Investment Rating - The report maintains a "Buy" rating for the company, with a target price of 46.83 HKD per share, compared to the current price of 40.80 HKD [5]. Core Insights - The company has received acceptance for the NDA of APG-2575, a novel Bcl-2 inhibitor for treating R/R CLL/SLL, which is the first domestically submitted NDA for a Chinese-origin Bcl-2 inhibitor and is expected to be the second Bcl-2 inhibitor globally to be launched [3][4]. - APG-2575 is positioned as a revolutionary therapy for CLL/SLL, with ongoing clinical trials that include multiple Phase III studies for various combinations and indications [3]. - The company is also pursuing new indications for its existing drug, Nilotinib, which is expected to be included in medical insurance negotiations, potentially leading to faster market penetration [3]. Financial Summary - The company's revenue projections for 2024-2026 are 1.013 billion, 609 million, and 1.074 billion RMB, respectively, indicating a significant growth rate of 356.5% in 2024, followed by a decline in 2025 and a recovery in 2026 [4]. - The EBITDA is projected to improve from -144 million RMB in 2024 to -304 million RMB in 2026, reflecting ongoing operational challenges [4]. - The net profit attributable to shareholders is expected to improve from -286 million RMB in 2024 to -469 million RMB in 2026, indicating a gradual recovery in profitability [4].

Investment Rating - The report initiates coverage on Ascentage Pharma (6855 HK) with an "Outperform" rating and a target price of 48.0 HKD per share [6] Core Views - Ascentage Pharma is a global biopharmaceutical company focused on developing first-in-class and best-in-class drugs, particularly in oncology, with 9 small molecule drugs in clinical development [3] - The company's core products, Olverembatinib (BCR-ABL TKI) and Lisaftoclax (BCL-2), are expected to achieve risk-adjusted global sales of 17.67 billion RMB by 2033 [4] - Ascentage Pharma has made significant progress in global expansion, with key products advancing in global registration clinical trials in both China and the US [3] Product Pipeline and Market Potential - Olverembatinib, the first and only third-generation BCR-ABL inhibitor approved in China, is expected to generate risk-adjusted global sales of 10.85 billion RMB by 2033, with 9.48 billion RMB from overseas markets [4] - Lisaftoclax, a potential second global BCL-2 inhibitor, is projected to achieve risk-adjusted global sales of 6.82 billion RMB by 2033, with 6.25 billion RMB from overseas markets [4] - The company's pipeline includes multiple first-in-class potential targets, with ongoing exploration in hematologic malignancies, solid tumors, and non-oncology indications [4] Financial and Strategic Developments - Ascentage Pharma achieved its first semi-annual profit in H1 2024, with revenue reaching 820 million RMB, a 477% YoY increase, driven by licensing income [10] - The company secured a significant partnership with Takeda, receiving a $100 million option fee and $75 million equity investment, with potential milestone payments totaling $1.2 billion [10] - Ascentage Pharma has filed for a US IPO in 2024, aiming to further expand its financing channels [10] Clinical Progress and Regulatory Milestones - Olverembatinib's global Phase III registration clinical trial for CML patients resistant to two or more TKIs has been approved by the FDA, with NDA submission expected by 2026 [17] - Lisaftoclax's Phase II registration clinical trial for R/R CLL/SLL in China has been completed, with NDA submission expected in 2024 [12] - The company is conducting over 40 Phase I/II clinical trials globally, with 8 registration trials, including 2 approved by the FDA [11] Market and Competitive Landscape - The global BCR-ABL inhibitor market exceeds $6 billion, with Olverembatinib showing potential as a best-in-class product due to its efficacy and safety profile [17] - Lisaftoclax is positioned as a potential best-in-class BCL-2 inhibitor, with advantages in efficacy, safety, and dosing convenience compared to existing therapies [40] - Ascentage Pharma's focus on first-in-class targets and its global clinical strategy position it well to capture significant market share in both China and international markets [13]

