Core views

Chi-Med announced its 2024 interim results. Comprehensive revenue from the oncology and immunology business continued to grow, reaching USD 0.1687 billion in the first half of 2024, an increase of 59% over the previous year. Since its launch in the US in November '23, fruquintinib has performed strongly, with sales reaching $0.1305 billion. The company has made significant progress in advancing globalization and expanding pipelines. Solepinib is expected to be approved domestically in the second half of the year, while sevotinib is expected to submit a new drug marketing application in the US by the end of the year. As of June 30, 2024, the company's cash balance was $0.8025 billion, supporting the company's continued expansion and R&D investment.

occurrences

HWong Pharmaceutical announced its results for the first half of 2024. The company's overall revenue for the first half of the year was 0.3057 billion US dollars, a year-on-year decrease of 42.6%; net revenue was 25.8 million US dollars, a sharp decrease from 0.1686 billion US dollars in the same period last year. Comprehensive revenue from oncology products was $0.1687 billion, up 59% year over year.

Brief review

Overseas sales of furoquintinib exceeded expectations, and internationalization progressed smoothly. In the first half of 2024, the company's overall revenue was 0.3057 billion US dollars, down from 0.5329 billion US dollars in the first half of 2023, mainly due to a decrease in non-core business revenue. However, strong growth in revenue from oncology products is bridging this gap. Fruquintinib's successful launch and sales performance in the US market achieved sales of 0.1305 billion US dollars. Domestic sales of fruquintinib were 61 million US dollars, up 8% year on year; sales of surufatinib were 25.4 million US dollars, up 12% year on year; sales of sevotinib were 25.9 million US dollars, up 18% year on year. The company continues to invest in R&D and marketing. The total R&D expenses were 95.3 million US dollars, a decrease of 34% compared with the same period last year. Among them, clinical and regulatory filing expenses in the US and Europe were 14.9 million US dollars, and R&D expenses in China were 80.4 million US dollars. Close collaboration with partners such as Takeda Pharmaceuticals has provided strong support for its expansion in global markets. The company's registration applications and progress in clinical trials in multiple international markets have shown its huge potential in innovative drug development and market expansion.

Solepinib: Potential recent Syk inhibitor, ITP indications included in priority review ESLIM-01 study showed that zolepinib significantly improved patient sustained response rate (48% vs. placebo group: 0, p < 0.0001), showed consistent efficacy and rapid onset in patients who had previously received TPO/TPO-RA (ESLIM-01:75%) treatment. The median time from baseline to initial platelet count greater than 50 x 109/L was 8 days, improving the WHO bleeding score and quality of life As a result, it was well tolerated, had low incidence of gastrointestinal toxicity and hypertension, and no thrombotic events. For patients with primary ITP, solepinib is an effective and safe and tolerable treatment option.

Solepinib is currently undergoing a phase 2 clinical study of autoimmune hemolytic anemia (waIHA). Autoimmune hemolytic anemia (AIHA) is an autoimmune disease, hemolysis and anemia caused by increased damage to red blood cells by producing autoantibodies at body temperature. waIHA is the most common form of AIHA, accounting for 80% of all adult AIHA cases. Currently, there are no treatments approved by the FDA, and there are urgent unmet medical needs. Corticosteroids are the first-line standard treatment, but most patients develop drug resistance or relapse. In many countries, ultra-indicated use of rituximab is recommended as second-line therapy.

The POC study showed encouraging results: over 24 weeks, the overall response rate of patients with waIHa was 66.7% and the sustained response rate was 47.6%. Patients transferred from the placebo group also achieved a high response rate similar to that of all patients. Hemoglobin levels started rapidly and continued to improve. The median onset time to initial Hb ≥100g/L was 4.1 to 4.9 weeks, and 71% of responding patients showed a stable response during the 24-week treatment period. Currently, the phase III ESLIM-02 study with WaiHA randomized control has been initiated, and the ITP global phase I study is being enrolled.

