Original title: An announcement exploded with a 40% increase, can 800 million US dollars save the company from fire and water?
High risk, high return.
Author | Xiao Yu'er
Edit | Xiaobai
On December 11, Baili Tianheng-U (hereinafter referred to as the "Company") issued an announcement on the global strategic cooperation agreement between its wholly-owned subsidiary SystImmune and Bristol-Myers Squibb (BMY.N) on the development and commercialization rights of BL-B01D1.
The next day, the company's share price directly 20CM limit, the 13th continued to rise 16.7%, two days up by 40%, after more than ten days of adjustment, as of December 25, the company's stock price rose 21% before the big rise.
Baili Tianheng tried an IPO as early as 2014, and finally went public successfully on January 6, 2023, just over a year ago, and the company's market value was 53.1 billion as of the close of the 25th, which is 5.36 times the listed market value.
(Source: Market Value APP)
So what kind of announcement is so powerful, and where does the company's market value support come from?
The world's only bispecific antibody ADC drug in the clinical stage
Bristimene Squibb will make an upfront payment of $800 million and up to $500 million in near-term contingent payments of up to $500 million following the entry into effect of an exclusive partnership agreement between SystImmune and Bristol-Myers Squibb for BL-B01D1, the company announced.
In addition, the company will receive up to $7.1 billion in additional payments upon reaching development, registration and sales milestones, with a potential total transaction value of up to $8.4 billion.
Investors should be excited by the $8.4 billion figure, but the company also cautioned that the milestone payments agreed in the cooperation agreement are subject to certain conditions, and the final milestone payments are uncertain.
However, after the cooperation agreement came into effect, the down payment of US$800 million contributed significantly to the company's performance in a short period of time.
The company's cooperation agreement can be analogous to Kelun Pharmaceutical's package of 7 preclinical ADC projects with an upfront payment of US$175 million and a milestone license of US$9.3 billion, as well as Akeso's co-licensing agreement with SUMMIT for its bispecific antibody drug ivoximab (AK112, PD-1/VEGF), and received a license fee income of 2.919 billion in the first half of 2023.
At the same time, Akeso's Kaitanil (AK104, PD-1×CTLA-4) product, as the world's first marketed tumor dual immune checkpoint bispecific antibody, was approved for marketing on June 29, 2022, and achieved revenue of 546 million yuan in the second half of 2022 and 606 million yuan in the first half of 2023, respectively, with outstanding performance.
The performance contributed by the above two drugs has made Akeso's loss-making performance for many years blossom and turn losses into profits, and make a profit of 2.525 billion yuan in the first half of 2023, which perfectly interprets the characteristics of high risk and high return in the field of innovative drugs.
(Chart: Market Cap APP)
BL-B01D1 is to Baili Tianheng what AK112 is to Akeso, and the arrival of the $800 million down payment will also make a earth-shaking change in the company's performance.
In terms of performance, we will talk about it in detail later, but now let's take a look at the BL-B01D1 product.
(Source: Company's 2023 semi-annual report)
BL-B01D1, SI-B001 and SI-B003 are the three innovative drugs that the company has made rapid progress, all of which are anti-tumor drugs, and all of them have entered phase II clinical trials for each indication.
In recent years, a series of innovative antibody drugs have been derived from the market, including bispecific antibodies, multispecific antibodies, antibody drug conjugates (ADCs), antibody fusion proteins, etc.
"ScienceBulletin", "Advances in Chemistry" and other related reports show that in the future, bispecific/multispecific antibodies and ADC drugs will become an important means of treating many diseases, including cancer.
According to the 2023 interim report, the company's BL-B01D1 is the world's only clinical-stage bispecific antibody ADC drug that can target both EGFR and HER3.
According to the company's announcement, BL-B01D1 monotherapy has shown strong efficacy signals in multiple epithelial tumor indications, especially in patients with non-small cell lung cancer and nasopharyngeal carcinoma in the final line, and has shown breakthrough efficacy that can advance to pivotal registration clinical trials.
At present, BL-B01D1 monotherapy is in the phase II clinical study stage, and has completed the submission of communication applications for 3 single-agent double-arm phase III registration clinical trials and 2 single-agent single-arm pivotal registration clinical studies.
