The phase III clinical trial of APL-1702 to treat HSIL has reached a major clinical endpoint, and we expect to submit an NDA in Q1 2024. The registered clinical trial of the second-line NMIBC treatment for APL-1202 is coming to an end, and we expect the trial to be completed as soon as possible within the year; the newly assisted phase II clinical trial of MIBC before surgery has met the pre-set requirements of the protocol.

The phase III clinical trial of the contrast agent APL-1706 in China has achieved successful results, and the NDA is being actively promoted. The company's R&D investment continues to increase, and a number of clinical trials are progressing smoothly. Overall, we gave a target price of 16.5 yuan to maintain the “buy” rating.

APL-1202: The second-line NMIBC phase III clinical trial has come to an end, and MIBC has newly assisted the orderly progress of overseas clinical trials.

APL-1202 is the world's first oral small molecule inhibitor to enter the registered clinical phase for the treatment of NMIBC (non-muscle-invasive bladder cancer). According to the company's 2023 mid-year report and three-quarter report, a number of APL-1202 clinical trials are progressing in an orderly manner:

① Second line: The phase III clinical trial of APL-1202 combined with chemotherapy perfusion to treat recurrent NMIBC with chemotherapy has come to an end and is currently being followed up with subjects. We expect the test to be completed as soon as possible within the year, after which the company will immediately proceed with follow-up work such as lock up, debunking, and statistical analysis.

② New MIBC Adjuvant: The completion of the international multicenter phase II clinical trial of APL-1202 combined with tilelizumab for new adjuvant treatment of MIBC (muscle-invasive bladder cancer) before surgery and obtained positive results, which met the pre-planned requirements of the protocol. We expect 2024H1 to read the top line data. The company will continue to explore the therapeutic potential in combination with PD-1 and actively prepare subsequent phase III clinical plans. Phase I clinical study data previously disclosed at the ASCO conference in June showed good efficacy signals and safety of APL-1202.

③ First-line: A phase III clinical trial of APL-1202 monotherapy for untreated medium-risk NMIBC is actively recruiting patients in China.

APL-1702: The phase III clinical trial has reached a major end point and is about to be submitted for an NDA. In September 2023, the company announced that the phase III clinical trial of the pharmaceutical-device integrated photodynamic therapy product APL-1702 to treat HSIL (advanced precancerous disease in cervical cancer) has reached a major clinical end point. Clinical data will be published later in relevant academic conferences and journals. We expect the product to submit an NDA in 2024Q1. APL-1702 is expected to bring new non-surgical treatment options to HSIL patients, and the market space is broad.

Investment in R&D continues to increase, and a number of clinical trials are progressing smoothly. 2023Q1-Q3 spent 246 million yuan on R&D, +43.47% over the same period last year. A number of clinical trials are progressing smoothly:

① Urological diseases: APL-1706 (adjuvant contrast agent) obtained successful results of phase III clinical trials in China in August 2023. According to data published by the company at the annual meeting of the International Urological Association (SIU) in 2023, 43.3% of subjects detected one or more additional bladder cancer foci through APL-1706 combined with blue light cystoscopy (BLC), and the company is actively promoting NDA; in July 2022 and March 2023, Uro-3500 (electronic endoscopic image processor) and Uro-G ( Registration applications for (disposable cystoscopy) have been accepted by the NMPA one after another, and we expect to be approved for listing from the end of 2023 to the beginning of 2024; in 2023, the company obtained exclusive global interest in UroViu's patented portable disposable cystoscope technology in the field of fluorescence imaging.

② Other disease areas: APL-1401 is the first DBH inhibitor in the world to enter the clinical stage for ulcerative colitis. The first case of phase Ib was enrolled in September.

The introduction of collaborative products accelerates the commercialization process. The company introduced the interests of prazopanib tablets (for renal cell cancer) and nellatinib maleate tablets (for breast cancer) in mainland China around the urogenital area. Among them, commercial sales of pezopanib have already begun, and sales of niratinib are expected to begin within this year. The initiative will accelerate the company's commercialization process, help the company focus on areas to further expand its product portfolio strategy, and consolidate and accelerate the implementation of commercialization capabilities through practice.

Risk factors: 1) The company's drug development speed falls short of expectations or the risk of R&D failure; 2) the company's drug review takes a long time and marketing time falls short of expectations; 3) the risk that commercial sales of the company's products fall short of expectations; 4) the risk that the company's innovative drugs fail to be included in the national health insurance catalogue in a timely manner or that prices drop significantly through health insurance negotiations; 5) the risk that the company's internationalization falls short of expectations.

Profit forecasting, valuation and rating: The company focuses on urogenital tumors and other major diseases. Relying on the three core technology platforms, the company has deeply laid out a product pipeline in the urogenital field to create an advantageous product portfolio integrating diagnosis and treatment, including 12 ongoing research projects corresponding to 9 products. Among them, APL-1202, an oral metap2 inhibitor for NMIBC, is in a critical clinical stage, and the phase III clinical trial of APL-1702 has reached the main end point, all of which are expected to change the treatment pattern of corresponding diseases and become major products in related treatment fields. According to the company's 2023 three-quarter report, we maintain the company's 2023/2024/2025 EPS forecast of -0.63/-0.79/-1.03 yuan. Using the absolute valuation method, the company's reasonable equity value was estimated at 9.4 billion yuan through the DCF model, the target price was maintained at 16.5 yuan, and the “buy” rating was maintained.