JWG Finance | PU Yin International issued a research report stating that Innovent Bio (01801) achieved total revenue of 3.95 billion yuan in 1H24 (+46.3% YoY, +12.8% HoH), with product revenue of 3.81 billion yuan (+55.1% YoY, +16.5% HoH), in line with the previously announced product revenue. Adjusted non-IFRS net loss was 0.16 billion yuan (-15.9% YoY, -50.6% HoH), better than the bank's and market expectations, mainly due to revenue surpassing the bank's previous forecasts, gross margin exceeding expectations, non-operating items' other income and other gains higher than the bank's prior predictions. EBITDA loss further narrowed to 0.161 billion yuan, down 40% year-on-year, 51.7% quarter-on-quarter, also exceeding the bank's expectations.

The bank continued to point out that the impressive growth of product revenue was benefited by the strong growth of Tyvyt and three bio-similar drugs, as well as the good growth of other new products on the market (such as Selpercatinib and Sitravatinib), combined with the relatively low base in 1H23 (partly due to the impact of the novel coronavirus). According to Lilly's statistics, Tyvyt's sales in the first half of the year were approximately 1.7 billion yuan (about 45% of the half-year product revenue), up by about 47% year-on-year and about 5% quarter-on-quarter. Excluding Tyvyt's revenue, the bank calculated that the sales revenue of other products in the first half of the year was approximately 2.1 billion yuan, accounting for about 55% of the half-year sales revenue, up by about 60% year-on-year and about 37% quarter-on-quarter. Management indicated that the three bio-similar drugs have become the second largest revenue growth driver for the company, mainly benefiting from the first-mover advantage and extensive hospital coverage. Additionally, the revenue growth of the newly launched drugs Selpercatinib (RET inhibitor, launched in March 2023) and Sitravatinib (VEGFR2, launched in November 2022) is also impressive. With more innovative drugs approved and further growth in revenue scale, the company's product gross margin (based on product revenue) has further increased to 82.2% (+2.8ppts YoY/+1.5ppts HoH).

The bank stated that the company reaffirmed its medium-to-long-term guidance, aiming to achieve non-IFRS EBITDA breakeven by 2025 and 20 billion yuan in revenue by 2027. For 2024, the company did not provide specific revenue guidance. Benefiting from the strong growth in 1H24, while noting a high historical base in 2H23, the bank believes that the second half of 2024 is expected to achieve approximately 30% revenue growth.

According to the updated financial data, the bank narrowed its forecast for adjusted non-IFRS net loss in 2024 by 19%, raised forecasts for adjusted non-IFRS net income in 2025 and 2026, mainly due to increased revenue forecasts, higher gross margin, slightly increased R&D expenses, and reduced administrative cost forecasts (benefiting from further improvement in the company's operational efficiency). Based on the DCF valuation model (WACC: 8.5%, perpetual growth rate: 3%), the bank maintains a 'buy' rating on the company and a target price of 60 Hong Kong dollars unchanged.