Ascentage announced FY19 net loss of RMB1,481mn, below our forecast of RMB1,082mn net loss. The difference was mainly due to RMB837mn one-off fair value loss on convertible redeemable preferred shares. Ascentage recognized RMB464mn research expense and RMB162mn admin expense, including RMB35m one-off listing expense. As of end-2019, the Company has RMB882mn cash on hand which provides strong funding for future R&D investment. Maintain BUY with our DCF-based TP unchanged at HK$45.8.
- HQP1351 to file NDA in 2020E. HQP1351 is a third generation BCR-ABL/KIT inhibitor for drug resistance in current TKI treatments (imatinib, dasatinib and nilotinib). In the Phase I trial, HQP1351 showed comparable efficacy and improved safety profile than ponatinib. No cardiovascular, cerebrovascular, or peripheral vascular thrombosis, including fatal myocardial infarction or stroke was reported among the 101 patients enrolled in China. HQP1351 finished patient enrollment of its pivotal phase II trial for r/r CML in China in Sep 2019 and will file NDA for treatment of r/r CML to the NMPA in 2020E, becoming the Company’s first commercialized product.
- APG-2575 received approvals for initiating three different trials in the US and China. As of Feb 2020, total 19 patients were enrolled in two Phase I trials in the US and China. Interim data from the US phase I trial shows satisfying safety profile with no DLTs (dose limiting toxicities), no TLS (tumor lysis syndrome) and the MTD (maximum tolerable dose) not reached at 20-600mg dose levels. In 1Q20, APG-2575 received approvals from the US FDA for a Phase Ib/II trial for r/r CLL/SLL (first patient enrolled in Mar 2020), a Phase Ib/II trial for WM, and approval from the NMPA for a Phase Ib trial for r/r AML.
- Strong in-house R&D capability in apoptosis pathways and next generation TKIs. Ascentage has a pipeline of eight clinical stage small molecule candidates covering areas such as cancers, HBV and age-related diseases. As of Dec 2019, Ascentage Pharma was conducting 30+ phase I or II clinical trials in China, US and Australia. The most advanced drug is HQP1351 which and expected to receive approval from NMPA in 2021E. APG-2575 has entered into Phase Ib/II trials while APG-1252, APG-115 and APG-1387 are in Phase I trials.
- Maintain BUY. We forecast drug sales to start in 2022E and apply risk-adjusted revenue to those drugs with different probability of success (PoS). We maintain our price target of HK$45.8 based on an 8-year DCF valuation (WACC: 10.98%, terminal growth 3.0%).