Product Pipeline and Development - Olverembatinib (耐立克°) and APG-2575 Lisaftoclax are key products under development[1] - APG-115 is a novel oral small molecule MDM2-p53 inhibitor in the company's pipeline[4] - APG-1252 is a novel small molecule drug targeting Bcl-2/Bcl-xL proteins to restore apoptosis[4] - APG-1387 is a novel small molecule IAP inhibitor being developed by the company[4] - APG-2449 is a third-generation inhibitor targeting FAK, ROS1, and ALK kinases[4] - APG-5918 is a highly potent oral selective EED inhibitor in development[4] - The company's pipeline includes multiple novel small molecule inhibitors targeting various cancer pathways[4] - Key therapeutic areas include leukemia (CML, ALL, AML) and lymphoma (Bcl-2/Bcl-xL)[4][5] - The company's third-generation BCR-ABL inhibitor, HQP1351, is designed to overcome drug resistance caused by BCR-ABL kinase mutations, including the T315I mutation[7] - The company's product HQP1351 is aimed at addressing drug resistance in BCR-ABL kinase mutations, particularly the T315I mutation[7] - The company has 6 small molecule candidates in clinical development, with 40+ Phase I/II trials ongoing in China, the US, Australia, and Europe[18] - The company's lead asset, Olverembatinib, is the first and only third-generation BCR-ABL1 inhibitor approved in China for T315I-mutated CML patients[18] - Olverembatinib received 4 FDA orphan drug designations and 1 fast-track designation for CML, AML, ALL, and GIST, as well as an EMA orphan drug designation for CML[23] - Olverembatinib was included in the 2024 NCCN CML treatment guidelines and recommended by the CSCO CML and Ph+ ALL treatment guidelines[23] - Olverembatinib was included in China's National Reimbursement Drug List in January 2023, significantly improving patient accessibility[23] - Nailike® (Olverembatinib) was approved for marketing in Macau, China in July 2024, targeting TKI-resistant CML patients with or without T315I mutation[24] - Nailike® was included in the 2024 CSCO Guidelines for Hematologic Malignancies in May 2024 and the 2024 NCCN CML Guidelines in December 2023[24] - The company disclosed updated 1-year follow-up data for Nailike® in CML and Ph+ ALL at EHA 2024, showing sustained clinical efficacy and good tolerability[24] - Nailike® demonstrated significant efficacy and safety in SDH-deficient GIST patients at ASCO 2024, marking its third consecutive year of presentation at ASCO[25] - The company plans to continue Phase III trials for Nailike® in CML (POLARIS-2), Ph+ ALL (POLARIS-1), and SDH-deficient GIST (POLARIS-3) in 2024[26] - Lisaftoclax (APG-2575) is expected to submit an NDA for CLL/SLL in China in 2024, potentially becoming the second global and first Chinese Bcl-2 inhibitor for this indication[27] - Over 1,000 patients, including more than 400 CLL/SLL patients, have been treated with Lisaftoclax (APG-2575) as of June 30, 2024[27] - Lisaftoclax (APG-2575) received FDA orphan drug designations for FL, WM, CLL, MM, and AML[27] - A Phase III trial (GLORA-4) for Lisaftoclax combined with azacitidine in high-risk MDS patients is underway in China[27] - A global Phase III trial (GLORA) for Lisaftoclax combined with BTK inhibitors in CLL/SLL patients previously treated with BTK inhibitors is ongoing[28] - Lisaftoclax (APG-2575) combined with pomalidomide and dexamethasone showed an ORR of 70.4% in 27 evaluable r/r MM patients, with 10 PR, 7 VGPR, and 2 CR cases[29] - Lisaftoclax (APG-2575) monotherapy or combination therapy in newly diagnosed AML patients showed an ORR of 64.1% and a CRc rate of 51.3% in 39 patients[29] - The company plans to submit a new drug application for Lisaftoclax (APG-2575) for the treatment of r/r CLL/SLL in China in 2024[30] - Alrizomadlin (APG-115) has received six orphan drug designations from the FDA, including for soft tissue sarcoma, gastric cancer, AML, retinoblastoma, melanoma, and neuroblastoma[31] - Alrizomadlin (APG-115) demonstrated promising antitumor activity and tolerability in progressive salivary gland cancer, particularly adenoid cystic carcinoma[32] - Pelcitoclax (APG-1252) has shown preliminary antitumor activity in heavily pretreated patients and is being studied in combination with osimertinib for EGFR-mutated NSCLC[34][35] - APG-5918, an EED inhibitor, has shown potential in improving hemoglobin deficiency in preclinical models of CKD-induced anemia[36] - The company is conducting a multicenter, open-label Phase I trial of APG-5918 in advanced solid tumors or lymphomas[36] - Lisaftoclax (APG-2575) is being studied in global Ib/II trials for WM patients in combination with BTK inhibitors[29] - Alrizomadlin (APG-115) is being evaluated in multiple clinical trials in combination with immune therapies or chemotherapy for solid and hematologic tumors[31][32] - APG-5918 showed preclinical