Ascentage announced that the US FDA has granted HQP-1351 an Orphan Drug Designation (ODD) for the treatment of chronic myeloid leukemia (CML). This implies promising commercial opportunities for HQP-1351 in the US market. Besides, HQP-1351 is conducting a pivotal phase II study for drug-resistant CML in China. Ascentage plans to submit an NDA to the NMPA for HQP-1351 within this year. Maintain BUY with our DCF-based TP unchanged at HK$45.8.
- HQP-1351 obtained ODD from US FDA. As a third generation BCR-ABL inhibitor targeting drug-resistant CML, HQP-1351 showed comparable efficacy to and improved safety profile than ponatinib in phase I study. In Jul 2019, the US FDA approved HQP-1351 to initiate a phase Ib trial. The ODD for HQP-1351 indicates the unmet medical need for r/r-CML patients with acquired resistance to current TKI treatments (imatinib, dasatinib and nilotinib). Receiving an ODD qualifies HQP-1351 various development incentives, including a tax credit of 50% in clinical trials, a waiver of the NDA fee, R&D grant, and, most importantly, seven years of US market exclusivity upon approval. In China, HQP1351 has finished patient enrollment of its pivotal phase II trial for r/r CML in Sep 2019 and plans to submit an NDA for treatment of r/r CML with T315I mutation to the NMPA in 2020E.
- APG-2575 to initiate four phase Ib/II trials in the US and China. APG-2575 recently received approvals from the US FDA for entering 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 and Phase Ib/II trial for r/r CLL/SLL. Previously, Phase I study of APG-2575 commenced in the US, Australia and China has shown a favorable 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; and promising anticancer activity.
- Strong in-house R&D capability in apoptosis pathways and next generation TKIs. Ascentage has a pipeline of eight clinical stage small molecule candidates, conducting 30+ phase I or II clinical trials in China, US and Australia. The most advanced drug, HQP1351, is granted ODD in the US and expected to receive NDA approval in China by 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 with TP not changed. 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%).
