On November 17, the company announced that its BCMA/CD3 dual-antibody CM336 was authorized externally in the form of NewCo., and the counterparty was Platina Medicines (PML), a subsidiary of Ouro Medicines, with a down payment/milestone of $0.016/0.61 billion, respectively. In addition, Connoah will also receive minority shares and future shares of Ouro Medicines. We are optimistic about the global commercial value of CM336, considering that the indications for self-immunity treatment of TCE have been initially verified, and that the counterparty has shown a deep understanding of the field of self-immunity and strong translational medicine capabilities in previous transactions. Maintain “buy-in.”

CM336: It is expected to be a new approach to self-exempt treatment

As a B-cell clean-up protocol, TCE has significant therapeutic potential for severe autoimmune patients. The BCMA/CD3 double antibody has an outstanding effect on plasma cells and plasma blastocytes. Johnson & Johnson's teclistamab has achieved significant curative effects in the back-line treatment of several patients with severe SLE, systemic sclerosis, and dry syndrome in early exploratory studies, and CRS did not exceed grade 2. In preclinical studies, CM336 induced cytokine release was significantly lower than that of REGN5458 and teclistamab analogs, and has the potential for better safety.

It is currently in phase I/II clinical phase, and progress in the field of self-immunity is in the first tier in the world.

Counterparty: Experienced. Fizetumab is a classic case, Ouro Medicines will hold 42% of Monograph Capital, which is a well-known biopharmaceutical investment institution. We believe that the counterparty is a key long-term contributor to this BD: MonographCapital's founder Fred Cohen is a senior partner in the TPG biomedical industry for over 20 years; Monograph participated in incubating Hi-Bio in 2021, which introduced fizetumab from MorphoSys with 15% equity and a $1 billion milestone in 2022, developed AMR indications, and the efficacy was superior to placebo controls (AMR relief ratio 81.8% Vs . 20.0%), successfully expanding new fields of immunization. Hi-bio was sold to BioGen this year for $1.8 billion. We believe that CM336 is the core product of Ouro Medicines, and future applications in the field of self-protection are worth looking forward to.

The self-defense field has a comprehensive layout to form a product matrix

New patients climbed smoothly after approval of the commercialization stage product sipuximab, and crSWnp/SAR, where the competitive pattern has eased, is expected to be approved within 1H25/2025. Early pipeline reserves are abundant: 1) CM313 is the initial POC for ITP treatment. It is one of the first CD38 monoclonal antibodies to explore self-exempt indications, and is optimistic about global value; 2) The dual antibodies CM512 and CM536 have been authorized.

Profit forecasting and valuation

Considering CM336's down payment revenue and adjusting the sales and cost of sipcibalizumab with reference to pricing and drug donation policies, we expect EPS to be (2.54)/(3.29)/(2.05) yuan for 24-26 (previous value: (3.02)/(3.26))

/($1.57)), based on DCF, the target price is HK$60.93 (WACC: 11.4%, sustainable growth rate 2.5%, previous value of HK$58.76 under the same WACC and sustainable growth rate). Maintain “buy-in.”

Risk warning: 1) The drug has not achieved the expected positive clinical results; 2) Drug commercialization uncertainty.