progress in improving hemoglobin deficiency in CKD-induced anemia models at EHA 2024[37] - APG-5918 demonstrated synergistic tumor growth inhibition with alrizomadlin in prostate cancer models at AACR 2024[37] - APG-2449 showed preliminary efficacy in NSCLC patients, including those resistant to 2nd-gen ALK TKIs, at ASCO 2024[38] - APG-2449 exhibited tumor metastasis inhibition and enhanced PLD's antitumor effects in epithelial ovarian cancer at AACR 2024[38] Financial Performance and Reporting - Revenue increased by RMB 681.0 million or 477.2% to RMB 823.7 million for the six months ended June 30, 2024, compared to RMB 142.7 million for the same period in 2023[13] - Other income and gains increased by RMB 0.3 million or 1.8% to RMB 17.3 million for the six months ended June 30, 2024, primarily due to increased bank interest income[13] - Sales and distribution expenses increased by RMB 6.3 million or 7.6% to RMB 89.6 million for the six months ended June 30, 2024, driven by commercialization of Olverembatinib (HQP1351) and other products[13] - R&D expenses increased by RMB 134.3 million or 43.4% to RMB 444.1 million for the six months ended June 30, 2024, mainly due to increased internal R&D spending[13] - Net income increased by RMB 565.1 million to RMB 162.8 million for the six months ended June 30, 2024, compared to a loss of RMB 402.3 million for the same period in 2023[13] - Cash and bank balances stood at RMB 1,100.3 million as of June 30, 2024, an increase of RMB 6.5 million or 0.6% compared to December 31, 2023[13] - Olverembatinib (HQP1351) achieved cumulative sales of RMB 489.7 million since its launch in November 2021, with sales in the first half of 2024 increasing by 120% compared to the second half of 2023[14] - The company received USD 100.0 million in July 2024 from Takeda Pharmaceuticals under an exclusive option agreement for Olverembatinib, with potential milestone payments and royalties up to USD 1.2 billion[14] - The company successfully issued and allotted 24,307,322 shares to Takeda Pharmaceuticals in June 2024, raising USD 75.0 million (approximately HKD 585.77 million)[14] - Revenue for the six months ended June 30, 2024, increased to RMB 823.7 million, up 477.2% from RMB 142.7 million in the same period in 2023[48][49][50] - Net profit for the six months ended June 30, 2024, was RMB 162.8 million, compared to a net loss of RMB 402.3 million in the same period in 2023[48][49] - R&D expenses for the six months ended June 30, 2024, increased to RMB 444.1 million, up from RMB 309.8 million in the same period in 2023[48][49] - The company received a $100 million option payment related to the exclusive option agreement with Takeda Pharmaceutical for the global rights to develop and commercialize Olverembatinib (耐立克®), excluding China, Hong Kong, Macau, and Taiwan[46] - The company is eligible to receive up to $1.2 billion in option exercise fees and additional potential milestone payments, as well as double-digit percentage royalties on annual net sales from the Takeda agreement[46] - Sales and distribution expenses increased by RMB 6.3 million or 7.6% to RMB 89.6 million, driven by the commercialization of Olverembatinib and other products[53] - R&D expenses increased by RMB 134.3 million or 43.4% to RMB 444.1 million, primarily due to higher internal R&D costs[54] - Administrative expenses decreased by RMB 4.3 million or 4.7% to RMB 87.0 million, mainly due to reduced labor and operational costs at the Suzhou base[56] - Financing costs decreased by RMB 18.6 million or 35.3% to RMB 34.1 million, primarily due to lower interest on bank borrowings[58] - Other expenses increased by RMB 2.9 million or 69.0% to RMB 7.1 million, mainly due to higher charitable donations[59] - The company's profit increased by RMB 565.1 million from a loss of RMB 402.3 million to a profit of RMB 162.8 million[60] - Net cash outflow from operating activities was RMB 354.4 million, a decrease from RMB 368.5 million in the previous period[61] - Net cash outflow from investing activities was RMB 131.3 million, including RMB 16.5 million for property, plant, and equipment[62] - Net cash inflow from financing activities was RMB 396.9 million, including RMB 532.0 million from the 2024 share subscription[62] - The company's current ratio improved to 1.8 from 1.4, and the quick ratio also improved to 1.8 from 1.4[63] - The company's cash and bank balances remained stable at RMB 1,100.3 million as of June 30, 2024, compared to RMB 1,093.8 million as of December 31, 2023[70] - The company's total