The combination of BL-B01D1 and SI-B003, the combination with chemotherapy drugs, and the combination with osimertinib have all obtained Phase II clinical trial approval, and are advancing to Phase II clinical studies of related combinations.
SI-B001 is a bispecific antibody molecular drug targeting EGFR×HER3, and as of the interim report of 2022, SI-B001 has entered Phase III clinical trials for the indication of epithelial tumors such as non-small cell lung cancer.
According to the company's prospectus at the beginning of the year, SI-B001 is leading the way in the competitive landscape of HER3-targeted bispecific antibody drugs (including bispecific antibodies and bifunctional antibodies).
(Source: Company Prospectus)
SI-B003 is a bispecific antibody molecular drug targeting PD-1 × CTLA-4, according to the company's prospectus at the beginning of the year, in addition to the marketed AK104 product, there are 5 global PD-1 (L1) × CTLA-4 bispecific antibodies in the clinical stage, and the competition pattern is also good.
(Source: Company Prospectus)
Judging from the above information, the progress of the company's three innovative drugs is relatively advanced, but before the product is commercialized, all this still has great uncertainty.
The company was founded in 2006 and began to enter the field of innovative biological drugs in 2011, after more than 10 years of accumulation, it has achieved the current phased results, but the company still has no products on the market in this sector, and has not generated product sales revenue, which shows the significance of the 800 million down payment to the company.
The performance of traditional medicine is declining
After experiencing a high of 1.207 billion in 2019, the company's revenue fell all the way to 703 million in 2022, and only achieved 378 million revenue in the first three quarters of 2023, continuing to decline by 21% year-on-year.
(Source: Market Value APP)
At the same time, the company's net profit is also declining, barely breaking even in 2019 and 2020, turning from profit to loss in 2021, and the loss continues to expand, with losses of 282 million and 515 million in the first three quarters of 2022 and 2023 respectively.
At present, the company's revenue comes from the business segment of chemical drug preparations and Chinese patent medicine preparations, and the main sales varieties are anesthesia (propofol medium/long chain fat emulsion injection, propofol emulsion injection, dexmedetomidine hydrochloride injection), parenteral nutrition (medium/long chain fat emulsion injection) and other chemical generics, as well as Chinese patent medicine preparations such as astragalus granules and chaihuang granules.
Among them, the total revenue of the three anesthetic drugs has been around 50%, which has a great impact on the company's performance, and all of them have entered centralized procurement.
Among them, dexmedetomidine hydrochloride injection started centralized procurement with volume in December 2018, and at that time, the company's variety was still in the consistency evaluation review and was not qualified to participate in centralized procurement, and only Yangtze River Pharmaceutical exclusively won the bid.
The failure to participate in centralized procurement directly led to the company's sales revenue of dexmedetomidine hydrochloride injection from 134 million in 2019 to 27 million in 2021, of which 75% year-on-year in 2020 and 19% year-on-year in 2021.
Propofol medium/long-chain fat emulsion injection started the national volume procurement in February 2021, when the company's specifications of the variety had passed the national consistency evaluation and certification, but because the relevant certification documents were still in the process, it was unable to participate in this centralized procurement.
Similarly, without winning the bid for centralized procurement, the company's sales revenue of propofol medium/long-chain fat emulsion injection also declined sharply, from 363 million in 2020 to 117 million in 2021, a decrease of 68%.
If the bid is not won, the sales volume of centralized procurement products will drop sharply, and the price will also be lowered if there is to continue to be sales, and then the revenue and profit will decline sharply.
Although the sales volume will increase after winning the bid, the product price will drop significantly, and the increase in sales after winning the bid will also consider whether it can make up for the impact of the decline in the bid price.
For example, in addition to the above two anesthetics, propofol emulsion injection won the bid in Shandong local centralized procurement in 2021, of which the lowest winning bid prices of 10ml, 20ml and 30ml specifications were 82%, 78% and 72% lower than the average unit price in 2020, respectively.
At present, the company's three main varieties of anesthetics have been selected for centralized procurement in Henan (13 provinces) Alliance, Guangdong Alliance, Chongqing Alliance, Shandong, Hunan and other provinces and cities.
