Matters:
On March 10, 2024, the company announced that it had received an initial payment of US$800 million from BMS for the BL-B01D1 development and commercialization license agreement, which is expected to have a positive impact on the 2024 results.
Commentary:
The world's first dual-target ADC with excellent efficacy in multiple cancers. BL-B01D1 is the world's first EGFR×HER3 ADC, showing therapeutic potential in many types of cancer. According to data released at ASCO's 2023 conference, the ORR for treating 38 cases of EGFR mutant NSCLC with BL-B01D1 was 63.2%, and the ORR for treating 49 cases of wild-type NSCLC was 44.9%. Among nasopharyngeal cancer, the ORR of 27 patients with median frontline treatment line 3 was 55.6%. In breast cancer, the ORR for TNBC and HR+ BC was 45.5% and 33.3%, respectively, and the DCR was 100% and 88.9%, respectively. The company has initiated clinical phase III research on BL-B01D1 treatment of nasopharyngeal cancer in China and NSCLC clinical phase I research in the US. BL-B01D1 has excellent curative efficacy in many major cancer types that have received severe treatment and lack treatment methods. Non-head-to-head has an advantage over other ADC drugs, and the market potential is huge.
Authorize BMS to reach the largest deal for domestically produced new drugs, which is expected to deliver on global value. On December 11, 2023, SystMmune, a wholly-owned subsidiary of Bailey Tianheng, reached an licensing agreement with BMS for BL-B01D1. The down payment is 800 million US dollars, the recent potential payment is as high as 500 million US dollars, and the milestone fee is 7.1 billion US dollars. The total amount can be as high as 8.4 billion US dollars. It is the largest overseas license amount for a single type of domestic innovative drug.
The licensing agreement between the two parties takes the form of joint development and will share BL-B01D1 global development costs, as well as profits and losses in the US market. BMS will receive royalties from net sales in mainland China, and SysTimMune will collect tiered royalties from net sales in the US and outside of mainland China. With its differentiated design, excellent efficacy, and partner BMS's leading position in tumor immunology development, BL-B01D1 is expected to deliver global value.
The ADC platform has been validated, and several follow-up pipelines have entered clinical practice. The company's proprietary ADC platform has shown superior plasma stability compared to other competitive products in preclinical studies, which is expected to improve safety. The company has established several ADC R&D pipelines with different targets. Among them, BL-M02D1 targets TROP2 and BL-M07D1 targets HER2, all of which are in phase Ib clinical research and have shown efficacy signals. BL-M11D1 targets CD33 and is in phase Ia clinical study. BL-M05D1 targets Claudin 18.2 and is in the IND phase.
According to previously released data, ADC-related interstitial lung disease was not observed in BL-B01D1 and BL-M07D1 clinical studies, and the safety advantages are outstanding. The efficacy and safety of the company's proprietary ADC platform products have been verified, and subsequent pipeline development is progressing smoothly, which will further expand the company's oncology layout.
Investment proposal: According to the approval reached by the company and the progress of core pipeline research and development, we expect the company's revenue for 2023-2025 to be 5.62 billion yuan, 54.06 billion yuan, and 3.255 billion yuan (the previous value of 2023-2024 was 6.22 billion yuan and 560 million yuan), with year-on-year growth of -20.1%, 862.1% and -39.8%; net profit to mother of -7.64, 38.72 billion yuan and 1,143 billion yuan. According to the innovative drug product pipeline valuation method (cash flow discount method based on risk adjustment), the company was valued at 80.8 billion yuan, and the corresponding target price was 201.5 yuan, giving it a “strong push” rating.
Risk warning: Clinical research and development falls short of expectations, commercialization falls short of expectations, risk of changes in cooperative licensing.