Eyes on the detailed head-to-head data of AK112 at WCLC in Sep

康方生物(09926)\r

In1H24,Akeso recorded RMB1.03bn in revenue,including RMB939mn fromproduct sales.Cadonilimab/AK104(PD-1/CTLA-4)recorded RMB706mn in salesin1H24,+16%YoY or-6%HoH,accounting for39%of our previous full-yearestimate.We attribute the weaker-than-expected sales performance to thepreparation for NRDL inclusion.Recall that Akeso reduced the retail price ofAK104from RMB13,220/125mg to RMB6,610/125mg in Jun2024.Concurrently,Akeso discontinued the PAP program,a move we believe positions the drug readyfor the upcoming NRDL negotiation.Approved in May2024,Ivonescimab/AK112(PD-1/VEGF)realized RMB103mn sales revenue in1H24.We expect AK104andAK112to participate in the NDRL negotiations by end-2024,which will boost theirsales upon the inclusion in early2025.Akeso maintained a high product GPmargin at91.6%in1H24,compared to91.8%in FY23.Selling expenses(incl.distribution cost)as%of product sales remained at56.4%in1H24,consistentwith the56.3%in FY23.R&D expenses increased3.4%YoY to RMB594mn in1H24.Akeso recorded RMB239mn of attributable net loss in1H24.As of Jun2024,Akeso had a sufficient cash balance of RMB5.69bn.\r

Eyes on readout of the Ph3H2H trial of AK112vs Keytruda in1L PD-L1+NSCLC at WCLC meeting.Akeso announced that the head-to-head Ph3China study of AK112mono vs Keytruda in1L PD-L1≥1%NSCLC met thePFS superiority endpoint(link1,link2),with“a HR significantly better thanexpected”.Following this,an NDA was accepted in Aug2024in China withpriority review,potentially offering a new chemo-free treatment option for PD-L1+NSCLC patients.We look forward to the detailed PFS data release of thestudy at the coming WCLC meeting in Sep,and will monitor the OS data as itmatures.Already approved in China for EGFR-TKI resistant nsq-NSCLC,thecorresponding MRCT HARMONi trial conducted by Summit is on track tocomplete enrolment in2H24.The Ph3China trial of AK112+chemo vstislelizumab+chemo in1L sq-NSCLC is also expected to complete enrolmentin4Q24.Akeso is expanding the indications for AK112,with new Ph3trialsinitiated in1H24including a Ph3China trial of AK112+chemo vsdurvalumab+chemo for1L BTC and a Ph3China trial of AK112+AK117(CD47)for PD-L1+HNSCC.A Ph3trial of AK112+chemo for1L pancreaticcancer is also in planning.\r

Rapid progress of indication expansion for AK104.Besides the approved2/3L CC,Akeso is actively expanding AK104’s indications.NDAs of AK104in1L GC(submitted in Jan2024)and1L CC(submitted in Apr2024)arecurrently under review,with the approval expected by end-2024/in1H25,respectively.Ph3trials of AK104in adjuvant HCC,advanced unresectableHCC,PD-L1-NSCLC,and PD-1-resistant2L GC are ongoing.With an INDfiled for AK138D1(HER3ADC),and multiple ADC assets in pre-clinical stageexpected to enter the clinic,Akeso plans to explore the potential of AK104orAK112combined with ADCs to compete with PD-1+chemo.\r

Maintain BUY.We look forward to the detailed data of AK112at the comingWCLC.Akeso’s non-oncology products are nearing commercialization withNDAs for PCSK9mAb and IL12/23mAb under review.We expect AK104andAK112be covered by NRDL early next year.We revise our TP from HK$59.61to HK$58.97(WACC:10.47%,terminal growth rate:3.5%).