Incident 1: On November 28, the company issued the “Notice Concerning Obtaining CDE Approval for Phase III Clinical Study of KC1036 for Advanced Esophageal Squamous Cell Carcinoma”. The company will begin phase III clinical research on KC1036 to treat advanced esophageal squamous cell carcinoma as soon as possible.

Incident 2: On December 19, the company issued an announcement stating that it had received the “Drug Clinical Trial Approval Notice” for “KC1036 for the treatment of advanced Juventus sarcoma in adolescents aged 12 and above”, approved and issued by the State Drug Administration, and will conduct clinical trials in the near future.

Incident 3: On December 26, the company issued an announcement stating that it had received the “Clinical Trial Notice” for “KC1036 Combined with PD-1 Antibody First-Line Maintenance Treatment for Locally Advanced or Metastatic Esophageal Squamous Cell Carcinoma”.

The core innovative product KC1036 shows outstanding potential as an anti-cancer drug. KC1036 is a class 1 innovative chemical developed independently by the company and has global intellectual property rights. It achieves anti-tumor activity by inhibiting multiple targets such as VEGFR2 and AXL. As of December 26, 2023, KC1036 is undergoing clinical research on various indications such as digestive system tumors and thymic tumors. More than 200 subjects have been enrolled. Current clinical study results have shown outstanding anti-tumor activity and safety.

A phase III clinical trial for KC1036 single-agent second-line treatment of esophageal squamous cell carcinoma was approved. According to phase II clinical data released by the company as of July 31, 2023, the objective response rate (ORR) of patients treated with advanced esophageal squamous cell carcinoma (ESCC) with KC1036 was 26.1%, the disease control rate (DCR) was 69.6%, and the median progression-free survival (MoS) was 7.1 months, which was clearly superior to the current clinical results. Based on the remarkable efficacy of a single drug in patients with locally advanced or metastatic esophageal squamous cell carcinoma, a phase III clinical trial of KC1036 single-agent second-line treatment of esophageal squamous cell carcinoma was successfully approved.

KC1036 and PD-1 antibodies were approved for first-line maintenance treatment of esophageal squamous cell carcinoma IND. According to the CSCO Esophageal Cancer Diagnosis and Treatment Guidelines (2023 edition), it is recommended to use PD-1 antibodies combined with platinum-containing chemotherapy for first-line treatment of unresectable locally advanced or metastasized/recurrent esophageal squamous cell carcinoma. After stopping chemotherapy, continue to receive PD-1 antibody maintenance treatment. There is still a large, unmet clinical need to improve the objective response rate of maintenance treatment and prolong progression-free survival. Based on the outstanding efficacy of KC1036 monotherapy in second-line treatment of esophageal squamous cell carcinoma, the company is actively expanding the combined use of KC1036 and PD-1 antibodies to meet first-line maintenance treatment needs for esophageal squamous cell carcinoma.

Clinical trials of KC1036 medication for children were approved, broadening pipeline indications. Juventus sarcoma is the second most common primary malignant bone and soft tissue tumor in children and adolescents. It is highly malignant, aggressive, and the most common patients are young, and treatment options are limited after first-line chemotherapy fails. Based on the safety, efficacy and population pharmacokinetic characteristics of KC1036 in adult patients with advanced solid tumors, the IND application for KC1036 to treat advanced Juventus sarcoma in adolescents aged 12 and above was successfully approved, and the indications were further broadened.

The incidence and death rate of esophageal squamous cell carcinoma in China is high, and the commercialization prospects of KC1036 are promising. The incidence and death rate of esophageal cancer in China is high. According to IQVIA data, the number of patients with esophageal cancer in China in 2022 was 742,000, of which the proportion of patients with advanced metastatic esophageal cancer was about 70%. Of these, about 80%, or 416,000, could receive systematic treatment. The efficacy and safety of KC1036 as a single agent have been verified by phase II clinical data. With subsequent clinical research progressing smoothly, the commercialization prospects are worth looking forward to.

Profit forecast and investment advice: We forecast that the company's revenue for 2023-2025 will be 1.11 billion yuan/1.33 billion yuan/1.55 billion yuan, respectively, with year-on-year growth rates of 27.6%/20.3%/16.7%, and net profit to mother of 170 million yuan/210 million/240 million yuan, respectively. The year-on-year growth rates will be 63.5%/23.5%/19.0%, respectively, and corresponding PE is 36/29/24 times, respectively. Clinical research on the company's core innovative product, KC1036, continues to progress, and commercialization prospects are promising. We are optimistic about the company's long-term development and maintain a “buy” rating.

Risk warning: Risk of product sales falling short of expectations, risk of failure or progress of new drug development falling short of expectations, risk of changes in industry policies, risk of increased market competition, etc.