All-time high, Biotech leader breaks through

Ask AI · How Can Rongchang Biotech Break Through Its Stock Price Through an Innovative Drug Pipeline?

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On March 19, amid generally weak conditions in the AH index, Rongchang Biotech’s share price in the A-share market hit an all-time high since its listing.

Although Rongchang Biotech’s strength may not seem surprising to some professional institutional investors, compared with the Innovative Drug ETF and other large- and mid-cap Biopharma/Biotech companies that are undergoing major adjustments or trading sideways, Rongchang has managed to carve out its own alpha—it is still in its own bull market.

The reasons behind Rongchang Biotech’s strong momentum are not only the big deal with AbbVie, or the uptake volume of telitacicept, but also the ongoing BD potential shown by Rongchang’s R&D platform, which is reflected to a certain extent in the recent AACR conference.

01

Two core base pipelines

1、Telitacicept

Telitacicept can be said to be Rongchang’s core pipeline, and also the one that had long been undervalued. Years ago, the company’s two target selections to assemble as a fusion protein were too ahead of their time; people from the previous era did not really recognize its value.

At present, among the globally leading fusion proteins with two targets, there are only these three pipelines in the front ranks, and two of them mainly target IgA nephropathy and Sjögren’s syndrome.

Mechanistically, compared with belimumab (Blys), telitacicept’s performance in systemic lupus erythematosus (SLE) and other autoimmune diseases provides a template for the Blys-targeting strategy: BLyS maintains the survival of mature B cells, while APRIL maintains the survival of plasma cells (especially long-lived plasma cells in the bone marrow). Belimumab blocks the upstream, whereas telitacicept blocks the downstream as well—meaning it clears pathogenic antibodies more thoroughly, covers a broader patient population, and in autoimmune diseases where the core disease mechanism centers on antibody-mediated damage, this mechanistic difference is extremely significant.

1）SLE

In terms of key clinical data grounded in numbers, telitacicept’s crucial clinical data in SLE come from its published research: at the 160mg dose, the 52-week SRI-4 response rate was about 71%, versus about 33% in the placebo group, with a net difference of nearly 38 percentage points.

For comparison, in belimumab’s BLISS-52 phase 3 clinical trial, the 10mg/kg group’s 52-week SRI-4 response rate was about 58%, the placebo group was 44%, and the net difference was only 14 percentage points. Compared against this, telitacicept’s improvement versus placebo is nearly three times that of belimumab.

Now let’s look at this indication’s market: in China, the number of SLE patients is roughly in the range of 1 million; mainly it depends on how much penetration there is, or how much future penetration rates can reach. First, in the U.S. based on real-world survey data cited by Morgan Stanley: the utilization rate of biologics among U.S. patients with moderate-to-severe SLE rapidly rose from 31% in 2021 to 49% in 2023, and is currently stabilized at about the 50% level.

China likely cannot match the U.S. on this, but European countries are comparable. According to Germany’s national rheumatology database and data from rheumatology physicians, in Germany the utilization rate of belimumab reached 15% in 2022. We assume it is now 20%. If China could reach 10%, that would mean 200,000 patient-years of treatment. After telitacicept is covered by medical insurance, its price is roughly 800 yuan (80mg), with a subcutaneous injection once per week; each dose is 160mg (i.e., 2 vials). The annual cost is 83,200 yuan. We then assume telitacicept could reach a market share of 40%. For a first-in-class product, that deserves recognition; then its sales peak for this indication could reach 3.328 billion yuan.

2）IgA nephropathy

According to a report by Frost & Sullivan, in 2021 there were about 2.2 million IgA nephropathy patients in China, and this inventory market is growing very slowly; we assume 2.2 million stays unchanged. As for this disease, there are no biologics approved domestically. The windfall drug recently riding the updraft is Narsoplimab. But telitacicept performs well in phase 3 clinical data for IgA nephropathy: compared with baseline, the 24-hour urine protein-to-creatinine ratio (UPCR) in the treatment group decreased by about 50–60%, versus about 15–20% in the placebo group, and the rate of decline in eGFR was also clearly controlled.

And compared with competitors: Sparsentan (DUPLEX phase 3) saw a UPCR decrease of about 40% at the 9-month primary endpoint; narsoplimab lowered it to just above 40%; while for IgaMord’s IgAN trial ADHERE, although it also produced a statistically significant reduction in proteinuria, the core mechanism is FcRn inhibition accelerating IgG degradation, so the reduction in IgA is relatively limited. Telitacicept reduces IgA production from the source; theoretically and in actual data, it appears more targeted.