current assets amounted to RMB 1,963.8 million, including cash and bank balances of RMB 1,100.3 million, inventory of RMB 10.7 million, and trade receivables of RMB 743.5 million as of June 30, 2024[70] - The company's total current liabilities were RMB 1,065.4 million, including trade payables of RMB 83.1 million, other payables and accrued expenses of RMB 215.2 million, and borrowings of RMB 729.5 million as of June 30, 2024[70] - The company's total non-current liabilities were RMB 1,265.3 million, including long-term borrowings of RMB 970.6 million and deferred revenue of RMB 233.4 million as of June 30, 2024[70] - The company has 574 full-time employees, with 70.9% (407 employees) engaged in R&D and laboratory work as of June 30, 2024[71] - Employee benefit expenses increased to RMB 218.9 million for the six months ended June 30, 2024, compared to RMB 201.2 million for the same period in 2023[71] - The company has 520 authorized patents globally, including 367 overseas patents, as of June 30, 2024[73] - The company plans to advance six differentiated clinical-stage product candidates to the next clinical stage and seek global NDA approvals[73] - The company aims to strengthen its global intellectual property portfolio and seek strategic partnerships with global biotech and pharmaceutical companies[73] - The company did not recommend an interim dividend for the six months ended June 30, 2024[74] - The company's unaudited condensed consolidated financial statements for the six months ended June 30, 2024, were reviewed by Ernst & Young and the Audit Committee, which found them to be in compliance with applicable accounting standards[161] - The company's interim financial information for 2024 shows revenue of RMB 823.746 million, a decrease of RMB 15.059 million compared to the previous year[169] - The company reported a net profit attributable to ordinary equity holders of RMB 162.826 million for the six months ended June 30, 2024, compared to a net loss of RMB 402.349 million in the same period last year[169] - Earnings per share for the six months ended June 30, 2024, were RMB 0.56, compared to a loss per share of RMB 1.47 in the same period last year[169] - The company reported a net profit of RMB 162,826 thousand for the first half of 2024, compared to a net loss of RMB 402,349 thousand in the same period of 2023[170] - Total comprehensive income for the first half of 2024 was RMB 165,095 thousand, a significant improvement from a loss of RMB 362,569 thousand in the first half of 2023[170] - The company's total assets as of June 30, 2024, were RMB 1,963,839 thousand, a 46.1% increase from RMB 1,344,178 thousand as of December 31, 2023[171] - Total equity increased to RMB 776,439 thousand as of June 30, 2024, from RMB 70,632 thousand as of December 31, 2023, representing a 999.5% increase[172] - Non-current liabilities decreased to RMB 1,265,281 thousand as of June 30, 2024, from RMB 1,495,588 thousand as of December 31, 2023, a 15.4% reduction[172] - The company's financial assets measured at fair value through profit or loss decreased to RMB 1,458 thousand as of June 30, 2024, from RMB 1,951 thousand as of December 31, 2023[171] - Contract liabilities decreased to RMB 233,423 thousand as of June 30, 2024, from RMB 251,189 thousand as of December 31, 2023[172] - Interest-bearing bank and other borrowings decreased to RMB 970,555 thousand as of June 30, 2024, from RMB 1,179,191 thousand as of December 31, 2023, a 17.7% reduction[172] - Deferred tax liabilities decreased to RMB 5,849 thousand as of June 30, 2024, from RMB 10,549 thousand as of December 31, 2023[172] - The company's cash and cash equivalents decreased to RMB 882,198 thousand as of June 30, 2024, from RMB 905,815 thousand as of December 31, 2023[171] - Net profit for the period reached RMB 163,001 thousand, compared to a net loss of RMB 402,351 thousand in the same period last year[173] - Total equity increased to RMB 776,439 thousand as of June 30, 2024, up from RMB 600,178 thousand as of June 30, 2023[173] - Cash and cash equivalents decreased by RMB 88,763 thousand, ending at RMB 952,434 thousand as of June 30, 2024[174] - Operating cash outflow was RMB 354,391 thousand, slightly lower than the previous year's outflow of RMB 368,464 thousand[174] - Financing activities generated a net cash inflow of RMB 396,906 thousand, primarily from the issuance of shares amounting to RMB 533,940 thousand[174] - Investment activities resulted in a net cash outflow of RMB 131,278 thousand, mainly due to investments in