Among them, propofol medium/long-chain fat emulsion injection won the bid in the local centralized procurement of the 13 provincial alliances in 2022, and the winning bid price of the 20ml:0.2g specification was 77% lower than the company's average unit price of the specification in 2021.
Reflected in the gross profit margin, it is the continuous decline of the company's chemical drug gross profit margin, which has declined from a high of 87.3% in 2019 to 74.9% in 2022, and also caused the company's comprehensive gross profit margin to drop from 81% in 2019 to 61.6% in the first three quarters of 2023, a decline of about 20 percentage points.
(Source: Market Value APP)
In addition to the decline in the profit margin of chemical drugs, the profit margin of the company's proprietary Chinese medicine fell slightly by about 3 percentage points in 2019-21, but it will directly decline by nearly 11 percentage points in 2022, and the situation is not objective.
(Chart: Market Cap APP)
According to the prospectus, in 2019-21, the sales share of the company's Astragalus (Astragalus granules) in domestic sample hospitals was 94%, 95% and 97%, respectively, ranking first in the industry, and gradually rising.
The market share is very high and gradually rising, but in 2019-21, the company's revenue of Astragalus granules was 190 million, 157 million and 161 million respectively, not increasing but declining, and the revenue has not exceeded 200 million, which shows that the ceiling of Astragalus granules has been seen.
(Source: Prospectus)
In 2019-21, the company's market share of Chai Huang granules in domestic sample hospitals was 82%, 83% and 81% respectively, ranking first in the industry, and the market share did not decline much, but the annual revenue was 41 million, 27 million and 24 million respectively, with a large decline and a lower ceiling.
(Source: Prospectus)
The ceiling of the Chinese patent medicine business is too low, and the performance and profit margin of chemical drugs continue to decline due to the impact of centralized procurement, and the company's former vision of "relying on the relatively stable cash flow brought by the chemical medicine and Chinese patent medicine business to support and feed back the research and development of the innovative drug business" may no longer be sustainable.
(Source: Prospectus)
Innovative drugs are the key to breaking the game
In 2018-22, the company's R&D expenses increased from 144 million to 375 million, with a CAGR of 27%, and in the first three quarters of 2023, the company's R&D expenses were 510 million, a year-on-year increase of 92%, and an increase of 36% over the full year of 2022.
At the same time, the R&D expense ratio also increased from 12.9% in 2018 to 53.3% in 2022 and 135% in the first three quarters of 2023.
Contrary to R&D expenses, due to the impact of centralized procurement and the maturity of the main products on sale, the company's sales expenses have decreased year by year, and have been lower than the amount of R&D expenses since 2022, but due to the same decline in overall revenue, the company's sales expense ratio remains at about 50%.
(Source: Market Value APP)
The gross profit margin continued to decline, the R&D expense rate continued to rise, falling and rising, the gross profit margin could no longer cover the R&D expense rate, and the company's net profit margin continued to be negative from 2021.
However, fortunately, the company has been successfully listed, raising funds to supplement ammunition for the research and development of innovative drugs, and the current innovative drug project will finally have the first return of 800 million US dollars, so the company's future as a whole is still worth looking forward to, and the innovative drug business will also be the main support for the company's future performance and market value.
(Source: Prospectus)
The revenue of the traditional chemical medicine and Chinese patent medicine segment has been declining, the gross profit margin has continued to decline, and the increasing R&D investment in the innovative drug business has caused the profit of Baili Tianheng to continue to be negative.
However, fortunately, the company's innovative drug business has entered the clinical stage with a number of models in the clinical stage, and the competition pattern is good, especially the world's exclusive bispecific antibody ADC drug BL-B01D1 in the clinical stage has seen a return of 500 million US dollars, so the company still has a bright future to look at.
Disclaimer: This report (article) is based on the public company nature of the listed company, based on the listed company's public company attributes, based on the listed company's public disclosure in accordance with its legal obligations (including but not limited to temporary announcements, periodic reports and official interactive platforms, etc.) as the core basis; The information or opinions expressed in this report (article) do not constitute any investment advice, and Market Value Storm does not assume any responsibility for any actions taken as a result of the use of this report.
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