Zhongtong Finance APP learned that Minsheng Securities released a research report, giving a "recommended" rating for the first time to Kexing Botai Biology-B (06990), and it is expected that the total operating income from 2024 to 2026 will be 1.364 billion yuan, 1.825 billion yuan, and 2.815 billion yuan; the net income attributable to the parent company will be -0.888 billion yuan, -0.781 billion yuan, and -0.305 billion yuan, with a target price of HKD 187.1. The company's heavyweight product SKB264 has been approved domestically and is rapidly advancing research and development overseas with partner Merck, which has a huge potential to become a global heavyweight product. At the same time, the company pipeline is rich, and many products are in the NDA stage.

The main points of the Minsheng Securities report are as follows:

ADC leading enterprise products will be approved soon, with sufficient cash for overseas authorization.

Kelonbotai is an innovative drug company under Kelon Group. After more than ten years of accumulation, it has formed a leading ADC research and development platform in the industry, "OptiDC", and is a domestic ADC leading enterprise. The company's pipeline contains more than 10 clinical stage candidate drugs, of which 5 are in key trials or NDA registration stages, and it is expected that multiple products will be approved this year and enter the commercialization stage. At the same time, thanks to the authorized cooperation with Merck, the company achieved revenue of 1.54 billion yuan in 2023, and as of the end of 2023, the ending balance of cash and cash equivalents was 1.529 billion yuan, with sufficient funds.

Domestically: SKB264 has huge potential, and many products will be approved for commercialization soon.

The company's core product SKB264 is a global leading TROP2ADC in research and development progress. SKB264 has a wide range of indications, with clinical trials comprehensively covering areas such as triple-negative breast cancer, HR+/HER2- breast cancer, EGFR mutant NSCLC, and EGFR wild-type NSCLC, and has published impressive clinical data at multiple academic conferences. Currently, SKB264 is in the NDA stage for the first indication of triple-negative breast cancer in the third line, and is expected to be approved in 2024. With the continuous expansion of indications in the future, it is expected that the sales peak of SKB264 will reach 7.35 billion yuan. The company's A166, A167, and A140 products have all entered the NDA stage, and are expected to be approved and listed soon, jointly opening Kexingbotai's commercialization year; the second-generation RET inhibitor A400 has excellent data and has been approved by the FDA for fast track qualification, and is expected to submit NDA in 2024. In the non-tumor field, the company has laid out targets such as JAK, TSLP, FXI/FXIa, etc., further enriching the company's research and development pipeline.

Overseas: Authorized cooperation with Merck is rapidly advancing global research and development, and multiple indications layout shows huge potential for heavyweight products.

Kexing Botai and Merck have in-depth cooperation in ADC research and development pipeline, and have already authorized SKB264 overseas equity, SKB315 global equity, and overseas or global equity of multiple preclinical ADCs through three cooperation agreements, and have the right to receive a total of 0.257 billion yuan in advance payment, 11.564 billion US dollars in milestone payments, and sales commissions. Merck has actively carried out more than 10 global multi-center registrations, and indications include various solid tumors such as lung cancer, endometrial cancer, breast cancer, gastric-esophageal cancer, and cervical cancer, fully exploring the treatment potential of SKB264. In the future, SKB264 is expected to become a heavyweight drug globally.

Risk reminders: risks of increased market competition; risks of product R&D falling short of expectations; risks of overseas legal and regulatory changes; risks of changes in review requirements; risks of changes in medical insurance policies and access policies.