According to a research report released by Huafu Securities on Kantor Bioscience (09926), it is estimated that the company's revenue will be 2.57, 3.98, and 6.15 billion yuan respectively from 2024 to 2026. Based on DCF valuation, with WACC of 12.32% and permanent growth rate of 3%, the fair stock price and market value of Kantor Bioscience were calculated to be HKD 55.85 and HKD 48.36 billion respectively. This is the first coverage and gives a "buy" rating.

Huafu Securities' main points are as follows:

The company's dual anti-cancer drugs development is globally leading, and the clinical development strategy is borrowed from the "kingdom-built road" of K drugs.

The globally first innovative tumor immunotherapy dual antibody drugs AK104 (PD-1/CTLA-4, camrelizumab) and AK112 (PD-1/VEGF antibody, IBI305) independently developed by the company have been approved in China. At present, key advantages include: 1) Mechanisms have been enhanced through internal synergistic mechanisms which increase the tumor response rate, thus expanding the PD1 mono drug benefited population; 2) It has good safety features that distinguish it from two monoclonal antibodies, with low discontinuation rate and providing a safety window for combined use of ADC, improving efficacy and expanding the benefited population as ADC for IO2.0 in combination with chemotherapy 2.0.

As the cornerstone of the new generation of immuno-oncology drugs, camrelizumab and IBI305 fully borrowed the "kingdom-built road" strategy of K drugs in clinical development, that is, narrow first and then wide plus large indication footholds, expanding cancer types, early auxiliary therapy. First, establish an advantage of being the pioneer and a barrier-free zone for indication of 2L cervical cancer and 2LEGFRTKI resistance, both of which have a great demand for unmet immunotherapy and then establish a core position in big cancer types like lung cancer and gastric cancer. Continuous expansion of indications in order to provide growth momentum. Taking camrelizumab as an example: 1) cervical cancer from 2/3L to 1L, gastric cancer 1/2L and auxiliary therapy, liver cancer 1L and postoperative auxiliary therapy; 2) six phase III clinical trials are in progress; the NDA of first-line indications for gastric cancer and cervical cancer have been accepted, all covering people with low PD-1 expression.

The greatest uncertainty for IBI305 has been resolved, taking the lead in the second-line treatment of lung cancer.

HARMONi-A: The indication of treatment of lung cancer EGFRTKI resistance has been approved, which is of significant clinical importance, as demonstrated by:

1) From the patient baseline, the population using 3rd generation TKI accounted for 86%, of which the proportion of those who had previously used 1/2 generations before using 3rd generation TKI was 55.9%, which is more in line with real-world clinical practice; 2) PFS benefits of all pre-set subgroups are consistent with the overall, with significant benefits. The HR of baseline brain metastasis patients for PFS is 0.40; T790M mutation subgroup HR for PFS is 0.22; 3) When data maturity was 52%, OS already had a significant separation trend.

HARMONi-2: The positive result marks the largest uncertainty in AK112's R&D success rate.

In the KEYNOTE-042 study, the HR of the mPFS for K drug mono-therapy vs chemotherapy in the PD-L1TPS≥1% group is 1.03, but IO drag effect leads to OS extension. Meanwhile, AK112 can also benefit from PFS in the PD-L1TPS1-49% group, showing that PD-1/VEGF dual antibody BIC has the ability. KEYNOTE-189 study supports that K drug combined with chemotherapy significantly benefits PFS, with further prolongation of OS. Combined with AK112-201 study data, we believe that the positive results of HARMONi-2 study further enhance the determination of AK112 combined with chemotherapy compared with K drug combined with chemotherapy in HARMONi-3 study (global) and AK112-306 study (domestic), and is expected to bring clear OS benefits.