Main points of investment
The R & D expenditure has increased steadily and the cash flow is abundant: the company's operating income in the first half of 2021 is 12.97 million yuan, which is the intellectual property license fee income from customers. R & D expenditure increased by 26.3% to 318 million yuan compared with the same period last year, mainly due to the increase in the number of clinical trials and R & D personnel conducted by the company for drug candidates, as well as increased spending on intellectual property rights. The company has cash and cash equivalents of about 1.53 billion yuan on hand, and if we consider the US $50 million of Cinda's equity subscription and the subsequent down payment of US $30 million for Cinda's cooperation with HQP135, the company has a cash flow of about 2 billion yuan and abundant cash flow, which can support the company's continuous R & D investment.
The cooperation between R & D and Becton Dickinson & Co has made gratifying progress, waiting for harvest: in the first half of 2021, the company's product pipeline research and development has made gratifying progress, especially HQP1351 and APG-2575. HQP1351 has been included as a breakthrough treatment by CDE and is expected to be approved for listing by the end of this year. In addition, the company will submit a full approval application for listing in the second half of the year (that is, it is not limited to CML with T315I mutation). The latest clinical data released at the ASCO conference show that among the 15 assessable patients, the ORR of APG-2575 monotherapy for r CLL/SLL is as high as 80%, and the critical phase 2 clinic is expected to be approved by CDE by the end of the year. At present, the company has carried out as many as 17 phase 1b/2 trials of APG-2575 worldwide, mainly focusing on indications such as CLL, NHL, AML, MM, WM and so on. APG-2575 has multiple potential advantages over Venetoclax, the only Bcl-2 inhibitor listed in the world, including no need for weekly dose climbing, rare occurrence of tumor lysis syndrome and so on.
Since Venetoclax was approved to go public in April 2016, sales have climbed rapidly, reaching $1.34 billion in global sales in 2020. Therefore, based on the differentiation advantage of APG-2575, we think that its global market space is broad. In terms of Becton Dickinson & Co cooperation, the company has reached a comprehensive strategic cooperation with INNOVENT BIO, which mainly includes the joint development and commercialization of HQP1351 with Cinda, the combined use of rituximab and CD47 with APG-2575 and Cinda, the subscription of US $50 million of company shares and the company's US $50 million warrants. For the company, the deep cooperation with INNOVENT BIO can not only promote the sales volume of the products on the market and after listing, but also tap the potential of the drugs under research in the combination of drugs, and maximize the commercial value of the products. At the same time, it is also the first time for domestic innovative pharmaceutical enterprises to cooperate in the form of strategic investment, which is expected to achieve a win-win situation, and also opens a new model for the follow-up cooperation between innovative pharmaceutical enterprises.
The first third-generation BCR-ABL inhibitor in China will be approved soon, and Cinda will speed up the commercialization process: the company has submitted an application for listing of HQP1351 in June 2020, and the product is expected to be approved to market before the end of this year, becoming the first third-generation BCR-ABL inhibitor in China. Working with Cinda's commercialization team, the company is expected to cover more than 800 hospitals before entering health insurance and quickly penetrate 80 per cent of the CML market, thereby increasing the peak sales of HQP1351 and maximizing the commercial value of its products.
Our point of view: the company's core products HQP1351 and APG-2575 have significant differentiation advantages and have the potential of best-in-class. Products can be combined with a wide range of drugs, and joint development with multinational pharmaceutical companies is expected to release the global potential of products; in particular, APG-2575 has the potential to become a "PD-1 monoclonal antibody" in the treatment of hematological tumors. At present, the company has a total of 12 innovative drugs in different stages of research and development, of which 8 are in the clinical stage, and the follow-up products are strong. It is recommended to pay attention.
Risk tips: research and development progress is not as expected, market competition intensifies, policy risks and so on.