Key points of investment

Incident: On April 22, 2021, Fu Hong Hanlin (02696.HK) announced that the self-developed innovative PD-1 inhibitor slurizumab injection (HLX10) was officially accepted by the National Drug Administration (NMPA) for unresectable or metastatic highly unstable microsatellite (MSI-H) solid tumors (Microsatellite Instability-High, MSI-H) solid tumors that have failed standard treatment and will be accepted by the National Drug Administration (NMPA) and will be included in the priority review process.

Opinion: China is the most populous country in the world, and the number of new cases of cancer far exceeds that of other countries. According to IARC data, in 2020, there were 4.57 million new cases of cancer in China. Since the MSI-H phenomenon occurs in various tumors, including colorectal cancer, gastric cancer, and endometrial cancer, the number of MSI-H cancer patients in China is huge, with more than 320,000 cases now occurring. Since there are currently no effective treatment products for MSI-H in China, HLX10 is expected to become the first anti-PD-1 monoclonal antibody to treat MSI-H solid tumors in China and quickly occupy the market.

Profit forecasting and valuation: We maintain our 2021-2023 forecast revenue of 15.97, 29.58 and 5.359 billion yuan, up 171.86%, 85.20% and 81.14% year-on-year; forecast net profit of -7.63, -500 and 366 million yuan. Maintain the target price of HK$68.50 and maintain the “buy” rating.

Risk warning: R&D progress and new product sales fall short of expectations, increased market competition, and risk of personnel changes.