Recently, the company announced positive phase 1 data on 3 tumor pipeline assets at the 2024 ASCO and ESMO Virtual Vaccination Conference, including IBI363 (PD-1/IL-2) positive phase 1 drug resistance and cold tumor data, IBI343 (CLDN18.2 ADC) potentially best-in-class first-stage pancreatic cancer efficacy and safety data, and IBI389 (CLDN18.2/CD3) preliminary gastric and pancreatic cancer data. The continued advancement of the cancer R&D pipeline reflects Cinda's strong R&D and execution capabilities. Reiterating our “Buy” rating and target price of HK$60.

IBI363 (PD-1/IL-2) has positive first-phase efficacy and safety data, and is expected to be a potential treatment for PD-1 resistance and inresponse for solid tumors: Recently, the company presented phase 1 data for potential first-in-class (FIC) PD-1/IL-2 dual anti-fusion protein monotherapy for three solid tumor indications (melanoma, lung cancer, and bowel cancer) at the 2024 ASCO and ESMOVirtual Immunity Conference.

Among 300 patients with solid tumors (proportion of patients previously treated with at least 2L: 81.8%, as of April 16, 2024), the overall ORR was 17.3%, of which the ORR for the previous IO treatment group was 17.6% (n=204), and the ORR for the 3 mg/kg dose group was 46.7% (n=15). In terms of safety (N=347), overall grade 3 or higher TRAE was 23.9%, grade 3 iRAE was 10.4%, and discontinuation due to TRAE was 3.2%. Among them, grade 3 or more TRAE was 13.2%, and discontinuation due to grade 3 iRAE and TRAE was 0%. Overall, as a FIC product, IBI363 showed good safety, climbing the dosage to a maximum of 3 mg/kg, breaking through previous IL-2 product doses; in terms of efficacy, we are pleased to see positive phase 1 data for the three indications, particularly IO treated SQ-nsCLC/melanoma, and two previous cold tumors (IO untreated mucosal melanoma and MSS CRC), which obtained significantly higher efficacy data than current treatments, which is impressive.

For the 3 solid tumors, the specific efficacy data are as follows: (1) In IO-treated NSCLC patients (N=70), the overall ORR was 27.1% and mPFS was 5.5 months, of which Sq-nsCLC ORR was 35.1% and adNSClc ORR was 18.2%; in the 3mg/kg dose group, the overall ORR was 77.8% (n=9), of which sq-nsCLC ORR was 100% (n=6) and ADNSclc ORR was 33.3 % (n=3) Despite the small sample size, efficacy data appeared to be excellent. In particular, sq-nsclc showed 35% ORR/5.5-month MPFs significantly higher than 2L SOC therapy docetaxel (13% ORR/3.9 month MPFs). (2) In IO treated melanoma (N=37), the overall ORR for the 1 mg/kg dose group was 29.7% (31.6%/42.9%/18.2% for cutaneous, acral, and mucosal melanoma, respectively), and MPFs were 4.2 months, which is better than the current standard therapy apatinib + temozolomide (7% ORR, 3-month mPFS), which is close to the TIL therapy approved abroad (31% ORR, 4.1 months MPFs). In patients with mucosal melanoma who had not undergone IO (N=8), IBI363 alone showed 75% ORR (0.3-1.5 mg/kg dose). Despite the small sample size, it showed surprising early efficacy in cold tumors. (3) Among 3L+ MSS CRC patients (N=63), the overall ORR was 12.7% (0.3-1.5 mg/kg), of which the 1mg/kg dose group ORR was 15% (N=20), which is better than the currently approved VEGF+ chemotherapy combination therapy (5%-6% ORR) globally. More importantly, it can respond to IBI363 regardless of whether the patient has liver metastasis. The ORR for patients with liver metastasis is 13.2% (n=38), and the ORR for CRC patients without liver metastasis is 12% (n=25), which is expected to resolve the phenomenon of PD-1 inresponse in patients with liver metastasis. For IBI363, the company has recently conducted a phase II trial in the US. The domestic POC test will enroll more melanoma and NSCLC patients in the high-dose group and determine the RP2D dose. International key clinical trials for NSCLC and melanoma are likely to be carried out in the future (depending on these two indication data), and follow-up plans are also being made for the longer term in combination with other treatments.

IBI343 (CLDN18.2 ADC) has excellent digestive tract safety and is potentially optimal in first-stage pancreatic cancer: Among patients with stage 1 PDAC and BTC (n=25), 7 cases achieved PR (5 PDAC, 2 BTC), and ORR was 28%; of these, in the 6 mg/kg dose group, 10 advanced PDAC subjects with CLDN18.2IHC1/2/3+ ≥ 60% +, ORR was 40%. Despite the small sample size, this efficacy data is better than other drug candidates for development that have disclosed pancreatic cancer data, including IBI389 (CLDN18.2/CD3 double antibody, Cinda), CT041 (CLDN18.2 CART, Keji), and MRG004A (TF ADC, LEP Biotech), and existing 2L SOC therapies. In terms of safety, the proportion of IBI343 patients with grade 3 or higher TRAE occurred in 25.7%, significantly lower than CMG901, SYSA1801, Zolbetuximab, and IBI389 (CLDN18.2/CD3). More importantly, the gastrointestinal toxicity index was greater than grade 3 vomiting and diarrhea, all lower than CMG901, SYSA1801, and Zolbetuximab (CLDN 18.2 mAb), showing excellent digestive safety. Management stated that excellent digestive safety was mainly due to Fc silencing design leading to gastrointestinal toxicity without ADCC effects. Hematotoxicity index grade 3 or greater neutropenia was 11%, lower than CMG901 and existing chemotherapy (2L PDAC standard therapy), similar to Zolbetuximab.

