1H23's performance met our expectations

The company announced 1H23 results: revenue of RMB 77,800, up 750% year on year, up 359% month on month; net profit to parent - 185 million yuan, corresponding profit per share - 0.33 yuan. Revenue is mainly due to revenue from Hickway and disposable vesicoscope products in Boao, Hainan. The performance is in line with our expectations.

Development trends

The clinical progress of the core product, the MetaP2 oral inhibitor APL-1202, is progressing smoothly. The registered clinical phase III of medium- to high-risk non-muscular-invasive bladder cancer (NMIBC) with recurrent second-line chemotherapy perfusion carried out in China has been completed. According to the clinical plan communicated with the CDE, the company plans to unravel the relapse events of 180 patients and conduct data analysis after the recurrence of 180 patients has been completed. The company is also developing an international phase I/II clinical trial of APL-1202 combined with tirelizumab for pre-operative adjuvant treatment of muscle-invasive bladder cancer in the US and China. Currently, it is entering the clinical phase II group. The company plans to advance to global registered clinical phase III after reading out the results of the mid-term analysis.

Many products are in advanced clinical stages or marketing approval stages, driving the company's commercialization process. In July 2023, the company completed the follow-up work for clinical phase III of the photodynamic therapy APL-1702, and is making every effort to promote the pathological review, subsequent storage, and statistical analysis of the data for this study. The company expects to disclose clinical data in September or October 2023. Clinical phase III of APL-1706, a contrast agent to aid in bladder cancer diagnosis or surgery, was successful in August 2023. The company is actively preparing domestic marketing applications for the product.

Furthermore, according to the company's announcement, the soft cystoscope product portfolio APLD-2101 has been accepted by the CDE.

Commercialization focuses on integrating specialist diagnosis and treatment, actively expanding the team, and the company's finances are sound. The company is actively expanding its commercialization team and related support teams, focusing on areas of focus on introducing peitopanil tablets to treat advanced kidney cancer and neratinib maleate tablets for enhanced adjuvant treatment of HER2+ positive breast cancer. The company plans to start selling the two introduced products in 2023 to train the commercial team and gain practical experience. The company is operating steadily. Although R&D and sales expenses rose significantly year-on-year due to product clinical expansion and commercialization preparation, 1H23, cash reserves are about 2.37 billion yuan and liabilities are about 100 million yuan. We believe that current capital is expected to support the company's profit and loss balance.

Profit forecasting and valuation

Since the APL-1202 recurrence was read out later than expected, we maintained our revenue forecast for 2023 but lowered our 2024 revenue forecast by 26% to RMB 130 million. Since the company began building a commercialization team in 2023 and increased sales expenses, we lowered our 23/24 net profit forecast from -371/-380 million yuan to -447/-468 million yuan, respectively. We used the DCF valuation method to maintain our outperforming industry rating, and lowered the target price by 22.1% to 16.57 yuan, which is 63.3% upward from the current stock price.

risks

New product launches, clinical trial data and sales fell short of expectations; competition intensified.