Kelun-Biotech recorded RMB1.38bn (+32% YoY) revenue in 1H24, including a total of US$90mn (or RMB641mn) milestone payments from MSD regarding multiple collaborated pipelines. In 1H24, Kelun-Biotech spent RMB652mn on R&D, +33% YoY, mainly driven by an uptick in clinical trials. The company is gearing up for the near-term launch of several key assets in China, including sac-TMT (TROP2 ADC), A166 (HER2 ADC), A167 (PD-L1 mAb) and A140 (cetuximab biosimilar) in 2H24 or 1H25. In preparation, the company has assembled a commercial team of 110+ people, with plans to expand the salesforce to around 400 employees by end-2024. Therefore, in 1H24, the company recorded RMB41mn in selling expenses (vs 0 in 1H23). Kelun-Biotech achieved RMB310mn net profit in 1H24. The company received RMB492mn in net proceeds from the placement of new H shares in May 2024. As of Jun 2024, Kelun-Biotech had a robust cash balance (incl. financial assets) of RMB2.9bn. Following Kelun Pharma's subscription to new domestic shares, the company expects to receive an additional RMB601mn in net proceeds.
The second BLA of sac-TMT submitted in China. Following the BLA submission of sac-TMT for 3L+ TNBC in Nov 2023, Kelun-Biotech recently submitted the second BLA of sac-TMT for 3L+ post-chemo and TKI-resistant EGFRm NSCLC in Aug 2024. Concurrently, Kelun-Biotech is preparing another BLA submission for sac-TMT for the treatment of 2L TKI-resistant EGFRm NSCLC. For EGFR-wild type NSCLC, the company has initiated a Ph3 trial in China to compare sac-TMT + Keytruda vs Keytruda in 1L PD-L1+ (TPS>=1%) NSCLC. Additionally, the CDE has granted approval for a Ph3 study of sac-TMT + Keytruda for first-line PD-L1-negative (TPS<1%) nsq-NSCLC, with the FPI expected soon. It's noteworthy that sac-TMT (Q3W) + A167 (PD-L1 mAb) achieved 15.4 months of mPFS in 1L NSCLC in a Ph2 study, significantly surpassing the SoC and other TROP2 ADC competitors (CMBI report link).
Out-licensed innovative bispecific ADC to MSD. MSD has initiated 10 global Ph3 trials of sac-TMT. These trials encompass a range of indications including NSCLC with five trials, TNBC, HR+/HER2- BC, GC, EC, and CC. The broad spectrum of clinical trials underscores MSD's commitment to advance sac-TMT's development. We expect MSD to initiate additional Ph3 trails of sac-TMT. MSD has exercised its option to in-license the ex-China rights of SKB571, a novel bispecific ADC at IND-enabling stage targeting lung and gastrointestinal tumors. For this, MSD will make an exercise payment of US$37.5mn to Kelun-Biotech, in addition to future milestone and royalty payments. Concurrently, MSD has returned the global rights for SKB315 (CLDN18.2 ADC) to Kelun-Biotech which will continue its development in China. Additionally, MSD/Kelun-Biotech are investigating SKB410/MK-3120 (Nectin4 ADC) in Ph1a study. Kelun-Biotech plans to submit IND applications for other four preclinical ADC assets under its licensed collaboration with MSD soon, and to explore new collaboration opportunities with MSD.
Maintain BUY. We remain confident about SKB264's global development and the approval in China. We raise our DCF-based TP from HK$246.13 to HK$243.38 (WACC: 10.31%, terminal growth rate: 4.0%).