property, plant, and equipment, and joint ventures[174] - The company's total cash and bank balances stood at RMB 1,100,314 thousand as of June 30, 2024, down from RMB 1,581,600 thousand in the previous year[174] - The company issued ordinary shares worth RMB 533,940 thousand during the period, contributing to the increase in share capital and share premium[173] - Exchange rate fluctuations resulted in a gain of RMB 2,269 thousand, positively impacting the company's comprehensive income[173] - The company's accumulated losses decreased to RMB 5,202,121 thousand as of June 30, 2024, from RMB 5,365,122 thousand at the beginning of the year[173] - Revenue from external customers in Mainland China increased to RMB 145.33 million in the first half of 2024, up from RMB 142.70 million in the same period in 2023[179] - Revenue from Switzerland, a new market, contributed RMB 678.42 million in the first half of 2024, compared to zero in the same period in 2023[179] - Total revenue for the first half of 2024 reached RMB 823.75 million, a significant increase from RMB 142.70 million in the first half of 2023[179] - Non-current assets in Mainland China slightly decreased to RMB 1,083.22 million as of June 30, 2024, from RMB 1,

Investment Rating - The report maintains a "Buy" rating for the company, with a target price of 40.23 HKD per share, compared to the current price of 33.45 HKD [4]. Core Insights - The company has achieved profitability for the first time, reporting a revenue of 824 million RMB in the first half of 2024, a year-on-year increase of 477.2%. The net profit attributable to shareholders is 163 million RMB, marking a turnaround from losses [2]. - The sales of the core product, Nairike, have seen significant growth, with a revenue of 113 million RMB in the first half of 2024, a quarter-on-quarter increase of 120% and a year-on-year increase of 5%. The product has received approval for market entry in Macau and is expected to participate in national medical insurance negotiations [2]. - The company is advancing its pipeline with APG2575 expected to file for market approval within the year, alongside four ongoing Phase III clinical trials targeting various indications [2]. - The company is strategically positioning itself with differentiated pipelines, including APG-5918 and APG-2449, which are in early clinical stages [2]. Financial Summary - The company reported a significant increase in revenue from 210 million RMB in 2022 to an estimated 1,013 million RMB in 2024, reflecting a growth rate of 651.4% in 2022 and 356.5% in 2024 [3]. - The net profit is projected to improve from a loss of 883 million RMB in 2022 to a loss of 286 million RMB in 2024, indicating a narrowing of losses [3]. - The EBITDA is expected to improve from -836 million RMB in 2022 to -144 million RMB in 2024, showing a trend towards operational efficiency [3].

[Performance Highlights](index=1&type=section&id=Performance%20Highlights) [Financial Highlights](index=1&type=section&id=Financial%20Highlights) H1 2024 revenue surged **477.2%** to **RMB 823.7 million**, primarily from IP income, turning a **RMB 402.3 million loss** into **RMB 162.8 million net profit** Key Financial Indicators for H1 2024 | Indicator | H1 2024 | H1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | RMB 823.7 million | RMB 142.7 million | +477.2% | | R&D Expenses | RMB 444.1 million | RMB 309.8 million | +43.4% | | Administrative Expenses | RMB 87.0 million | RMB 91.3 million | -4.7% | | Profit/(Loss) for the Period | RMB 162.8 million | (RMB 402.3 million) | Turned Profitable | - Significant revenue growth primarily stemmed from intellectual property income, pharmaceutical product sales, commercialization rights income, and service revenue[2](index=2&type=chunk) - As of June 30, 2024, the Group's cash and bank balances totaled **RMB 1.1003 billion**, with an additional **USD 100 million** option payment received from Takeda Pharmaceutical in July 2024[3](index=3&type=chunk) [Business Highlights](index=2&type=section&id=Business%20Highlights) The company achieved significant business milestones, including a major strategic partnership for Olverembatinib with Takeda and key pipeline products advancing to Phase III - An exclusive option agreement was signed with Takeda Pharmaceutical for core product Olverembatinib, granting Takeda exclusive global development and commercialization rights outside Greater China[4](index=4&type=chunk) Strategic Collaboration Financial Terms with Takeda Pharmaceutical | Item | Amount | | :--- | :--- | | Exclusive