1H24's performance is in line with expectations, and 2H24-2025 is also expected to launch three new products and multiple new indications of Ketanil and Edafen, driving 49% of revenue CAGR in 2024-26. The target price was raised to HK$72.

1H24 is in line with market expectations and the target price was raised: total product sales revenue increased 24.0% to 0.939 billion yuan (RMB, same below), of which Ketani 0.706 billion yuan (+16.5% year-on-year), and the newly listed Ida Party recorded delivery revenue of 0.103 billion yuan, which is basically in line with market expectations. In addition, the company also confirmed approximately 80 million yuan in authorized revenue from partner Summit. The gross margin of 1H24 product sales increased by 1.5 ppts, the operating expense ratio (based on product sales) decreased by nearly 20 ppts, and net operating loss after excluding BD narrowed by 27% to 0.329 billion yuan. The company guides annual R&D/management expenses of 1.3-1.4 billion/0.2-0.21 billion yuan, a slight increase over the previous year. We lowered the company's 2024-26 revenue by 6-13% to reflect the potential impact of the recent price reduction in ketanil; at the same time, considering the continued clinical progress of Idafang's overseas and new products in the mainland and the increase in the probability of successful development, the medium- to long-term revenue forecast was raised. We delayed the start year of the DCF model by one year to 2025 and raised the target price to HK$72.0.

Early, middle, and late stage pipelines go hand in hand, and major catalysts are about to be implemented: 1) Yidafang: The first head-to-head K drug phase III will be released on the evening of September 8, Beijing time. The market currently generally expects a PFS HR value of 0.5-0.6. Several important phase II data will be published at the ESMO conference in mid-September; two head-to-head PD- (L) 1 phase III were recently launched, respectively for head-to-head Imfinzi first-line treatment of biliary cancer and the first-line treatment of head and neck squamous cancer with AK117 head-to-head K medicine. 2) Ketani: Phase III data for 1L cervical cancer was announced (October IGCS conference); the published 1L gastric cancer stage III data was astonishing. The risk of death among subjects with PD-L1 CPS<5 still decreased by 30%, close to 38% of all subjects, and the clinical medical community's approval continued to increase; a new phase III study on 2L PD- (L) 1 treated gastric cancer (+AK109), middle to advanced liver cancer, and advanced NSCLC. 3) Early clinical stage: AK117 and AK109 first entered phase III research. Among them, AK117 became the world's first CD47 monoclonal antibody to enter phase III solid tumor research. While competing products at the same target failed one after another, they still retained hope for drug development. 4) Early pipelines:

HER3 ADC has submitted an IND application and is expected to become the company's first ADC molecule to enter clinical trials. It is expected that a significantly differentiated “dual antibody IO+ADC” development strategy will be created in the future.