Even so, the big question is whether treating IgA nephropathy truly requires biologics. That is a very important issue. In the U.S., a drug from Takeda—Voyxact, targeting APRIL with a single target—was approved. But honestly, its sales peak is not very high. The expected sales peak in 2031 is 955 million USD, and it doesn’t even reach the threshold of a blockbuster. Another relatively well-known drug is Povetacicept—an APRIL-targeted drug with the same target as telitacicept. Its sales were priced very high by Vertex, reaching 4 billion USD. However, the author still has reservations about treatment approaches for IgA nephropathy in China: penetration is not expected to be very high; achieving 5% penetration would already be very good. If the annual treatment cost is around 100,000 yuan, then the market share at peak could be 35%, and the final sales peak would be about 3.85 billion yuan.

3）Myasthenia gravis

For MG, the main complementary mechanism can be considered as follows: telitacicept and efgartigimod have complementary mechanisms. Efgartigimod is “fast-acting”—it directly clears existing IgG, works quickly, and is suitable for controlling acute phases; telitacicept is “slow modification”—it inhibits plasma cells producing pathogenic antibodies from upstream, and theoretically, continuous use can achieve deeper disease control without relying on frequent dosing to maintain effects.

If this logic is validated by real-world data, telitacicept’s positioning in MG could be: efgartigimod addresses acute exacerbations, while telitacicept provides long-term maintenance treatment. The two drugs do not need to be zero-sum competitors; they can be used sequentially or alternately within the same patient. If this positioning holds, the market ceiling for the MG indication will be further opened.

Of course, the domestic inventory of MG patients is not that large—about 200,000 to 300,000. If biologic penetration could reach 15% and telitacicept could achieve 25%, then the domestic peak sales for the MG indication would be around 940 million yuan.

So overall, telitacicept’s sales peak could be 8.118 billion yuan. Using a triple PS to enter valuation (the treatment for first in class), the market value it could reach is 24.354 billion yuan, i.e., an estimated valuation of 24.354 billion yuan. In fact, don’t think these numbers are too large; you can think of telitacicept in the autoimmune field as the PD-1 of the pipeline in a drug. Also, autoimmune drugs are an inventory market: patients are not treated only for their life expectancy and then die within the short term; they take the medication for life. Therefore, this indication is more favorable for commercialization.

2、RC48

Next is the RC48 pipeline. Many people think it has already been “priced in”—after all, the 2.6 billion USD licensing collaboration by Seagen years ago had long been baked into market expectations. But there is still a major indication being studied in phase 3: first-line treatment of HER2-expressing gastric cancer. In 2035, the number of gastric cancer cases is expected to be 467,600, with a HER2-positive proportion of 12%, i.e., 56,100. Claude’s current annual treatment cost is 300,000. Assuming in 2025/2035 the penetration rate times market share could reach 8%, the future sales peak would be 1.35 billion USD, which could translate to a market value of about 3 billion USD.

Besides that, RC48’s sales peak is roughly around 900 million USD, and the market value it could enter would be about 2 billion USD. The total RC48 pipeline could add incremental market value of another 5 billion yuan.

Roughly like this: based on the domestic market, the market value it could enter is 29.4 billion yuan. But there is also revenue from VOR overseas. Since there are milestone payments of 4 billion USD, assuming it obtains 2 billion USD within 10 years, amortized per year is 0.2 billion USD—i.e., 200 million USD per year. Discounting at r=10%, the net present value of the revenue would be 1.352 billion USD, equivalent to about 9.3 billion yuan.

Additionally, for overseas sales peaks, we’ll be conservative: efgartigimod’s peak was reported at 10 billion USD; we assume telitacicept sells less well, with only a 2 billion USD peak. Then 10% revenue share is 200 million USD, multiplied by 10× PE gives 200 million USD, i.e., 13.8 billion yuan valuation. Adding overseas equity, the valuation can reach 23.1 billion yuan.

Finally, the total sums to: Rongchang Biotech’s two front-runner pipelines can be valued at 52.5 billion yuan.

02

RC148—very important, but with uncertainty

The background of this deal has been discussed in our previous review of Rongchang: an upfront payment of 650 million USD, with a total consideration of up to 5.6 billion USD; and AbbVie is an MNC. The latter point is critical—within the same-target products, winning an MNC partner versus winning a mid-cap Biotech partner leads to completely different valuation premiums in the market.

Let’s pull RC148 and same-target competitors for a horizontal comparison to see whether the numbers are solid.

