For innovative drugs, progress in clinical research and development is undoubtedly the best catalyst for stock prices.

At the ESMO conference, Gacos-B (01167) announced clinical data on the self-developed KRAS G12C inhibitor (KRAS G12C inhibitor) and JAB-3312 (SHP2 inhibitor) combination therapy in the form of an oral report. Clinical trial results verified the safety and efficacy of Glairase and JAB-3312 combination therapy, and laid the foundation for further registered clinical trials.

Affected by this news, on October 24, the stock price of Gacos surged 19.21%, but the market did not continue to rise the next day, but instead rallied back. By the closing time, the company's stock price had dropped 4.27% to HK$4.04 per share, with a turnover of HK$4.07 million.

As far as data is concerned, the data announced by Gacos at the ESMO conference this time is really impressive. In terms of efficacy, in all dose groups for advanced non-small cell lung cancer, the ORR of KRAS G12C inhibitors and SHP2 inhibitors combined with first-line treatment was 65.5% (38/58), and DCR was 100%. Among them, in the dosage group that combined 800 mg glarese (once daily) and 2 mg JAB-3312 (with weekly intervals of administration), the objective remission rate was 86.7% (13/15), and the DCR was 100%.

In terms of safety, in all dose groups, the incidence of grade III and grade 4 TRAE (treatment-related adverse events) was 39.6%, while in the dose group using 800 mg grelasel and 2 mg JAB-3312, the incidence rate of grade 3 and 4 TRAE was 36.7%.

The data is excellent, but the stock price has not continued to strengthen. Perhaps the reason behind this is that it is not too difficult for Gacos to monetize it, and that Gacos's SHP2 has been returned by AbbVie.

SHP2 combined use is the general trend

Over the past few decades, SHP2 has been considered an “irrevocable” target. However, with recent research progress, SHP2 targeted drug development has gradually made breakthroughs, making it one of the cutting-edge targets for current new drug development, and is expected to be used in combination with various drugs, including immune checkpoint drugs, to improve the effectiveness of tumor treatment. Today, as a star cancer target, SHP2 has attracted many domestic and foreign pharmaceutical companies to deploy R&D, such as Novartis, AbbVie, Pfizer, Gacos, Nuochengjianhua, and Suzhou Qinhao Pharmaceutical.

However, currently no drugs targeting the SHP2 target have been approved for marketing worldwide, but many SHP2 inhibitors have been approved for clinical use. Among them, TNO-155 is the drug that is progressing the fastest in phase 2 clinical phase. This product is also the first SHP2 inhibitor to enter the clinical phase.

However, Novartis has not been successful in developing SHP2 inhibitors, which is evidenced by the poor efficacy of SHP2 inhibitors as a single drug. At the 2021 ASCO Annual Meeting, Novartis announced the preliminary results of the phase 1 clinical trial of TNO155 in adults with advanced solid tumors. The results showed that as of February 8, 2021, among the 125 patients enrolled, the objective remission rate was 0%, and 94% of patients stopped treatment due to disease progression, adverse reactions, and death.

It is for this reason that latecomers almost acquiesced to the development of SHP2 inhibitors mainly for use in combination therapy.

However, the Amjin KRAS G12C inhibitor Lumakras combined with RMC4630 did not show a “1+1>2” effect. In addition, as early as 2021, Revolution stopped co-drug testing of RMC-4630 and MEK inhibitors. This means that the combination drug combination of SHP2 may continue to decrease, which undoubtedly limits the future growth space of this target product.

From the perspective of combination therapy, as an adjuvant drug, based on the function of the SHP2 target in activating the RAS protein and implementing the PD1 signaling pathway, the SHP2 inhibitor combined with PD (L) 1 monoclonal antibody/KRASG12C inhibitor is highly recognized by the industry. China Post Securities believes that SHP2 inhibitors and PD (L) 1 monoclonal antibodies are the two main indications for the treatment of non-small cell lung cancer (NSCLC) and esophageal squamous cell carcinoma (ESCC). Referring to JNCC data, the number of new NSCLC and ESCC cases in China in 2021 was 740,000 and 252,000 respectively. The number of patients with 2L driver gene-negative advanced NSCLC and 2L advanced ESCC suitable for SHP2i combined with PD (L) 1 was 166,000 and 106,000, respectively, for a total of 272,000. Based on a 20% penetration rate and an annual cost of 100,000 yuan, the potential market for SHP2 inhibitors in the three main indications is 5.44 billion yuan.