Option Payment | USD 100 million (received in July 2024) | | Option Exercise Fee and Potential Milestone Payments | Up to approximately USD 1.2 billion | | Sales Royalties | Double-digit percentage of annual sales | | Equity Investment | USD 75 million | - Core product Olverembatinib's sales revenue in H1 2024 increased by **120%** compared to H2 2023 and **5%** compared to H1 2023[4](index=4&type=chunk) - Key candidate product lisaftoclax (APG-2575) received approval to conduct a registrational Phase III clinical study (GLORA-4) for MDS patients[5](index=5&type=chunk) - Olverembatinib received approval to conduct a registrational Phase III clinical trial (POLARIS-3) for SDH-deficient GIST patients and a registrational Phase III clinical trial (POLARIS-2) for CML-CP patients in the US[5](index=5&type=chunk) [Management Discussion and Analysis](index=4&type=section&id=Management%20Discussion%20and%20Analysis) [Business Overview](index=4&type=section&id=Business%20Overview) The company is a global biopharmaceutical company focused on innovative therapies for hematological malignancies, with core product Olverembatinib commercialized in China and a strong global IP portfolio - The company focuses on discovering, developing, and commercializing first-in-class and best-in-class therapies to address global unmet medical needs in hematological malignancies[8](index=8&type=chunk) - Core product Olverembatinib is China's first and only approved third-generation BCR-ABL inhibitor for T315I-mutated CML patients[8](index=8&type=chunk) - As of June 30, 2024, the company held **520** authorized patents globally, with **367** being overseas authorized patents[9](index=9&type=chunk) [Pipeline Review](index=5&type=section&id=Pipeline%20Review) The company has six clinical-stage small molecule candidates targeting various pathways, with core and key products advancing in multiple registrational clinical studies Product Pipeline as of June 30, 2024 | Candidate Product | Mechanism | Primary Indication | Clinical Stage | | :--- | :--- | :--- | :--- | | Olverembatinib (HQP1351) | BCR-ABL/KIT | Drug-resistant CML, GIST, etc. | Marketed/Phase III | | Lisaftoclax (APG-2575) | Bcl-2 selective | CLL/SLL, AML, MDS, MM | Phase III/Phase II | | Alrizomadlin (APG-115) | MDM2-p53 | AML, MDS, Solid Tumors | Phase II/Phase I | | Pelcitoclax (APG-1252) | Bcl-2/Bcl-xL | NSCLC, SCLC, Lymphoma | Phase II/Phase I | | APG-5918 | EED selective | Oncology/Anemia | Phase I | | APG-2449 | FAK/ALK/ROS1 | NSCLC/Solid Tumors | Phase I | [Olverembatinib](index=5&type=section&id=Olverembatinib) As China's first and only approved third-generation BCR-ABL inhibitor, Olverembatinib is included in national medical insurance, approved in Macau, and advancing global Phase III trials for GIST and CML - In July 2024, Olverembatinib was officially approved for marketing by the Macao Pharmaceutical Administration Bureau (ISAF)[14](index=14&type=chunk) - In May 2024, NMPA approved the initiation of a registrational Phase III clinical study (POLARIS-3) for SDH-deficient GIST patients[14](index=14&type=chunk) - In February 2024, the US FDA granted permission to conduct a registrational Phase III clinical trial (POLARIS-2) for CML-CP patients[14](index=14&type=chunk) - The company expects to apply for inclusion of the indication for drug-resistant/intolerant CML-CP patients in the 2024 National Medical Insurance Directory, effective early 2025[16](index=16&type=chunk) [Lisaftoclax (APG-2575)](index=7&type=section&id=Lisaftoclax%20(APG-2575)) Lisaftoclax, a novel oral Bcl-2 inhibitor, is expected to file an NDA in China for r/r CLL/SLL in 2024, with multiple global registrational Phase III studies ongoing for various hematological malignancies - An NDA for lisaftoclax for relapsed/refractory CLL/SLL is planned for submission to China NMPA in 2024, potentially becoming the world's second and China's first approved Bcl-2 inhibitor[17](index=17&type=chunk)[20](index=20&type=chunk) - Recently approved by NMPA to conduct a registrational Phase III clinical study (GLORA-4) in combination with azacitidine for MDS[17](index=17&type=chunk) - Data presented at EHA 2024 showed an objective response rate (ORR) of **70.4%** for lisaftoclax combination therapy in relapsed/refractory multiple myeloma (MM)[18](index=18&type=chunk) [Alrizomadlin (APG-115)](index=9&type=section&id=Alrizomadlin%20(APG-115)) Alrizomadlin, an oral MDM2-p53 inhibitor with six FDA orphan drug designations, is undergoing multiple clinical studies in solid and hematological