The company recorded an adjusted loss of 232 million yuan in the first half of 2020, which mainly reflects 544 million yuan in R & D expenses. The company plans to submit a new drug application for sugemalimab (CS1001, PD-L1 antibody) in the fourth quarter of 2020, which is used for first-line squamous and non-squamous non-small cell indications. We think the company is still undervalued compared with the industry and maintain its buy rating. And keep the target price of HK $19.83 based on rNPV valuation unchanged.
There is still a loss in the first half of 2020.
The company's adjusted loss narrowed to 232 million yuan year-on-year (compared with a loss of 276 million yuan in the same period in 2019), mainly excluding equity incentive fees (96 million yuan, the same period last year was 130 million yuan) and the profit or loss caused by the fair price change caused by the conversion of preferred shares (no profit or loss during the reporting period, compared with 756 million yuan in the same period last year). The main reason for the loss is the higher R & D cost (544 million yuan, compared with 384 million yuan in the same period last year).
The company will submit Sugemalimab's first new drug listing application in the fourth quarter.
The company plans to submit an application for Sugemalimab's first-line squamous and non-squamous non-small cell indications to the State Drug Administration in the fourth quarter. This potential application is based on the results of a phase 3 clinical study of CS1001-302 (nude 480) covering both untreated patients with squamous and non-small cell lung cancer. Recently disclosed interim data showed that CS1001 combined chemotherapy improved the median progression-free survival (7.8months vs. 4.9months, HR 0.50) compared with chemotherapy alone, and the safety data were consistent with previous data. Compared with other PD-1/L1 companies with similar clinical progress, we believe that the company's strong execution and R & D capabilities should be reassessed to the peer level of similar PD-1/L1 clinical progress.
More catalysts can be expected
The company listed a number of catalysts up to the end of 2020, including: 1) Ivosidenib (IDH1) has obtained a drug sales license in Taiwan for the treatment of relapsed and refractory acute myeloid leukemia 2) submit two new drug applications for TKI: Pralsetinib (RET) will submit an application for listing of second-line RET mutated non-small cell lung cancer in China, and Ivosidenib (IDH1) will submit an application for listing of indications for recurrent refractory acute myeloid leukemia in Singapore; 3) the registered clinical data of Sugemalimab in stage III NSCLC will be disclosed between the fourth quarter of this year and the first quarter of next year. Management also expects that the company's 100000 square meter production base in Suzhou will be structurally capped in the near future, with a planned production capacity of 26000 liters of macromolecular drugs and 1 billion tablets per tablet of small molecular drugs.
Maintain the buy rating and keep the target price of HK $19.83 based on rNPV valuation unchanged
The company is moving from a clinical biotechnology company to a biotechnology company with a number of commercial products. We maintain our buy rating and keep our target price of HK $19.83 unchanged. We are optimistic about the company's clinical stage of tumor immunity core products, experienced independent clinical team and strong Becton Dickinson & Co ability.