RC148’s first-line treatment data in PD-L1-positive NSCLC: ORR 57.1%. Next, looking at the later-line data, at the 20mg/kg dose group RC148 achieved ORR 66.7% and PFS of 8.3 months—note that this involved combination with docetaxel. Meanwhile, AK112’s single-agent second-line data were: for TPS≥1% patients, ORR 42.9%; for TPS<1% patients, ORR 25.0%. If we compare absolute values directly, RC148’s data look better in the combination regimen. But we must be honest: this is not a head-to-head study; the baselines are not fully comparable, so we cannot extrapolate as if they were from the same setup.

For more specific data comparison, please refer to the table below. It should be said that RC148 is not exactly disappointing—at least it is a me-too compared with SSGJ-707 and AK112.

How much valuation can RC148 get in China?

According to a research report from Citic Securities, Kangfang obtained close to 6 billion yuan worth of valuation in the domestic NSCLC indications; but the author believes we cannot simply transplant Kangfang’s situation to all PD-1×VEGF bispecific antibodies and assume the same valuation. After all, later entrants lag by more than three years. So how much would RC148 get? The author believes the sales peak for the lung cancer indication could be 2 billion yuan; more than that would not be appropriate. Then applying 2.5× PS, the market value it could enter would be 5 billion yuan.

What about overseas? This is the biggest uncertainty, with an even larger question mark: whether Summit’s harmoni-3 can actually be executed is still undecided. We must apply a success probability discount; we’ll use 70%. Also, the author believes we cannot plug Summit’s overseas sales peak into the valuation for the entire class of PD-1×VEGF bispecific antibodies, especially since AbbVie entered later.

Citic Securities priced Summit’s overseas sales peak at 6.6 billion USD. Given the current situation of same-target competition (involution), and the impact from future K drug biosimilars, we assign AbbVie a sales peak of 2 billion USD. Then apply a 10% split: 200 million USD; 10× PE: 2 billion USD, i.e., 13.8 billion yuan. Milestone payments are also discounted to 2 billion USD, amortized over 10 years: 200 million USD per year. Discount at r=10%; the net present value of total revenue is 1.352 billion USD, or 9.3 billion yuan. Apply a 70% discount; the total overseas value becomes 16.2 billion yuan.

Combining domestic and overseas, the pipeline valuation of RC148 is about 21.2 billion yuan. That is also reasonable—after all, AbbVie is an MNC, bringing a valuation premium driven by high certainty.

03

AACR 2026—imagination space for early-stage pipelines

The early-stage pipelines Rongchang showcased at this year’s AACR mainly revolve around two directions: first, an extension of ADC technology—beyond the HER2-MMAE framework of RC48, exploring more target and payload combinations; second, deepening bispecific antibody technology—beyond the PD-1×VEGF framework of RC148, advancing the bispecific antibody platform into more tumor immunology target combinations.

The author thinks that the most interesting signal observed from the AACR data is Rongchang’s推进 speed on the MSLN-targeted ADC (RC88). MSLN is highly expressed in refractory tumors such as mesothelioma, pancreatic cancer, and ovarian cancer. At the 2024 ASCO conference, Rongchang Biotech disclosed very impressive I/II phase clinical research data. In the ovarian cancer cohort, among 31 patients who had received 2 to 4 lines of prior treatment, the objective response rate (ORR) reached 45.2%, the confirmed objective response rate (cORR) was 41.9%, and the median duration of response (DoR) was 8.02 months.

Another line worth mentioning separately is RC118—HER2/CD3 bispecific, i.e., using the approach of T-cell engagers (TCE bispecific) to target HER2-positive tumors. Internationally, this direction is represented by technology layouts from Xencor and Johnson & Johnson. Domestically, there are not many companies that have reached the clinical stage; Rongchang is one of the early movers and has an advantage. If RC118’s early data come out positive, the value of this pipeline independently could be quite substantial.

To be candid, it’s very difficult to quantify the valuation of early-stage pipelines. What we can say now is simply this: Rongchang’s R&D platform is no longer a Biotech driven by a single product; it is moving toward a Biopharma with real pipeline depth.

AACR data is just a signal; it’s impossible to provide an exact calculation, but it is more than enough.

Conclusion: Rongchang’s rise to new highs this time is not an accident. As far as the valuations we can currently account for are concerned, although the stock price has climbed, it is still at a reasonable stage. Its valuation right now is 73.7 billion yuan; if you add the platform premium optimistically, it could reach 80–90 billion yuan. But with respect to AbbVie’s BD, we still need to be cautious. This year, the data from Kangfang and Summit will significantly impact Rongchang’s valuation, and the fluctuation range could reach 20 billion yuan.