J.P. Morgan: RemeGen posts recurring profits for two consecutive quarters; cuts 2027 revenue forecast

What drove the improvement in third-quarter profitability?

Revenue in the third quarter of 2026 was 910 million yuan, up 46% year on year. Product sales were 810 million yuan, up 33% year on year and 16% quarter on quarter, with approximately 100 million yuan in additional licensing revenue.
Excluding non-recurring items, third-quarter recurring net profit was 74 million yuan, marking a second consecutive quarter of recurring profitability. Non-recurring items mainly came from a fair-value gain of 542 million yuan.
Product sales rose 26% year on year to 2.15 billion yuan in the first nine months, with telitacicept contributing 1.43 billion yuan and RC48 contributing 720 million yuan.

Management remains confident that product sales will grow by more than 25% in 2026. J.P. Morgan believes the growth achieved in the first nine months and the relatively low comparison base in the fourth quarter of 2025 make the target achievable.
Management also reiterated its expectation of reaching recurring break-even in 2026, excluding items related to business collaborations. J.P. Morgan believes continued sales growth and improved operating leverage will support this goal.
Licensing revenue depends on milestone events; a more clearly defined near-term trigger is the start of the overseas Phase III trial of RC148, with the first patient expected to be enrolled in the fourth quarter of 2026.

J.P. Morgan expects telitacicept’s systemic lupus erythematosus business to continue growing at 10%–20% annually and expand into IgA nephropathy, myasthenia gravis and Sjögren’s syndrome. Management’s combined peak sales target for the latter two indications is 1 billion yuan.
Expansion of RC48 into first-line urothelial cancer is another source of growth, with sales expansion dependent on medical insurance reimbursement coverage. Management preliminarily expects research and development expenses in 2027 to be flat or higher year on year and the regional sales team to expand modestly.
Two global Phase III data readouts are important tests of overseas potential: results from the telitacicept myasthenia gravis study are expected in mid-2027, while data from the Pfizer-led study of RC48 in first-line urothelial cancer may be released in the first half of 2027.

After adjusting sales assumptions for the two core products, J.P. Morgan revised its revenue forecasts for 2026, 2027 and 2028 to 2% higher, 5% lower and 10% lower, respectively, than before; its licensing revenue forecasts remain unchanged.
The bank also raised its gross margin assumptions and adjusted expenses and tax rates based on management guidance and recent trends, resulting in changes to its recurring net profit forecasts for the same periods of an increase of 8%, an increase of 14% and a decrease of 8%, respectively.
J.P. Morgan maintained its overweight ratings on the A and H shares and lowered its December 2027 price targets from 151 yuan and 129 Hong Kong dollars to 132 yuan and 114 Hong Kong dollars, respectively.