Core ideas:

Incident 1: On January 2, 2025, the company announced that the NDA for the treatment of EGFR mutant NSCLC with combination therapy with MET amplification and disease progression after treatment with first-line EGFR inhibitors has been accepted by the National Drug Administration and given priority review.

Sevotinib's second-tier NSCLC listing application is in advance domestically, and is being actively promoted overseas. According to the corresponding announcement, three registered clinical trials have been carried out for the combination therapy of sevotinib and osimitinib:

(1) SACHI: second-line treatment of EGFR-TKI refractory MET+ NSCLC, domestic phase 3; (2) SAFFRON: second/third-line treatment of osimitinib refractory MET+ NSCLC, global phase 3; (3) SAVANNAH: second/third-line treatment of osimitinib refractory MET+ NSCLC, global phase 2 registered clinical trial. The domestic marketing application submitted this time is based on SACHI's research results. The treatment has been included in priority review, and the specific data is expected to be released at next year's academic conference.

Incident 2: On January 2, 2025, the company announced the sale of 45% of its shares in Shanghai Hehuang to Gimpo Health and Shanghai Pharmaceutical for 0.608 billion US dollars (RMB 4.478 billion) in cash.

Hehuang Pharmaceutical will retain 5% of Shanghai Hehuang Pharmaceutical's shares after the transaction is completed. In 2023, the net revenue of Shanghai Hehuang Pharmaceutical was 47.4 million US dollars, not consolidated revenue.

Focus on innovating the main business, and sell traditional Chinese medicine assets smoothly. According to the company's official website, the company plans to use the proceeds from these transactions to further develop its internal product pipeline, including its next-generation ADC platform. The company's first drug candidate based on this platform is scheduled to enter clinical trials in the second half of 2025.

Profit forecasting and investment advice. The company's R&D, commercialization and overseas capabilities have been initially verified, and the differentiated innovation pipeline is sufficient. As each product gradually enters the harvest period. Net profit due to mother for 24-26 is estimated to be USD 0.005, 0.02, and 0.074 billion USD, respectively. The reasonable value of the company was HK$41.35 per share (USD 1 = HK$7.78) through the DCF Act, maintaining a “buy” rating.

Risk warning. Drug review risks, fee control policy risks, R&D progress falls short of expectations.