tumors, showing promising anti-tumor activity - Received **six** Orphan Drug Designations (ODD) and **two** Rare Pediatric Disease Designations (RPD) from the FDA[21](index=21&type=chunk) - Ongoing Ib/II studies in collaboration with Merck for combination with pembrolizumab in melanoma and other solid tumors[21](index=21&type=chunk) - Study results showed good anti-tumor activity and tolerability for APG-115 in patients with progressive salivary gland cancer, especially adenoid cystic carcinoma (ACC)[23](index=23&type=chunk) [Pelcitoclax (APG-1252)](index=10&type=section&id=Pelcitoclax%20(APG-1252)) Pelcitoclax, a Bcl-2/Bcl-xL dual inhibitor with FDA orphan drug designation for SCLC, is undergoing multiple combination studies in China for NSCLC, neuroendocrine tumors, and non-Hodgkin lymphoma - APG-1252 is a dual Bcl-2 and Bcl-xL protein inhibitor, granted Orphan Drug Designation by the FDA for small cell lung cancer (SCLC)[24](index=24&type=chunk) - Multiple combination studies are ongoing in China, including a Phase Ib study with osimertinib for EGFR-mutated NSCLC[25](index=25&type=chunk) [APG-5918](index=11&type=section&id=APG-5918) APG-5918, a highly selective EED inhibitor, shows potential for improving CKD-related anemia and is in Phase I trials for advanced solid tumors/lymphoma in the US and anemia in China - APG-5918 is a highly selective EED inhibitor, with preliminary studies showing its potential to improve anemia caused by chronic kidney disease (CKD)[26](index=26&type=chunk) - Approved for clinical trials for anemia-related indications in China, with single-dose escalation studies in healthy subjects completed[27](index=27&type=chunk) [Other Clinical or IND Stage Candidate Drugs](index=12&type=section&id=Other%20Clinical%20or%20IND%20Stage%20Candidate%20Drugs) APG-2449, the first domestic third-generation ALK inhibitor and FAK/ALK/ROS1 triple kinase inhibitor, shows preliminary efficacy in NSCLC patients, including those with brain metastases - APG-2449 is the first domestic third-generation ALK inhibitor, also a FAK/ALK/ROS1 triple kinase inhibitor[28](index=28&type=chunk) - ASCO annual meeting data showed preliminary efficacy for APG-2449 in TKI-naive and second-generation ALK TKI-resistant NSCLC patients, with initial inhibitory effects on brain metastases[28](index=28&type=chunk) [Discovery Pipeline](index=13&type=section&id=Discovery%20Pipeline) The company is developing targeted protein degraders (TPD) to address drug resistance, with a p53-MDM2 pathway degrader in preclinical development and a low platelet toxicity Bcl-xL degrader underway - The company is developing Targeted Protein Degraders (TPD) to address drug resistance issues with traditional drugs[29](index=29&type=chunk) - The first orally active degrader targeting the p53-MDM2 pathway has entered preclinical development[29](index=29&type=chunk) - A Bcl-xL protein degrader with potential for low platelet toxicity is under development, with a preclinical candidate nomination expected by year-end[29](index=29&type=chunk) [R&D, Commercialization and Business Development](index=14&type=section&id=R%26D%2C%20Commercialization%20and%20Business%20Development) R&D investment grew in H1 2024, with core product Olverembatinib showing strong commercialization progress and the Takeda strategic collaboration significantly advancing its global reach R&D Expenses | Period | Amount | | :--- | :--- | | H1 2024 | RMB 444.1 million | | H1 2023 | RMB 309.8 million | - Core product Olverembatinib (HQP1351) achieved **RMB 112.92 million** in VAT-inclusive sales revenue in H1 2024[32](index=32&type=chunk) - As of June 30, 2024, the product was accessible in **670** hospitals and DTP pharmacies nationwide, supported by a commercial team of approximately **100** people[32](index=32&type=chunk) - The Suzhou industrialization base successfully completed GMP batch production of Olverembatinib tablets, supporting clinical supply in China and globally[35](index=35&type=chunk) - The exclusive option agreement with Takeda Pharmaceutical will leverage Takeda's global commercial expertise to expand Olverembatinib's accessibility to patients worldwide[36](index=36&type=chunk) [Financial Statements and Review](index=17&type=section&id=Financial%20Statements%20and%20Review) [Condensed Consolidated Financial Statements](index=17&type=section&id=Condensed%20Consolidated%20Financial%20Statements) H1 2024 financial statements show **RMB 823.7 million** revenue and **RMB 162.8 million** net profit, with total assets increasing to **RMB 3.107 