The company's recent situation

On September 27, 2024, the company's partner Bristol-Myers Squibb (BMS) announced that the FDA has officially approved Cobenfy (KarXT) for oral treatment of schizophrenia in adults on September 26.

reviews

Karxt became the first novel mechanism drug approved by the FDA for the treatment of schizophrenia in decades.

This approval is mainly based on the EMERGENT series of studies, which include the EMERGENT-1, 2, and 3 studies, which all obtained positive efficacy and safety results, and EMERGENT-4 and 5 studies that assessed long-term safety. Zaiding Pharmaceutical owns KarXT's development, production and commercialization rights in Greater China. In August 2024, the company completed the enrollment of all patients in the Phase III registered schizophrenia bridging clinical trial in China. The company is expected to obtain key research data and submit a listing application in China at 2H24-1H25. We expect progress to be at least 2 years ahead of the competition. Furthermore, the KarXT approved label does not include a black frame warning of “increased mortality among Alzheimer's patients”, laying the foundation for KarXT to expand into Alzheimer-related mental illness in the future. At the same time, BMS is also conducting KarXT's Phase III clinical trial on Alzheimer's disease-related mental illness, and the company joined the study in Greater China in July 2024.

KarXT is expected to open up domestic and international markets with its advantages in effectiveness and safety. According to WHO statistics, there are about 24 million people with schizophrenia in the world, and more than 8 million in China. According to ExpertMarket Research estimates, the global market for schizophrenia drugs reached 8.2 billion US dollars in 2023, and China was about 8.8 billion yuan. Although a large number of antischizophrenic drugs have been approved for marketing up to now, currently available drugs are still unable to meet clinical needs in treating negative symptoms and cognitive impairment. KarXT can significantly improve positive, negative, and cognitive symptoms of schizophrenia, which will also be one of its core sales drivers in the future.

The company has entered the performance exchange period, and there are plenty of catalysts. In addition to KarXT, which is expected to be marketed domestically in 2026, the company's other core product, agamod, is used to treat myasthenia gravis. Since entering health insurance, 1H24 has contributed 36.4 million US dollars in revenue. The company expects its annual sales to reach 80 million US dollars, which is the main driving force for the company's performance growth; Agamod's NDA for another indication of chronic inflammatory demyelinating polyradiculoneuropathy was also accepted by the CDE in May 2024. At the same time, the company expects 2L+NSCLC for tumor electric field treatment to be listed on 2H24 in the EU and the US, and to submit a marketing application for 2L+NSCLC domestically on 4Q24.

Profit forecasting and valuation

We maintain the company's 2024 and 2025 earnings forecasts unchanged. We maintain our outperforming industry ratings. Considering KarXT's successful overseas approval, we raised the KARxT domestic clinical success rate. Based on the DCF model, we raised the target price of 8.7%/8.7% for H shares/US stocks at HK$24.34/$31.41, which has 35.1%/32.9% upside compared to the current stock price.

risks

Approval and commercialization fell short of expectations, and progress in reversing losses was slower than expected.