Matters:

On August 20, 2024, Nochengjianhua announced its results for the first half of 2024. Revenue of 0.42 billion yuan (+11.17%), of which obutinib revenue was 0.417 billion yuan (+30.02%). The first half of the year achieved a net loss of 0.262 billion yuan attributable to shareholders of listed companies, a reduction of 0.16 billion yuan compared with a loss of 0.422 billion yuan in the same period in 2023.

R&D investment accounts for 100.40% of revenue (+4.73pp).

Commentary:

Obutinib is covered by health insurance as the only BTKi used to treat MZL. Obutinib was approved for three indications in China: r/r CLL/SLL, MCL, and MZL. 24H1 sales reached 0.417 billion yuan (+30%), and Q2 increased 49% year-on-year in a single quarter. The main reason is that obutinib entered medical insurance as the first and only BtKI approved for MZL and was recommended by CSCO lymphoma diagnosis and treatment guidelines. Currently, all three indications of obutinib are covered by medical insurance, and the price remains unchanged. The company raised its annual sales growth guide to 35% (previous value: 30%).

The hematoma layout is comprehensive, and the expansion of indications drives sales growth. Nuochengjianhua has deployed 6 products in the field of hematoma, covering all segments of myeloma, leukemia and non-Hodgkin lymphoma. Obutinib's new indication 1L CLL/SLL has been accepted by the CDE, and discussions are under way to submit an NDA for r/r MCL to the FDA.

The first domestic marketing application for CD19 monoclonal tamxitumab combined with lenalidomide to treat r/r DLBCL has been accepted by the CDE and included in priority review.

The first NDA in the field of self-exemption will be submitted as soon as the end of 2025. More than half of China's ITP Phase III group has been enrolled in obutinib. The data is expected to be read out next year, and the NDA will be submitted as early as the end of 2025. The SLE Phase IIb study has completed enrollment, and mid-term analysis results are expected by the end of this year. Self-immunity is expected to relay hematomas and open a second growth curve for obutinib. In the JAK/TYK2 signaling pathway, the company deployed the TYK2/JAK1 inhibitor ICP-332 and the TYK2 variant inhibitor ICP-488. Phase III enrollment for ICP-332 treatment of atopic dermatitis has been initiated, clinical applications have been submitted for the phase II vitiligo study, and phase I clinical trials in the US have begun. ICP-488 has initiated a psoriatic phase II clinical trial, and data is expected by the end of this year.

The first product in the field of solid tumors has entered the pre-NDA stage. A registration study for the pan-cancer TRK inhibitor ICP-723, which is positive for NTRK fusion, has been completed, with an ORR of 80-90% and a PFS of over 36 months.

Furthermore, ICP-723 is also effective against patients with acquired resistance to first-generation TRK inhibitors, and it is expected that NDA will be submitted in 2025Q1. There are also four candidate products under development in the field of solid tumors, including ICP-192, a pan-FGFR inhibitor with better selectivity, and ICP-189, a SHP2 inhibitor, etc., which are progressing smoothly.

Investment suggestions: A number of products have entered Phase II/III clinical trials in the later stages of development. The future is optimistic about the company's R&D strength, clinical execution and commercialization promotion capabilities. Based on adjusted profit expectations for the first half of the year, we expect the company's revenue for 2024-2026 to be $9.11, 14.07 billion, and 1,740 million yuan, respectively, up 23.3%, 54.5% and 23.7% year-on-year; net profit to mother is -5.27, -5.26, and -366 million yuan (previous values of -6.14, -6.24, and -399 million yuan). According to the innovative drug product pipeline valuation method (cash flow discount method based on risk adjustment), the company was given an overall valuation of 22.623 billion yuan, and the corresponding target price was 12.8 yuan, maintaining the “recommended” rating.

Risk warning: Clinical progress falls short of expectations, commercial performance falls short of expectations, and changes in the competitive landscape.