Jinwu Financial News | According to the First Shanghai Research Report, Kangfang Biotech (09926)'s product revenue in the first half of '24 was +24% to 0.94 billion yuan, with cardonil revenue rising 16.5% year over year to 0.71 billion yuan; Piamprimizumab 0.13 billion yuan and ivoxil 0.1 billion yuan, plus license fee revenue. The company recorded a total revenue of 1.03 billion yuan, gross margin of 91.3%, R&D expenditure +3% to 0.59 billion yuan, returned to mother Profit loss of 0.24 billion yuan. In 24 years, the company's net cash in hand was 2.4 billion yuan. The two placements in 24 years (March and October) raised HK$1.17 billion and HK$1.92 billion respectively.

According to the report, the company's product pipeline progress: 1) Cardonelli AK104 (PD-1/CTLA-4): First-line cervical cancer reached both PFS (12.7 vs 8.1 months, HR 0.62) and OS (not reached vs22.8, HR 0.64), and the only group with significant curative effects of low PD-L1 expression/negative expression (CPS<1 group reduced the risk of death by 23%); first-line gastric cancer was approved in October 24, reaching the OS endpoint (15vs10.8 months), HR 0.62), It is the only first-line gastric cancer phase III study that benefits the entire population, effectively filling the current clinical gap where PD-1 monoclonal antibodies have low PD-L1 expression and limited curative efficacy in negative gastric cancer (PD-L1cps <1mOS is 17.6 months, while PD-1 MOs are generally around 11 months); adjuvant treatment for gastric cancer and hepatocellular cancer after PD- (L) 1 progression; adjuvant treatment for gastric cancer and hepatocellular cancer after first-line PD-L1 expression negative non-small cell lung cancer, non-small cell radiotherapy Lung cancer is stage III. 2) Evosi AK112 (PD-1/VEGF): Non-small cell lung cancer that progressed after EGFR treatment was approved in May '24. Summit has completed overseas phase III recruitment and obtained FDA Fast Track qualification. It is expected to obtain top-line data from multi-regional trials in 25 years. The first-line PD-L1-positive NSCLC single-drug head-to-head PK pavolizumab phase III clinical trial reached the main PFS endpoint (11.14 vs 5.82 months, HR 0.51), submitted an NDA in July, and Summit plans to launch a phase III clinical trial of PD-L1TPS ≥ 50% 1LNSCLC in early 25 (single drug versus K drug). First-line squamous non-small cell lung cancer was enrolled in stage III in China, and overseas summits expanded the first-line squamous cell carcinoma revision population to non-squamous cell cancer patients, VSK drug+chemotherapy, and the sample size was expanded to 1,080 cases. Phase III clinical trials for first-line biliary tract cancer, first-line pancreatic cancer, and first-line PD-L1-positive head and neck squamous cell carcinoma (combined with AK117-CD47) were initiated at the same time. Both AK104 and 112 are covered by health insurance.

Using the DCF valuation method, the bank valued the company, assuming a WACC of 10.0% and a sustainable growth of 3.0%, mainly considering the valuation of post-clinical products, and taking into account some overseas value of AK112 (6 billion US dollar sales, 60% probability of success), to arrive at a target price of HK$77.7, with room for 19% increase from the current price.