1H23's performance met our expectations

The company announced 1H23 results: net profit for the mother - 51 million yuan. The company's first product, suvortinib, was approved by the State Drug Administration on August 23, 2023, in line with our expectations.

Development trends

Suvortinib was approved for marketing, and the first batch of prescriptions was quickly implemented. Suvortinib (product name: suvortinib) has been approved in China for patients with locally advanced or metastatic NSCLC who have had disease progression through previous platinum-containing chemotherapy, or who are intolerant to platinum-containing chemotherapy, and have been tested to have an EGFR 20 exon insertion mutation (exon20ins). It became the first innovative domestic drug targeting advanced NSCLC with EGFR exon20ins mutant. Compared with similar competitors, Mobotinib from Takeda and Johnson & Johnson's EGFRXCmet, the double anti-amivantamab Get out of touch Tinib has a higher remission rate and is safe. Just 4 days after it was marketed, suvortinib officially began to be sold to hospitals and pharmacies across the country. We expect 2H23 to start contributing revenue to the company.

The multi-dimensional breakthrough in EGFR mutant NSCLC treatment has progressed smoothly. The company is actively promoting the registered phase III trial of shubotinib compared with platinum-containing chemotherapy for first-line EGFR exon20ins mutant advanced NSCLC, and clinical trials for advanced EGFR mutant NSCLC that failed to treat EGFR-TKI with suvortinib plus golicitinib. The company expects to complete patient enrollment in 24 years. Preliminary data showed that suvortinib first-line EGFR exon20ins NSCLC ORR 77.8%.

Differentiate the layout of hematomas in research pipelines. The highly selective JAK1 inhibitor golicitinib globally registered clinical data for peripheral T-cell lymphoma was disclosed at the 2023 ASCO conference. The company expects 2H23-2024 to submit marketing applications to the NMPA and FDA. DZD8586 is a brain-penetrating small molecule inhibitor developed by the company. Preclinical data shows that there are significant inhibitory effects on wild-type BTK, C481S mutant BTK, and BTK mutations that cause pirtobrutinib resistance. The company is exploring clinical effects on relapsed B-cell non-Hodgkin lymphoma.

Profit forecasting and valuation

Since the overseas clinical progress of suvortinib was slower than our expectations, we lowered 23/24 revenue by 39%/47% to 0.93/324 million yuan, respectively; since the company has already begun building a commercial team, we expect to invest more sales expenses in '23, so we lowered our net profit forecast for 23 years from -7.30 to -826 million yuan. We lowered our 24-year sales expenses slightly, so we raised our 24-year net profit from -724 million yuan to -718 million yuan. Overseas clinical delays of suvortinib did not affect peak sales estimates, and domestic approval and sales are progressing smoothly. We used the DCF valuation method to maintain an outperforming industry rating and maintain a target price of 50.31 yuan, which is 52.4% upward from the current stock price.

risks

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