"Star Daily" reported on July 4th (Reporter Zheng Bingxun) that innovative drug company, ConnoGenetics (9966.HK), seems to be experiencing a "rough year".

After the core research product KN046 suffered consecutive research setbacks in 2023 and 2024, the only commercially available product, Enfolitumab (KN035), also recently failed a key clinical trial overseas. The indication for this monotherapy was for the treatment of soft tissue sarcoma.

Cooperating company Tracon (TCON.OO) announced that, in a key trial, the objective response rate (ORR) of 82 assessable patients was 5%, lower than the 11% required to support the biological license application (BLA), and therefore terminated further development on Enfolitumab.

Three and a half years have passed since the cooperation agreement was signed.

◌ Enfolitumab supports income alone.

This overseas clinical failure of KN035 is not only the first product of ConnoGenetics to achieve indication and go abroad, but also the first to achieve commercialization.

In November 2021, KN035 (trade name: Envidor) received conditional approval for sale by the National Medical Products Administration. It is used for the treatment of adult patients with unresectable or metastatic microsatellite instability-high (MSI-H)/mismatch repair deficient (dMMR) late-stage solid tumors. It became China's first domestically produced PD-L1 monoclonal antibody to be approved for sale, and the world's first subcutaneous injection PD-L1 monoclonal antibody. Compared to previous PD1/PD-L1 products, the subcutaneous injection of KN035 has differentiated advantages such as shorter administration time and good safety.

However, since the approval of Enfolitumab for late-stage solid tumor indications, ConnoGenetics has not been granted any new product or indications. Thus, Enfolitumab has become the only product contributing to the company's revenue. In 2023, Enfolitumab's contributed product revenue was 0.196 billion yuan, a year-on-year increase of 32.54%, and accounted for nearly 90% of the annual revenue.

At the end of 2019, ConnoGenetics reached a cooperation agreement with Tracon and T-sled Corporation to develop KN035 in the United States, Canada, Mexico and other countries at Tracon's expense and commercialize it. ConnoGenetics has the right to collect a franchise royalty fee amounting to tens to mid-double digits of the net sales of KN035.

However, the failure of this clinical trial means that ConnoGenetics' expectation of receiving sales commissions from Tracon has fallen through. Fortunately, however, at the beginning of this year, ConnoGenetics reached a new agreement with another company, Glenmark, on KN035, which may bring revenue from a new source.

In January of this year, ConnoGenetics and T-sled, as licensors, agreed with Glenmark to develop KN035 for commercial use in all tumor fields in India, the Asia-Pacific region (excluding Singapore, Thailand and Malaysia), the Middle East, Africa, Russia, the CIS countries and Latin America.

ConnoGenetics and T-sled will receive a non-refundable advance payment and milestone payment of 0.701 billion US dollars, respectively, and are expected to receive a franchise royalty fee ranging from a single to double digits of KN035's net sales level.

The reporter of "Star Daily" wrote to ConnoGenetics to ask about the progress of its overseas cooperation with Glenmark, but has not received a response at the time of publication. Only time will tell whether KN035's cooperation with Glenmark will be successful.

◌ When will new products emerge?

Since ConnoGenetics has multiple products and pipelines in development, the company has not yet turned a profit.

From 2021 to 2023, ConnoGenetics achieved revenues of 0.146 billion yuan, 0.167 billion yuan, and 0.219 billion yuan, with corresponding losses of 0.412 billion yuan, 0.326 billion yuan, and 0.211 billion yuan. Meanwhile, R&D expenses have remained high, at 0.481 billion yuan, 0.468 billion yuan, and 0.408 billion yuan for the same period.

As of the end of 2023, ConnoGenetics' cash and cash equivalents balance was 1.086 billion yuan. Referring to the above R&D investment situation, the static situation of the cash flow is sufficient for ConnoGenetics to conduct research for more than two years.

In fact, in addition to Enfolitumab, another core research product of ConnoGenetics, KN046, was once ahead in its research progress, with several indications entering the key clinical phase, including combination chemotherapy for 1L squamous NSCLC (non-small cell lung cancer) and 1L pancreatic cancer.

KN046 is the world's first PD-L1/CTLA-4 bispecific antibody developed by ConnoGenetics, which targets PD-L1 and CTLA-4, which have significantly different structures, and can change the positioning of the tumor microenvironment and reduce off-target toxicity. Unfortunately, two key studies around KN046 suffered setbacks.

Firstly, in May 2023, ConnoGenetics announced that phase III clinical trials of KN046 for the treatment of advanced unresectable or metastatic squamous NSCLC patients combined with platinum-containing chemotherapy failed to achieve statistical significance for OS (overall survival), and did not successfully complete unblinding. The Independent Data Monitoring Committee recommended that ConnoGenetics continue its research and collect more data until final OS analysis.

Following that, in May 2024, Conagen announced that the phase III clinical trial of KN046 with albumin-bound paclitaxel and gemcitabine for the treatment of advanced or metastatic pancreatic ductal adenocarcinoma (PDAC) had reached the predetermined number of deaths, but the data analysis showed that the OS results did not reach the predetermined statistical endpoint.

Both of the above two key studies failed, which caused Conagen's stock price to plummet at the time, and also meant that the journey to market for Conagen's new products was lengthened.

Combined with Conagen's disclosed financial report for 2023, the pipeline that is still in a critical clinical stage includes KN046 combined with chemotherapy for 1L squamous NSCLC, KN035 combined with chemotherapy for 1L cholangiocarcinoma, and KN026 combined with docetaxel for 1L breast cancer, combined with chemotherapy for 2L gastric cancer/gastroesophageal junction cancer (GC/GEJ), among which, the indication of KN046 for 1L squamous NSCLC is still in the Pre-NDA state.

A reporter from the 'Science and Technology Innovation Board Daily' wrote to Conagen, inquiring about the new progress of the research on KN046 for the treatment of 1L squamous NSCLC in 2024 and other most promising pipelines to be approved next. As of the publication, no reply has been received.

Conagen's pipeline progress as of the end of 2023