Company event: Kangfang Biotech announced its 2024 interim results announcement. Product revenue was 0.94 billion yuan, +24% compared with the same period last year (0.76 billion yuan in the same period last year), mainly due to the approval and sales growth of the company's two dual-antibody products. Among them, sales of cardonilizumab (PD-1/CTLA-4 dual antibody) grew steadily, with revenue of 0.706 billion yuan, an increase of 16.5% over the previous year. Evosimab (PD-1/VEGF dual antibody), which was approved at the end of May this year, achieved delivery revenue of 0.103 billion yuan for 2024H1.
Cardonilizumab AK104: Sales continued the high growth trend, and subsequent major indications progressed steadily.
1) Sales performance: Thanks to excellent clinical efficacy and market demand, product sales continued to grow at a high rate. 24H1 revenue was 0.706 billion yuan, +16.5% year-on-year (0.606 billion yuan in the same period last year). Since its launch on June 29, 2022, it has accumulated sales of 2.61 billion yuan.
2) Two new indications NDA+ phase III are under study: the NDAs for 1L gastric cancer and 1L cervical cancer were accepted by the CDE in January '24 and April '24, respectively. Additionally, post-operative liver cancer adjuvant, mid-stage liver cancer, 2L gastric cancer, and 1L PD-L1 negative NSCLC are all in phase 3 clinical trials.
3) Wide range of indications: Cardonil lays out many major indications through combined medication, and has carried out more than 20 clinical trials with the aim of further expanding market potential through combined medication.
Evosimab AK112: Strong contribution at the beginning of marketing, overseas certainty gradually became clear1) Sales performance: Evosimab was obtained on May 24 this year and was jointly approved for marketing. EGFR mutant non-squamous NSCLC, which is used to treat the progression of EGFR-TKI treatment, achieved rapid initial shipment within one week of approval, and achieved delivery revenue of about 0.103 billion yuan in just over 30 days of approval.
2) First-line lung cancer NDA acceptance+phase III clinical trial of multiple head-to-head PD- (L) 1 treatments: The new indication NDA for evosimab monotherapy for PD-L1 positive NSCLC was accepted by the CDE in July of this year and included in priority review. In addition, phase III clinical trials of evosimab plus chemotherapy compared to tirelizumab plus chemotherapy first-line treatment for squamous NSCLC, evosimab plus chemotherapy first-line treatment for biliary tract cancer, and evosimab + chemotherapy versus pabolizumab+chemotherapy for first-line treatment of squamous NSCLC tripartite head-to-head PD- (L) 1 therapy is being actively promoted.
3) Overseas: Partner SUMMIT is actively promoting enrollment in two Phase III clinical trials, Harmoni and Harmoni-3.
In June of this year, Kangfang Biotech signed a supplementary license agreement with SUMMIT and confirmed authorized revenue of about 80 million yuan.
Oncologic/non-tumor pipelines are being developed, and new drugs such as HER3 ADC have entered the clinical stage. The two new drugs, inucimab PCSK9 and iroximab IL-12/23, are both in the NDA phase and are expected to be approved in 24-25 years. Gumocizumab IL17A is in phase III. Rephalizumab CD47 has initiated several clinical studies worldwide for hematomas and solid tumors. Proxime VEGFR2 monoclonal antibody combined with AK104 and chemotherapy has achieved the first enrollment in phase III clinical trials for advanced GC/GEJC where first-line PD- (L) 1+ chemotherapy failed. Furthermore, the company's interim report revealed that three new drugs, AK135 (IL-1RAP), AK137 (CD73/LAG3), and AK138D1 (HER3ADC), have entered the clinical phase.
Profit forecasting and valuation. We expect the company's revenue for 2024-2026 to be 2.567/4.164/6.596 billion yuan, and net profit to mother of -0.348/0.219/1.28 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 $55.5 billion, corresponding to HK$59.3 billion (exchange rate of RMB 1 = HK$1.07).
In view of the company's excellent innovation pipeline and strong commercialization, overseas clinical certainty gradually became clear, maintaining the company's “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.