【Company Research】Ascentage Pharma Group (6855 HK) – Gear up for commercialization

14. Smooth R&D progress. Ascentage reported attributable net loss of RMB678mn in 2020 vs RMB1,481mn in 2019, which was mainly due to one-off fair value loss of RMB837mn on convertible redeemable preferred shares in 2019. The net loss was less than our estimate of RMB729mn in 2020E. R&D cost increased 22% YoY to RMB565mn in 2020, primarily due to increasing cost in clinical trials, research headcount and IP expenses. As of end-2020, Ascentage had a robust pipeline of 8 clinical stage drug candidates and 4 preclinical-stage drug candidates, mainly targeting apoptotic pathways. Ascentage is conducting over 40 Ph I or Ph II clinical trials in the US, Australia, and China. As of 31 Mar 2021, Ascentage has obtained a total of 11 ODDs and 1 FTD granted by the US FDA for four assets, including APG-2575 (Bcl-2 selective inhibitor), HQP1351 (3rd-generation BCR-ABL inhibitor), APG-1252 (Bcl-2/Bcl-xL inhibitor) and APG-115 (MDM2-p53 inhibitor).

 

14. HQP1351 to enter into commercial stage. In Jun 2020, Ascentage filed NDA to the NMAP for HQP-1351 in r/r CP/AP-CML patients with T315Im, which is Ascentage’s first NDA submission. We expect HQP1351 to be approved by 4Q21E, becoming the first third-generation BCR-ABL inhibitor in China. Meanwhile, the Company has appointed Mr. Gang Zhu (祝刚) as Chief Commercial Officer (CCO) to lead commercial initiatives. Mr. Zhu has rich experiences in commercializing innovative oncology drugs. Ascentage aims to establish a commercialization team of over 100 sales by end-2021E.

 

14. APG-2575 delivered preliminary PoC data. APG-2575, a Bcl-2 selective inhibitor, has received approvals for multiple Ph Ib/II clinical studies in China, US, Australia and Europe, and is currently being assessed in multiple hematologic malignancies globally. In total, over 150 patients have been treated with APG-2575 as a single agent at doses ranging from 20 mg to 1,200 mg in 13 ongoing clinical trials. Over 50 r/r CLL patients have been treated with APG-2575. Preliminary results showed that more than 70% ORR has been reached in evaluable patients. No dose-limiting toxicity (DLT) has been reported and the maximun tolerated doses (MTD) has not been reached, even in 1,200mg dose level. We think APG-2575 has potential to become the first domestic Bcl-2 inhibitor approved in China.

 

14. Expect more global collaborations in the future. Capitalizing on its robust in-house R&D capabilities, Ascentage has established global partnerships with multiple leading biotechnology, pharmaceutical companies and institutes. Ascentage entered into global clinical collaborations with MSD and Acerta (AstraZeneca), respectively, to jointly explore therapeutic potential of multiple combination therapies in multiple diseases. Ascentage also obtained from the University of Michigan the exclusive global rights to a MDM2 protein degrader developed by the PROTACs technology.

 

14. Maintain BUY. We forecast HQP-1351 to obtain NMPA’s approval by 4Q21E. We maintain positive on Ascentage’s long-term growth. Considering the dilution of last two round placements, we update our DCF model and derive our new TP of HK$62.04 based on a DCF valuation (WACC: 11.72%, terminal growth of 2.0%).