3rd quarter results are in line with our expectations

The company announced results for the 3rd quarter: 3Q23 revenue of 47.17 million yuan, 1-3Q23 revenue totaling 127 million yuan; 1-3Q23 net profit to mother - 241 million yuan. The results are in line with our expectations.

Development trends

The 1-3Q23 performance was in line with our expectations, and the first-line NSCLC indication for befotinib was approved for marketing. The company's 1-3Q revenue was mainly the milestone revenue of befotinib and the KRAS G12C inhibitor D-1553. Following the approval of second-line T790M+ NSCLC with Befotinib at the end of May 23, Befotinib was approved by NMPA for first-line treatment of EGFR mutant NSCLC indications, and became the fourth third-generation EGFR TKI in the domestic market. We believe that as first-line indications of befotinib are approved for marketing, future sales volume of befotinib is expected to increase steadily and contribute to sales revenue.

The 2023 ESMO conference announced positive clinical data on KRAS G12C colorectal cancer and pancreatic cancer. At the 23rd ESMO conference, Yifang Biotech's KRAS G12C inhibitor D-1553 combined with cetuximab was presented orally on phase II clinical data for treating KRAS G12C mutant colorectal cancer. Of 40 CRC patients with KRAS G12C mutations, 80.0% of patients had previously received ≥2 line systemic treatment, ORR 45.0%, mPFS 7.6 months, and an estimated 9-month OS rate of 82.4%. We believe that compared with the current standard treatment for KRAS G12C mutation CRC, the clinical data published this time were positive; in addition, data from a small sample of 14 cases of advanced pancreatic cancer treated with D-1553 also showed treatment potential, with an ORR of 35.7% and mPFs of 8.54 months. We believe that the therapeutic potential of KRAS G12C inhibitors for colorectal cancer and pancreatic cancer has become more clear with the publication of positive clinical data.

A number of products are about to enter the clinical data readout/harvesting stage. It is recommended to pay attention to the company's subsequent disclosure of clinical data for key products. The company expects D-1553 to submit a new drug marketing application for second-line treatment of KRASG12C mutant NSCLC in China around the end of the year. We believe that D-1553 is expected to become the company's second commercial product. In addition, SERD oral small molecule drug D-0502 will disclose phase 1b data for single-drug treatment of HR+ breast cancer at the 2023 SABCS conference; according to the company announcement, the TYK2 inhibitor D-2570 will also release phase 1 positive data at the end of the year and will conduct phase II clinical trials for moderate to severe plaque psoriasis. We believe that the company's future catalytic data will be intensive, and we can focus on future clinical data updates for products.

Profit forecasting and valuation

We keep our 2023/24 revenue forecast of RMB 262/116 million unchanged, and our 2023/24 net profit forecast of -RMB 2.78/- 458 million yuan unchanged. The outperforming industry rating and target price remain unchanged at RMB 20.0. Using the DCF valuation method, there is 24.5% upside compared to the current stock price.

risks

New products launched; clinical trial data and sales fell short of expectations; competition intensified.