1-3Q24 Results Exceed Our Expectations

The company announced 1-3Q24 results: revenue of 0.338 billion yuan, a year-on-year increase of 743.97%; net loss to mother of 0.6 billion yuan, corresponding to a loss of 1.35 yuan per share. The results for the first three quarters exceeded our expectations, mainly due to surpassing expectations in the amount of sulvortinib.

Development trends

Domestic sales of suvortinib reflect commercialization capabilities, and it is recommended to continue to monitor the progress of overseas declarations. According to the company's announcement, the month-on-month growth rate of suvortinib was more than 50% for two consecutive quarters, and we expect 3Q24 to maintain a good volume. We believe that the company has demonstrated commercialization capabilities with sulvetinib. If suvoratinib is successfully included in the national health insurance catalogue, it is expected to further help it launch in 2025. Furthermore, according to the company's announcement, suvortinib for first-line treatment of EGFR exon20insnsCLC was recognized by the US FDA as the first breakthrough treatment for this indication, and the global multi-center phase III study WU-KONG28 has reached the main end point. Previously, the results of the first globally registered clinical WUKONG1B of suvortinib were presented orally at ASCO in 2024. We believe it is expected to provide an important basis for European and American declarations, and it is recommended to continue to monitor the progress of overseas declarations.

Golixitinib has been approved for domestic marketing, and it is expected that it will begin to be released. According to the company's announcement, in June 2024, golisitinib was approved for marketing in China for r/r PTCL, becoming the only treatment drug with a new PTCL mechanism acting on the JAK/STAT pathway in the world, and the world's first batch of prescriptions was officially issued within 2 days after marketing. Currently, golisitinib has been included in the CSCO 2024 Lymphoma Diagnosis and Treatment Guidelines Level II recommendation, and we expect that it will also be included in medical insurance coverage to benefit more patients.

Subsequent differentiated innovation pipelines continue to advance. According to the company's announcement, phase II clinical trials of DZD8586, the world's first LYN/BTK dual-target non-covalent small molecule inhibitor that can completely penetrate the blood-brain barrier, on CLL/SLL and DLBCL are progressing smoothly, and the new NSCLC small molecule inhibitor DZD6007 is carrying out phase I clinical studies of EGFR NSCLC in China.

Profit forecasting and valuation

Due to better dosage of sulvortinib, we raised our 2024/2025 revenue forecast by 23.4%/6.1% to 0.433 billion yuan/0.963 billion yuan, and adjusted the 2024/2025 net profit forecast to -0.942 billion yuan/-0.727 billion yuan (previously -1.155 billion yuan/-0.754 billion yuan). We maintain the company's outperforming industry rating. Based on the DCF model, the company's target price of 54 yuan remains unchanged, with 13.7% upside compared to the current stock price.

risks

Research and development failed, review progress fell short of expectations, commercialization fell short of expectations, and medical insurance price cuts exceeded expectations.