Incident: The company announced positive interim results from a phase II clinical trial of the NASH treatment drug ASC41, which is a thyroid hormone receptor beta agonist.

ASC41 has a good ability to reduce liver fat levels. In this phase II clinical trial, each of the three cohorts received a placebo/ 2mg ASC41/4mg ASC41 once daily for 52 weeks. Mid-term data showed that the liver fat content of patients in the 2 mg/4 mg dose group decreased by 55%/68.2% compared to the baseline, and the proportion of patients whose liver fat content decreased by more than 30% was 92.3%/93.3%, respectively. In a non-head-to-head comparison, this result was superior to the same target drugs Resmetirom, VK-2809, and TERN-501.

ASC41 has good safety. Among patients treated with ASC41, only 2 patients (2/28, 7.1%) had drug-related grade 2 adverse events. No grade 3 or higher adverse events were observed, showing good gastrointestinal tolerability of the drug.

The company is in the first tier of the NASH treatment circuit in the country. The company is currently actively promoting ASC 41 and ASC 40, both of which are in clinical phase 2. The progress of NASH drug development in China is in the first tier. ASC40 is progressing faster. Phase 2 clinical liver biopsy data is expected to be released in Q1 '24. It is recommended to pay close attention.

Profit forecast, valuation and rating: The company has an active layout on the NASH circuit and is at the forefront of the world. It maintains a net profit forecast of -2.04/-2.84 billion yuan for 23-25, and maintains a “buy” rating.

Risk warning: NASH drug development has failed, and the liquidity of the Hong Kong stock market has shrunk.