A next-generation innovative drug flagship that continues to evolve, and the two major FIC dual antibodies accelerate commercialization. Kangfang Biotech is a biopharmaceutical company integrating research, development, production and commercialization of innovative new antibody drugs. It was listed on the Hong Kong Stock Exchange in April 2020. The two core dual antibodies, AK104 (PD-1/CTLA4) and AK112 (PD-1/VEGF), have been approved for listing in China, and the company has entered a period of innovation harvest.
AK112 (PD-1/VEGF) has been approved for marketing in China. Positive results have been obtained in both major clinical trials, and the certainty is gradually becoming clear overseas.
1) AK112-301 (domestic) /HarmonI (overseas): NSCLC, the first domestic indication for EGFR-TKI, was approved for marketing in May 24. 86% of patients have received third-generation TKI treatment in the past, which is more in line with real-world clinical medication rules. OS HR is 0.80 when data maturity reaches 52%, and there is a trend of further differentiation. Furthermore, AK112 shows good safety, controllable adverse reactions, and low discontinuation rate. Overseas, Harmoni achieved the first patient administration in May 23. We believe that the follow-up treatment background of the US clinical trial is cleaner than in China, and the OS data may be less interfered with by subsequent treatment, so the probability of obtaining optimal OS efficiency overseas is greater. 2) AK112-303 (domestic) /Harmoni-3 (overseas): The SNDA for treating PD-L1 positive NSCLC with EVOSIX 1L was accepted by the NMPA on July 29. The company previously announced that it had strong positive results. The single drug significantly prolonged patients' PFS, and the risk was significantly better than expected compared to HR. In particular, PFS benefits were significant among people with PD-L1 TPS 1 to 49%. Subgroup analyses such as squamous cell carcinoma/non-squamous cell carcinoma all showed strong positive results for ongoing Harmoni-3 International III Phase clinical (1L metastatic Sq-nsclc) provides confidence. In addition, AK112-306 (head-to-head replacement Rayleigh Zhu, 1L late Sq-nsCLC), which is currently being developed domestically, is also expected to provide data support for Harmoni-3. AK112 is expected to become a next-generation I/O cornerstone drug. Thanks to its good efficacy and safety, it provides rich room for imagination for subsequent use in combination with ADC and expansion of indications.
Sales momentum of ketani (PD-1/CTLA-4, AK104) is strong, and new indications are being actively promoted. Ketani was approved for sale in June 2022 to treat 2L/3L cervical cancer. The sales volume in 2023 was 1.36 billion yuan, with cumulative sales of 1.91 billion yuan, and strong commercialization performance. Major indications are being actively expanded. Among them, 1L cervical cancer and 1L gastric cancer are both in the NDA stage, and post-operative adjuvant for liver cancer and 1L PD-L1 negative NSCLC are being enrolled in phase 3 registered clinical trials. Relevant clinical data show that AK104 has significantly benefited people with low PD-L1 expression and negative results, bringing better immunotherapy solutions to the entire population, and there is broad scope for future sales growth.
The research pipeline is abundant, and commercialization is imminent. Both new drugs, AK102 (PCSK9) and AK101 (IL-12/23), are in the NDA phase and are expected to be approved in 24 years. AK111 (IL17) is in phase III and is expected to submit an NDA in 2024. AK117 (CD47) has initiated several clinical studies around the world for hematomas and solid tumors. AK109 (VEGFR2) is combined with AK104 to cover major indications such as stomach, lungs, and liver. GC/GEJC phase III, which progresses after PD- (L) 1 treatment, has been initiated.
Profit forecasting and valuation. The company has an excellent innovative self-research pipeline and strong commercialization performance. As positive results are read, overseas clinical certainty gradually becomes clear. The company's revenue for 2024-2026 is estimated to be 2.567/4.164/6.596 billion yuan, respectively. Calculated using the DCF method, assuming a sustainable growth rate of 3%, WACC of 9.70%, the company's reasonable equity value is $54.8 billion, corresponding to HK$58.6 billion (exchange rate of RMB 1 = HK$1.07). First coverage, giving the company a “buy” rating.
Risk warning: risk of clinical development failure, risk of deteriorating competitive landscape, risk of sales falling short of expectations, industry policy risk, etc.