Surufatinib: Developing Indications with Market Potential

Currently, standard treatment plans for PDAC include chemotherapy regimens such as FOLFIRINOX or gemcitabine combined with albumin conjugated paclitaxel. For PDAC patients, there are no effective treatment options other than chemotherapy, and the chemotherapy regimen has limited efficacy and low survival rate. Preclinical data showed that surufatinib combined with PD-1 antibodies and AG can inhibit tumor cell growth and improve the tumor immune microenvironment. The IIT trial showed encouraging early efficacy: surufatinib in combination with AS and carellizumab (NASCA group) observed higher immune cell infiltration, showing 50% ORR (vs. AG group: 26.9%), 9-month mPFS (vs. AG group: 5.8), and 13.3-month MoS (vS.Ag therapy: 7-11 months), all higher than current first-line metastatic PDAC therapy and are safe and manageable. Phase II/III studies have now been initiated to treat primary PDAC.

HMPL-306: The third wave of innovative products has entered phase III registration. HMPL-306 is a dual inhibitor of IDH1 mutation and IDH2 mutation. It has shown strong and sustainable 2-HG inhibitory effects in both IDH1 and IDH2 mutant tumor cell lines, and is highly penetrating in preclinical models. Compared with approved and currently being developed IDH inhibitors, HMPL-306 showed deeper relief effects, good tolerability safety, mild hepatotoxicity, and low levels of differentiation syndrome (DS). The Phase I study's data are encouraging:

HMPL-306 has a long half-life, and doses of 150 mg and 250 mg QD can achieve > 90% 2-HG inhibition; 250 mg QD reaches complete target inhibition earlier than 150 mg QD, and RP2D can reach steady state faster and allow patients to receive lower but equally effective doses after stabilization; HMPL-306 targets IDH1 mutations and IDH2 mutations to overcome resistance due to isomer conversion, which is higher in patients with relapsed/refractory AML with IDH1 or IDH2 mutations The Cr+CrH rate, observed OS benefits in RP2D, showing remarkable effectiveness. The RAPHAEL registration phase III study has now been initiated.

Accelerating innovation pipelines: Soler is leading overseas, and Suofan and 306 pioneered growth new domain companies are progressing rapidly in research and development of the three major drug pipelines. Multiple products are working simultaneously, showing excellent clinical data and competitive patterns, and continuously promoting product globalization. Solepinib is a potential first Syk inhibitor in China. Phase Ib study dose increment optimization can be expected; phase II/III trials will bring significant new growth room for surufatinib; HMPL-306 has strong competitiveness in IDH mutant AML. The company's pipeline continues to unleash innovation potential and is expected to continue to catalyze the improvement of the company's fundamental value.

Profit forecasting, valuation and investment recommendations

The company has abundant pipeline reserves, and the global market continues to expand. We expect the company to achieve revenue of $0.665 billion, $0.858 billion, and $1.023 billion from 2024 to 2026, respectively. Considering the growing maturity of the company's internal R&D and deepening global layout, it was given a “buy” rating.

Risk analysis

Overseas sales and marketing applications for new drugs fall short of expectations: In the overseas marketing application process, there may be risks such as extended approval cycles due to factors such as additional data and changes in the approval process. The progress of overseas sales and commercialization performance in the US will affect the company's future revenue.

Risk of uncertainty in new drug development: New drug development has the characteristics of long R&D cycle, high investment, high risk, and low success rate. From laboratory research to approval and marketing of new drugs, it is necessary to go through many complicated steps such as pre-clinical research, clinical trials, new drug registration and marketing, and after-sales supervision. Every step faces the risk of failure.

Research and development falls short of expectations: In the development process of new drugs, from drug discovery, pre-clinical research, clinical trials to commercial marketing, there are not only problems that companies may face due to poor technology, procedures, etc., but also risks such as lack of timely communication with supervisors and non-compliance.