In 1H24, Akeso recorded RMB1.03bn in revenue, including RMB939mn from product sales. Cadonilimab/AK104 (PD-1/CTLA-4) recorded RMB706mn in sales in 1H24, +16% YoY or -6% HoH, accounting for 39% of our previous full-year estimate. We attribute the weaker-than-expected sales performance to the preparation for NRDL inclusion. Recall that Akeso reduced the retail price of AK104 from RMB13,220/125mg to RMB6,610/125mg in Jun 2024. Concurrently, Akeso discontinued the PAP program, a move we believe positions the drug ready for the upcoming NRDL negotiation. Approved in May 2024, Ivonescimab/ AK112 (PD-1/VEGF) realized RMB103mn sales revenue in 1H24. We expect AK104 and AK112 to participate in the NDRL negotiations by end-2024, which will boost their sales upon the inclusion in early 2025. Akeso maintained a high product GP margin at 91.6% in 1H24, compared to 91.8% in FY23. Selling expenses (incl. distribution cost) as % of product sales remained at 56.4% in 1H24, consistent with the 56.3% in FY23. R&D expenses increased 3.4% YoY to RMB594mn in 1H24. Akeso recorded RMB239mn of attributable net loss in 1H24. As of Jun 2024, Akeso had a sufficient cash balance of RMB5.69bn.
Eyes on readout of the Ph3 H2H trial of AK112 vs Keytruda in 1L PD-L1+ NSCLC at WCLC meeting. Akeso announced that the head-to-head Ph3 China study of AK112 mono vs Keytruda in 1L PD-L1≥1% NSCLC met the PFS superiority endpoint (link 1, link 2), with "a HR significantly better than expected". Following this, an NDA was accepted in Aug 2024 in China with priority review, potentially offering a new chemo-free treatment option for PD- L1+ NSCLC patients. We look forward to the detailed PFS data release of the study at the coming WCLC meeting in Sep, and will monitor the OS data as it matures. Already approved in China for EGFR-TKI resistant nsq-NSCLC, the corresponding MRCT HARMONi trial conducted by Summit is on track to complete enrolment in 2H24. The Ph3 China trial of AK112+chemo vs tislelizumab+chemo in 1L sq-NSCLC is also expected to complete enrolment in 4Q24. Akeso is expanding the indications for AK112, with new Ph3 trials initiated in 1H24 including a Ph3 China trial of AK112+chemo vs durvalumab+chemo for 1L BTC and a Ph3 China trial of AK112+AK117 (CD47) for PD-L1+ HNSCC. A Ph3 trial of AK112+chemo for 1L pancreatic cancer is also in planning.
Rapid progress of indication expansion for AK104. Besides the approved 2/3L CC, Akeso is actively expanding AK104's indications. NDAs of AK104 in 1L GC (submitted in Jan 2024) and 1L CC (submitted in Apr 2024) are currently under review, with the approval expected by end-2024/in 1H25, respectively. Ph3 trials of AK104 in adjuvant HCC, advanced unresectable HCC, PD-L1- NSCLC, and PD-1-resistant 2L GC are ongoing. With an IND filed for AK138D1 (HER3 ADC), and multiple ADC assets in pre-clinical stage expected to enter the clinic, Akeso plans to explore the potential of AK104 or AK112 combined with ADCs to compete with PD-1+chemo.
Maintain BUY. We look forward to the detailed data of AK112 at the coming WCLC. Akeso's non-oncology products are nearing commercialization with NDAs for PCSK9 mAb and IL12/23 mAb under review. We expect AK104 and AK112 be covered by NRDL early next year. We revise our TP from HK$59.61 to HK$58.97 (WACC: 10.47%, terminal growth rate: 3.5%).