Looking ahead, management believes that IBI343 is expected to differentiate the development of other similar drug indications by rapidly advancing PDAC. Currently, the company's PDAC indications have obtained the US FDA Fast Track Designation (Frast Track Designation) qualification. Also, in addition to pancreatic cancer, gastric cancer POC data is expected to be presented at the ESMO GI conference at the end of the month.

l The efficacy data for early stage pancreatic cancer of IBI389 (CLDN18.2/CD3) is impressive, and it is expected that differentiated development will be achieved through people with low and medium expression of CLDN18.2: As the world's first targeted CLDN18.2/CD3 double antibody published with clinical data, IBI389 has remarkable efficacy in pancreatic cancer with low expression in CLDN18.2, and gastric cancer efficacy data is beginning to have potential. (1) Among 27 PDAC cancer patients (CLDN18.2IHC2+/3+≥ 10%), the 600 μg/kg Q3W dose group showed an ORR of 29.6% and a CoRR of 25.9%. Among 18 subjects with CLDN18.2 IHC 2/3+ ≥ 40%, ORR and CorR were 38.9%, and the 3-m PFS ratio was 47.1%. Overall, nearly 30% ORR was significantly higher than CT041 (17% ORR, n=24) and the current 2L SOC therapy, second only to IBI343 (CLDN18.2 ADC, n=10) mentioned above. Considering that CLDN 18.2 was expressed in this trial to medium to low, we think the response rate data is also quite impressive. (2) Among 26 patients with 3L+ G/GEJ C (CLDN18.2IHC2+/3+ ≥ 10%), the ≥10 μg/kg Q3W dose group showed an ORR of 30.8% and mPFs of 3.5 months. ORR efficacy data are close to LM-302 and ATC-022 (29%-30.6%), but not as good as CMG901 (35%) and SYSA1801 (47%). MPFs are less data than CMG901 and LM-302. In terms of safety, among 120 patients with CLDN18.2+ solid tumors (72 PDAC, 37G/GEJC, cutoff date: March 11, 2024), the dose climbed from ≤ 10 μg/kg to 600 μg/kg, no DLT was observed, grade 3 or more TRAE was 58.3%, TRSAE was 43.3%, grade 3 or higher CRS 0.8%, grade 3 infusion-related adverse events were 0%, discontinuation rate due to TEAE was 10%, death due to TRAE was 0.8% . In contrast, the side effects of IBI389 grade 3 or above are higher than CLDN18.2 ADC with disclosed safety data (≥3 grade TRAE/TEAE is basically in the 20% +~ 55% range), indicating that there is still room for further improvement in the safety of TCE therapy.

l Pancreatic cancer is a major differentiation in the company's CLDN 18.2 target development, and the two assets IBI343 and IBI389 are expected to complement each other in the future: According to the company's conference call, management believes that PDAC, as a cancer that is currently difficult to treat, is an important development direction for IBI343 and IBI389. This is one of the major differences between Cinda CLDN18.2 development and other companies. Additionally, IBI343 and IBI389, as two different modalities, are expected to achieve complementary synergy. In current patients, it has been observed that ADC is more advantageous for rapid tumor control, while TCE is more long-lasting.

The company's main catalysts for the next 12 months include: 1) approval of two oncology drugs: IBI344 (ROS1) and IBI351 (KRAS); 2) submission of two comprehensive business line drugs: NDA: IBI112 (IL23p19), Mashidu peptide (diabetic indications); 3) Key data readout: IBI363 (PD-1/IL-2) melanoma and lung cancer PoC data readout (3mg/kg single drug), IBI343 (CLDN18.2ADC) third-line gastric cancer PoC data readout and Pancreatic cancer PoC data readout, IBI389 (CLDN18.2/CD3) pancreatic cancer gastric cancer data update, picontibimab (IL-23p19) stage 3 psoriasis data and stage 2 ulcerative colitis data readout, IBI311 (IGF-1R) stage 3 thyroid eye disease complete data readout, IBI334 (EGFR/B7H3) solid tumor POC data readout, IBI302 (VEGF/C) NaMD PoC data read out, Mashidu peptide stage 3 diabetes data (DREAMS-1 and DREAMS-2) readout and IBI351 (KRAS G12C) critical stage 2 lung cancer data readout.

Maintaining the “Buy” rating and target price of HK$60: We maintain our 2024/2025/2026 forecast unchanged. Based on the DCF valuation model (WACC: 8.5%, sustainable growth rate: 3%), our company target price is HK$60, which corresponds to a market value of HK$98 billion.

Investment risks: Sales fall short of expectations, commercialization progress falls short of expectations, development delays, or clinical trial data falls short of expectations.