In 2Q24, RemeGen recorded strong product sales, with revenue reaching RMB411mn (+77% YoY), mainly from the product sales of RC18 and RC48, compared to RMB330mn in 1Q24 (+24% QoQ) and RMB254mn in 2Q23 (+62% YoY). The total product sales were RMB729mn in 1H24 (+75% YoY), representing approximately 47% of our previous FY24 estimate, largely in line with our expectations. We are reassured that the Company is on track to meet its FY24 sales target of 50%+ YoY increase. The GP margin (vs product sales) improved slightly to 76.8% in 1H24 (vs 75.9% in FY23). RemeGen’s SG&A expense ratio (vs product sales) decreased from 79% in 1Q24 to 67% in 2Q24. In 2Q24, the R&D expense was RMB475mn, vs RMB331mn in 1Q24, with the 43% QoQ increase mainly due to the ongoing pivotal studies, especially in the US. The Company recorded a wider net loss of RMB432mn in 2Q24 (vs RMB349mn in 1Q24). As of Jun 2024, RemeGen had a cash balance of RMB873mn (incl. financial assets), with RMB933mn short-term borrowings and RMB1,342mn long- term borrowings, indicating a need for additional financing. Additionally, RemeGen recently revised its plan to raise up to RMB1.95bn by issuing additional A-shares.
Looking forward to RC18’s global development. The first stage of
　　RC18’s Ph3 global SLE trial (NCT05306574) has completed enrolment of 90 patients as of 1Q24. We expect the Company to unblind the first-stage study in 1Q25 after a 52-week treatment period for the enrolled patients. Concurrently, the enrollment for the second stage of the Ph3 study is underway. We anticipate the data release of the first stage could act as a significant catalyst for a potential out-licensing deal for RC18. A parallel global Ph3 study of RC18 in SLE (NCT06456567) has also been registered. Additionally, a global Ph3 trial of RC18 for MG is ongoing in the US with FPI in Aug 2024. The US FDA has also approved Ph3 trials of RC18 for pSS and IgAN. In China, RC18 was recently approved for RA in Jul. The China Ph3 trial of RC18 for MG met the primary endpoint in Aug 2024, with the sNDA expected to follow. The China Ph3 trials in pSS and IgAN also completed enrolment in May.
　　Smooth clinical progress of RC48. In China, RC48 has already been approved for use in 2L+ UC and 3L GC. A China Ph3 trial of RC48 in HER2- positive BC with liver metastasis met the primary endpoint in Jun 2024, with sNDA expected to be filed shortly. Additionally, a Ph3 trial of RC48 in HER2- low BC is currently ongoing. To expand RC48’s use for front-line treatment, a Ph3 trial of RC48+toripalimab for 1L HER2-expressing UC has completed enrolment in Aug 2024. Furthermore, a Ph2/3 trial of RC48 + toripalimab + chemo or RC48 + toripalimab + trastuzumab in 1L GC is ongoing. Internationally, Seagen/Pfizer is conducting a pivotal Ph2 trial of RC48 as a monotherapy in 2L HER2-expressing UC and a Ph3 trial of RC48 + Keytruda in 1L HER2-experssing UC.
　　Maintain BUY. We expect RC18 and RC48 to maintain strong sales momentum in China. Nevertheless, considering the delayed progress of the international collaboration deal for RC18 and the risk of liquidity, we revise down our DCF-based TP from HK$41.72 to HK$19.59 (WACC: 12.93%, terminal growth rate: 2.0%).