WACC of 10.7% and terminal growth rate of 2.0%.

• Current Price: HK$25.00, implying a 62.1% upside.

• DCF Valuation (RMB mn):

  • 2022E: 14,407
  • 2023E: -
  • 2024E: -
  • 2035E: 40,035

• Sensitivity Analysis (HK$):

  • Terminal growth rate affects valuation significantly:
    • 3.0%: HK$55.58
    • 2.5%: HK$49.54
    • 2.0%: HK$40.51
    • 1.5%: HK$35.98
    • 1.0%: HK$33.26

• CMBIGM vs Consensus:

  • Revenue: CMBIGM forecasts are -9% to -11% lower than consensus.
  • Gross Profit: CMBIGM forecasts are -5% to -7% lower.
  • Net Profit: CMBIGM forecasts are NA compared to consensus.
  • Gross Margin: CMBIGM forecasts show an increase of +2.27 to +2.56 ppt.

Shareholding and Market Data

• Market Cap (HK$ mn): 9,985.0

• Average 3-Month Total Return (HK$ mn): 25.6

• 52-Week High/Low (HK$): 23.5 / 28.8

• Total Issued Shares (mn): 399.4

• Shareholding Structure:

  • Management: 27.5%
  • SDIC Shanghai: 18.3%

Share Performance

Analyst Ratings

• Maintain BUY with a target price of HK$40.51.
• BUY indicates a potential return of over 15% over the next 12 months.

Risk and Disclosure

• The report contains financial and market risk disclosures, emphasizing that past performance does not guarantee future results.
• CMBIGM is not a registered broker-dealer in the US, and the report is intended for major US institutional investors only.
• The report may include conflicts of interest due to CMBIGM's investment banking relationships with the companies mentioned.
• The report is subject to change and is for intended recipients only, with no prior written consent for reproduction or distribution.

Conclusion

Biocytogen is positioned to benefit from its Project Integrum and out-licensing strategy, with a focus on antibody development and CRO services. Despite current net losses, the company is expected to become profitable by 2025E, with revenue growth projected to continue at a moderate pace. The BUY rating reflects the company's potential for significant returns in the coming year, based on its strong BD pipeline and growth in revenue and gross margin.