Incidents:

Recently, the company released its 2024 semi-annual report. The company's revenue for the first half of 2024 was 1.576 billion yuan (+110.57% YoY), net profit to mother 0.656 billion yuan (YoY +214.82%), net profit not attributable to mother 0.647 billion yuan (+251.94% YoY).

Comment:

The release of core products was accelerated, and revenue and profit increased year-on-year. The company's revenue achieved rapid year-on-year growth, mainly due to the fact that the company's core product, vometinib, continued to grow with the gradual improvement of the sales team and channels after the first-line treatment indications were included in medical insurance, sales continued to grow, market share steadily increased, and revenue continued to grow. The reason for the rapid increase in profit is that while operating income has increased dramatically, expenses for various periods have been effectively controlled, and the company has achieved remarkable results in reducing costs and increasing efficiency.

The treatment of EGFR mutation-positive lung cancer has been deployed across the entire line with vormetinib, and the clinical pipeline continues to advance. Vormetinib is the company's core product. In March 2021 and June 2022, it was successively approved for second-line and first-line treatment for patients with EGFR mutation positive non-small cell lung cancer (NSCLC). Both indications have been included in the national health insurance catalogue. Vometinib has differentiated clinical advantages. First-line treatment for advanced NSCLC has a progression-free survival (PFS) of 20.8 months, with significant benefits; second-line treatment for advanced NSCLC has an objective remission rate (ORR) of 74%, and safety is good. At the same time, the company fully exploited the clinical advantages of vometinib varieties, expanded the scope of clinical application, and actively carried out clinical trials for various indications, including adjuvant treatment, 20 exon insertion mutation treatment, treatment indications for patients with brain metastases, etc., and several key phase 2/phase 3 clinical projects are being promoted simultaneously. Existing data shows that NSCLC patients with EGFR mutation have significantly increased CNS ORR compared to gefitinib and has good curative effects; NSCLC with advanced EGFR 20 exon insertion mutations can reach 78.6%, showing good potential, and has been recognized as a breakthrough therapy by CDE and FDA. In addition to monotherapy, the company is promoting the exploration of combined curative effects with products such as c-Met ADC and FAK small molecule inhibitors. The company's core product line is NSCLC, which is expected to continuously expand the market, and is expected to continue to improve performance.

Continuous layout research and development, internal and external guidance, continuous enrichment of product pipelines. The company continued to lay out R&D, with R&D expenses of 0.131 billion yuan in the first half of the year (+16% year over year). In addition to vometinib to expand the multi-product pipeline, AST2169 liposome (KRAS G12D) has been approved for Phase 1 clinical trials, leading the development progress; the next-generation AST2303 (EGFR oral small molecule inhibitor) introduced from Heyu Pharmaceutical has submitted an IND application. The internal edge is leading to the outside, and the product pipeline is constantly being enriched.

Profit forecast and investment suggestions: The company is committed to the research and development of innovative drugs in anti-cancer and other fields. The product market space is broad and the future can be expected. We expect the company to achieve revenue of 3.015/3.469/3.821 billion yuan in 24-26, with earnings of 2.76/3.17/3.64 yuan per share, giving the company a “buy” rating.

Risk warning: risk of R&D falling short of expectations, risk of sales falling short of expectations, policy risk, etc.