The III phase clinical of APL-1202 treatment of second-line NMIBC is coming to an end, and we expect to complete the trial within this year; the phase I neoadjuvant clinical before MIBC revealed positive data at the ASCO conference, and the phase II clinical progression was orderly. APL-1702 has completed phase III clinical follow-up, and we expect Q1 to submit NDA in 2024. Phase III clinical trial of developer APL-1706 in China has achieved successful results and is actively promoting NDA.

The company's R & D investment has been continuously increased, and a number of clinical trials have been carried out smoothly. The introduction of two pipeline collaborative drugs to speed up the process of commercialization; the construction and upgrading of diagnosis and treatment integration platform to provide a more comprehensive integrated solution.

APL-1202: the second-line NMIBC III phase clinical is coming to an end, and MIBC new adjuvant overseas clinical progress is orderly.

APL-1202 is the first oral small molecule inhibitor in the world to enter the registered clinical stage for the treatment of NMIBC (non-muscular invasive bladder cancer). According to the company's mid-2023 report, a number of APL-1202 clinical trials are progressing in an orderly manner:

The second line of ①: the III phase clinical trial of APL-1202 combined with chemotherapy perfusion in the treatment of recurrent NMIBC is coming to an end and is in the follow-up stage of the subjects. The late schedule of the trial is mainly due to the fact that the speed of events in the later stage of the clinical trial is later than the assumption in the design of the clinical trial scheme, and that the subjects' follow-up to the hospital is affected by the macro environment such as the epidemic situation to a certain extent, which makes some subjects fall off, resulting in the number of events that did not reach the target during the reporting period. We expect the test to be completed within this year, after which the company will immediately push forward the follow-up work such as database locking, uncovering blindness, statistical analysis and so on.

② MIBC neoadjuvant: the international multicenter II phase clinical trial of APL-1202 combined with tirelizumab for preoperative neoadjuvant therapy for myometrial invasive bladder cancer (MIBC) completed its first patient enrollment in December 2022. The company is actively promoting the recruitment of phase II subjects, and we expect to achieve mid-term analysis results in H1 in 2024. The release of phase I clinical trial data at the ASCO conference in June 2023 demonstrated the good efficacy and safety of the product.

③ front line: phase III clinical trials of APL-1202 monotherapy for untreated intermediate-risk NMIBC are actively recruiting patients in China.

Phase APL-1702:III clinical trial has completed follow-up and will be submitted to NDA soon. APL-1702, a drug-mechanical integrated photodynamic therapy product, completed an international multicenter phase III clinical trial in July 2022.

The company has completed the clinical follow-up work in July 2023 and is making every effort to promote the pathological review of the study and the follow-up locking database and data statistical analysis. We expect the product to be submitted to NDA in 2024Q1. APL-1702 is expected to bring a new non-operative treatment for patients with HSIL (high precancerous lesion of cervical cancer).

The investment in R & D has been continuously increased, and a number of clinical trials have been carried out smoothly. 2023H1 spent 177 million yuan on R & D, + 90.12% year-on-year; as of June 30, 2023, the company had 183R & D personnel, + 45.24% year-on-year. A number of clinical trials are progressing smoothly:

① urinary system diseases: APL-1706 (auxiliary contrast agent) obtained the successful results of phase III clinical trials in China in August 2023. The company is actively promoting NDA;2022 in July and March 2023. Applications for registration of Uro-3500 (electronic endoscope image processor) and Uro-G (disposable bladder soft endoscope) have been accepted by NMPA, and we expect to be approved for listing from the end of 2023 to the beginning of 2024. In 2023, the company won the exclusive rights of UroViu portable disposable cystoscope in the field of fluorescence imaging.

Other disease areas of ②: the IND application of APL-1401 (DBH inhibitor) was approved by FDA and CDE in November 2022 and June 2023 respectively. It is the first DBH inhibitor in the world to enter the clinical stage for ulcerative colitis. In January 2023, the company entered into a partnership with ReviR Creek Technology to jointly carry out innovative therapy research for genitourinary system tumors and related major diseases using ReviR's independently developed AI drug development platform and targeted RNA technology.

The introduction of collaborative products to speed up the process of commercialization, team building carried out in an orderly manner. The company introduces pezopanil tablets (for renal cell cancer) and nelatinib maleate tablets (for breast cancer) around the genitourinary focus area, and will later have the production and commercial interests of these two drugs in Chinese mainland. The two products are expected to be commercialized this year. This move will accelerate the commercialization process of the company, help the company to deeply expand its product portfolio strategy around its focus areas, and consolidate and accelerate the landing of commercialization capabilities through practice. At present, the company has begun to actively expand the commercialization team and its related support team, focusing on eight parts, such as Medical Affairs Department, Market access Department, sales Department, Marketing Department, Commerce Department, Digital Operation Department, sales efficiency and so on. The construction of commercialization team is carried out in an orderly manner. At the same time, the company has recently upgraded the online management platform of "Hong Yihui", which has further improved the integrated layout of diagnosis and treatment in the field of genitourinary diseases, which can achieve accurate allocation of resources, reduce costs and improve efficiency; it will also be online and offline collaboration to enable commercial teams to help achieve accurate marketing goals.

Risk factors: 1) the research and development speed of the company's drugs is not as fast as expected or the risk of research and development failure; 2) the company's drug review takes a long time and the time to market is not as long as the expected risk; 3) the commercial sale of the company's products is not as expected; 4) the company's innovative drugs are not included in the national health insurance catalogue in time or the price is reduced by the medical insurance negotiation; 5) the company's internationalization is not as expected.

Profit forecast, valuation and rating: the company focuses on genitourinary tumors and other major diseases, relies on three core technology platforms, deeply arranges product pipelines in the genitourinary field, and creates an advantageous product portfolio for the integration of diagnosis and treatment, including 12 projects under research corresponding to 9 products. Among them, APL-1202, an oral MetAP2 inhibitor for NMIBC, and APL-1702, a photodynamic drug combination product for HSIL, are in the stage of III or critical clinical trials, which are expected to change the treatment pattern of the corresponding diseases and become important products in related treatment fields; other products under development have significant competitive advantages.

According to the company's mid-2023 report, considering that the progress of the APL-1202 clinical trial is later than expected and the R & D cost increases rapidly, the company adjusts the company's 2023 EPS 2024 EPS forecast to-0.63 Mae 0.79 Mae 1.03 yuan (the original forecast is-0.57 gamma 0.70 lap 0.90 RMB). Using the absolute valuation method, the reasonable equity value of the company is estimated by the DCF model, of which β = 1.3( the average of Nuocheng Jianhua, Rongchang, Jiakos, Beida Pharmaceutical, Microcore, Zeta Pharmaceutical and Yifang), and WACC=8.81% (Rf takes the yield of 10-year treasury bonds 2.6%, the compound yield of Shanghai and Shenzhen 300 rises slightly, the risk premium is 6.0%, and the tax rate is 15%). Take into account the company's subsequent pipeline layout of 1.5%, corresponding to the target price of 16.5 yuan, to maintain the "buy" rating.