In other words, if a pharmaceutical company wants to promote the listing of SHP2 inhibitors and occupy this huge market, it can basically only bind PD-1 and KRAS inhibitors.

However, the reason AbbVie returned Gacos's SHP2 inhibitors was not due to poor clinical data performance, or to AbbVie's own R&D pipeline. According to AbbVie's 2022 financial report, AbbVie's business is mainly divided into seven segments: immunology, hematologic oncology, neurology, medical aesthetics, ophthalmology, women's health, and other businesses. Among them, the share of autoimmune diseases is still close to half, followed by hematologic oncology.

There is neither PD-1 nor KRAS in its R&D pipeline. In other words, the introduction of SHP2 inhibitors has not had much benefit for AbbVie, and it is also difficult to obtain considerable commercial value. Based on this, it is inevitable that CCOS' SHP2 will be returned by AbbVie.

Currently, Gacos is using KRAS on its own, and the data performance is good. In addition, its core product, Grarese, is about to enter commercialization, so independent commercialization is unavoidable. So how is the commercialization of Gacos currently progressing?

Independent commercialization is just getting started

From the perspective of the R&D pipeline, Grarese is the product with the fastest development progress in Gacos. Currently, all 3 Glairase indications are being promoted. Among them, China's key clinical registration clinical registration for non-small cell lung cancer is expected to be completed in September this year, 2024H1 submitted an NDA application, and progress remains in the top three in China; the CRC data for the post-treatment with rituximab was published in JCA-AACR 2023. The progress is first in China, ORR 62.8% is superior to overseas competitors, and PFS data is worth paying attention to; it was approved by the CDE in August this year as a breakthrough therapy for the treatment of 2L+ pancreatic cancer, and is expected to start clinical registration in China in September this year. pancreatic cancer Early data is expected to be published by ASCO GI in January 2024.

In other words, it is still less than a year until Gacos officially enters the “hematopoietic era.” However, whether it can be successfully commercialized is, on the one hand, the competitiveness of its core product, Grarese's re-market, and on the other hand, it is the ability of CarcoS' own commercial layout.

As far as the product is concerned, according to the Zhitong Finance App, in terms of drug efficacy and safety, Grease's ORR is 53.3%, and the DCR is close to 100%. Judging from the mechanism of action of the drug, Gacos makes some compounds into alkali molecules, so KRAS G12C causes very little damage to the gastrointestinal tract, and gastrointestinal toxicity is significantly lower than that of competing products. Judging from safety data, Gacos and Amgen data are close, but in terms of the indicator “test interrupted due to any side effects,” the incidence rate of Amgen is 4%, and Gacos is 0.

From a competitive perspective, there are 25 clinical KRAS G12C inhibitors worldwide, including 2 approved for marketing, 2 phase III clinical models, 1 phase II/III clinical model, 3 phase II clinical models, 7 phase I/II clinical models, and 10 phase I clinical models. There are 18 clinical KRAS G12C inhibitors in China, 3 phase III clinical models, 1 phase II/III clinical type, 2 phase II clinical models, 6 phase I/II clinical models, and 6 phase I clinical types.

Judging from clinical progress, with the exception of Baekje, Zaiding, and Cinda, Gacos is progressing rapidly among domestic research companies, but the indications are basically the same. Therefore, after Gacos products are marketed, they do not have a first-mover advantage in the market.

In addition to this, Cacos's financial report for the first half of 2023 is not optimistic. According to its financial report for the first half of 2023, Gacos earned 40.3 million yuan in the first half of the year, all from R&D cost reimbursement arising from licensing and cooperation agreements for R&D, manufacturing, and commercialization of SHP2 inhibitors signed by AbbVie. The company lost 166 million yuan during the period, and cash and cash equivalents were about 784 million yuan, a decrease of about 675 million yuan over the same period in 2022. Originally, AbbVie also had landmark revenue, but now its SHP2 inhibitors have been returned by AbbVie, which has affected Cacox's cash situation to a certain extent.

It burns nearly 700 million dollars a year. This also means that within the next year, if CCOSCO products are no longer marketed and sold, their cash flow will also be in jeopardy. In order to reduce production costs, on the production side, Gacos is applying for listing license holder (MAH) status. The company will cooperate with a CDMO company to carry out production in accordance with the MAH system.

On the sales side, the company is also actively setting up a marketing team, establishing its own central marketing department, and promoting academic exchanges and market access. At present, Gacos's commercialization system is beginning to be set up, but since competition in the core product market is relatively intense, it is unclear whether its commercialization path will go smoothly.