Key points of investment:
Cardonil grew steadily, and Ivorsi's approval for lung cancer TKI resistance contributed to a 24H1 performance increase of 1.02 billion yuan (-72.13%), of which product sales revenue was 0.939 billion yuan (+23.96%). By product: Cardonelli achieved revenue of 0.706 billion yuan (+16.5%), Eversi's shipping revenue of 0.103 billion yuan, and other products of 0.131 billion yuan. The gross sales profit of 24H1 products was 0.858 billion yuan, and the product gross margin was as high as 91.3%. Sales expenses 0.516 billion yuan (+16.6% YoY), R&D expenses 0.594 billion yuan (+3.4% YoY), net loss 0.249 billion. The company has developed efficiently, 4 NDAs for new indications have been submitted and reviewed, and 7 new phase III clinical trials have been launched for 5 products (including 3 new products).
Cardonil benefits all people with 1L gastric cancer and 1L cervical cancer, and will fill the clinical gap 1) 1L gastric cancer: NDA was accepted by the NMPA in January of this year, and is currently the only IO product that benefits OS in people with low PD-1 expression. 2) 1L cervical cancer: The NDA was accepted by the NMPA in April. The phase III study has reached both main endpoints of PFS and OS, and is currently the only phase 3 clinical study that benefits the entire population. 3) Four phase 3 clinical trials are underway: including 2L gastric cancer, 1L liver cancer, post-operative support for liver cancer, and 1L lung cancer. We believe that all people with gastric cancer and cervical cancer have significant benefits. This is both “stock adjustment” and “structural adjustment” (PD-L1 testing services become pharmaceuticals). Patients with low PD-L1 expression have unmet clinical needs. This is a differentiated “incremental” that avoids internal involvement to a certain extent. It is expected that cardonil will have strong growth momentum after the 1L indication is approved.
A strong positive result was obtained for ivoxide versus head K, and “chemotherapy” is the better choice for first-line lung cancer 1) On May 24, NSCLC, which progressed EGFR-TKI, was approved for marketing. All PFS HR subgroups of third-generation EGFR resistant people benefited significantly, and it has been included in many clinical guidelines. 2) The NDA for treating PD-1 positive NSCLC was accepted in August, and the head-to-head K drug received strong positive results. It will soon be read out in the 2024 WCLC as an LBA oral report, and is expected to become a new first-line “de-chemotherapy” plan for lung cancer. 3) Newly initiated clinical phase 3:1L biliary tract cancer (head-to-head valiumab), 1L head and neck squamous cell carcinoma (combined with AK117 head-to-head K drug, this is AK117's first phase 3 clinical trial, and the world's first phase 3 study of CD47 monoclonal antibody in solid tumors), and 1L pancreatic cancer (combined chemotherapy). We believe that “anti-PD-1” and “anti-VEGF” are Nobel Prize-level broad-spectrum mechanisms in the history of cancer treatment. The high efficacy and low toxicity of the world's pioneering dual antibodies may bring the synergistic effects of “IO” + “anti-vascular” to the highest level in history, and historical data on the combined use of the two drugs cannot be used as a reference. As phase 2 data for more cancer types is read out in ESMO, the broad spectrum, low toxicity, and efficiency of Ivorsi will be further verified.
Profit forecasting and investment advice
As product sales slightly exceeded expectations, we raised the company's 2024-2026 revenue from 2.57, 3.98, and 6.15 billion yuan to 2.65, 4.06, and 6.42 billion yuan, respectively, and net profit to mother increased from -0.47, 0.21, and 1.26 billion yuan to -0.39, 0.28, and 1.47 billion yuan, respectively. According to DCF's valuation, based on WACC of 9.54% and a sustainable growth rate of 3%, the company's reasonable share price is estimated to be HK$71.52 and a reasonable market value of HK$61.9 billion, maintaining a “buy” rating.
Risk warning
Risk of clinical trial failure, risk of product sales falling short of expectations.