RemeGen Co Ltd
　　Soft commercialisation in 2023; guidance of at least 50% YoY growth in drug sales in 2024
　　RemeGen announced 2023 results with revenue up 40.2% to RMB1.08bn and net loss widened from RMB998.8m in 2022 to RMB1.5bn in 2023, in line with the preliminary results. The management expects at least 50% YoY growth in drug sales in 2024, with higher revenue contribution from RC18 than RC48. We believe RemeGen’s current valuation has already reflected its soft commercialisation in 2023 and market concern over its tight cash position. Eyes on overseas pipeline progress of RC18. Maintain BUY and cut TP to HK$46.
　　Key Factors for Rating
　　Soft commercialisation amid industry headwind: RemeGen announced 2023 results with revenue up 40.2% to RMB1.08bn and net loss widened from RMB998.8m in 2022 to RMB1.5bn in 2023, in line with the preliminary results. The widened loss was mainly due to surging R&D expense and selling expenses, partially offset by improved gross profit margin (76.5% in 2023 vs. 64.8% in 2022). R&D expenses increased by 33% YoY to RMB1.3bn, with R&D expense ratio decreasing by 7ppts to 121%. Meanwhile, selling expenses increased by 76% YoY to RMB775m, with selling expenses ratio increasing by 15ppts to 72%. Revenue from telitacicept (RC18) and disitamab vedotin (RC48) was c.RMB520m and c.RMB530m, respectively. In terms of commercialisation, RC18/RC48 has 700+/500+ salesperson, and has been admitted to 800/650 hospitals (+300/+200 hospital in 2023).
　　2024 outlook: the management expects at least 50% YoY growth in drug sales in 2024, with higher revenue contribution from RC18 than RC48. The management shared that despite lingering impact of industry rectification activities, not only the impact is mitigating, but also both RC48 and RC18 see faster hospital entry in 1Q24. In terms of sales and marketing, RemeGen expects the number of salesperson remain at current level, with more devoted to marketing, leading to decrease in selling expenses ratio. In terms of cash position, as of December 31, 2023, RemeGen has cash of c.RMB730m, and the management believes that it has sufficient capital source to meet daily operational needs, including secured loan credit of c.RMB4bn, revenue from BD projects, and refinancing, etc.
　　Key Risks for Rating
　　(i) Slower-than-expected sales ramp-up of RC18 and RC48; (ii) delay or failure of major clinical trials; and (iii) change of key management.