Innovent Earnings: Better Than Expected; Raising Valuation by 17%, Shares Undervalued

We raise Innovent Biologics’ fair value estimate to HKD 50.80 per share from HKD 43.50, after strong 2023 results that led us to lift key growth assumptions. Revenue of CNY 6.2 billion, up 36.2% year over, surpassed our estimated CNY 5.4 billion. Growth was driven by its core asset Tyvyt, a PD-1 drug being included in the Chinese national drug reimbursement list. Tyvyt contributed revenue of USD 393.4 million in 2023 compared with USD 293.3 million in 2022, according to Eli Lilly's recent disclosures. It validates the view of a more dovish price cut on innovative drugs during China's national volume-based procurement. As such, we think the pricing of PD-1 drugs is likely to remain relatively stable in 2024 and 2025.