billion** and net assets significantly rising to **RMB 776.4 million** Key Data from Condensed Consolidated Statement of Profit or Loss (RMB Thousand) | Item | H1 2024 (Unaudited) | H1 2023 (Unaudited) | | :--- | :--- | :--- | | Revenue | 823,746 | 142,701 | | Gross Profit | 808,687 | 124,547 | | R&D Expenses | (444,079) | (309,814) | | Profit/(Loss) before Tax | 162,895 | (399,603) | | Profit/(Loss) for the Period | 162,826 | (402,349) | Key Data from Condensed Consolidated Statement of Financial Position (RMB Thousand) | Item | June 30, 2024 (Unaudited) | December 31, 2023 (Audited) | | :--- | :--- | :--- | | Total Non-current Assets | 1,143,231 | 1,156,215 | | Total Current Assets | 1,963,839 | 1,344,178 | | Cash and Bank Balances | 1,100,314 | 1,093,833 | | Total Current Liabilities | 1,065,350 | 934,173 | | Total Non-current Liabilities | 1,265,281 | 1,495,588 | | Net Assets | 776,439 | 70,632 | [Financial Review](index=29&type=section&id=Financial%20Review) This section details the **477.2%** revenue increase, primarily from IP income, a **43.4%** rise in R&D expenses, and decreases in administrative and finance costs, leading to a **RMB 162.8 million** net profit - Revenue increased by **RMB 681 million** or **477.2%** year-on-year, primarily due to the combined impact of intellectual property income, pharmaceutical product sales, commercialization rights income, and service revenue[70](index=70&type=chunk) - R&D expenses increased by **RMB 134.3 million** or **43.4%** year-on-year, mainly due to increased internal R&D activities[73](index=73&type=chunk) - Administrative expenses decreased by **RMB 4.3 million** or **4.7%** year-on-year, primarily due to reduced staff costs and operating depreciation expenses at the Suzhou base[75](index=75&type=chunk) - Finance costs decreased by **RMB 18.6 million** or **35.3%** year-on-year, mainly due to reduced interest on bank borrowings[77](index=77&type=chunk) - As a result of the aforementioned factors, the company's net profit turned from a **RMB 402.3 million loss** in the prior period to a **RMB 162.8 million profit**[79](index=79&type=chunk) [Key Financial Ratios and Liquidity](index=34&type=section&id=Key%20Financial%20Ratios%20and%20Liquidity) The company's financial position significantly improved, with current and quick ratios increasing to **1.8**, and the debt-to-asset ratio sharply decreasing to **77.2%**, indicating stronger solvency and a more robust financial structure Key Financial Ratios | Ratio | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Current Ratio | 1.8 | 1.4 | | Quick Ratio | 1.8 | 1.4 | | Debt-to-Asset Ratio | 77.2% | 993.5% | - As of June 30, 2024, the Group's cash and bank balances amounted to **RMB 1.1003 billion**, largely consistent with year-end 2023[89](index=89&type=chunk) - As of June 30, 2024, the Group's total interest-bearing bank and other borrowings amounted to **RMB 1.700 billion**[85](index=85&type=chunk)[87](index=87&type=chunk) [Other Information](index=37&type=section&id=Other%20Information) [Employees and Remuneration Policy](index=37&type=section&id=Employees%20and%20Remuneration%20Policy) As of June 30, 2024, the company had **574** full-time employees, with **70.9%** in R&D, reflecting its R&D-centric strategy, and implemented incentive plans to attract and retain talent Employee Distribution by Function (as of June 30, 2024) | Function | Number of Employees | Percentage | | :--- | :--- | :--- | | R&D | 407 | 70.9% | | Commercial | 101 | 17.6% | | Administrative and Others | 66 | 11.5% | | **Total** | **574** | **100.0%** | - Employee benefit expenses for H1 2024 were **RMB 218.9 million**, compared to **RMB 201.2 million** in the prior period[92](index=92&type=chunk) [Future and Outlook](index=39&type=section&id=Future%20and%20Outlook) The company plans to accelerate clinical development and global NDA applications for six candidate drugs, seek global partnerships, and strengthen its global intellectual property portfolio to become a leading biotech company - The company will accelerate the advancement of six candidate drugs in its highly differentiated novel clinical pipeline to the next clinical stage and pursue global NDA applications[94](index=94&type=chunk) - Plans to actively seek strategic partnerships with global biotechnology and pharmaceutical companies to seize global commercialization opportunities[94](index=94&type=chunk) - Will further strengthen its comprehensive and growing global intellectual property portfolio to safeguard shareholder interests[94](index=94&type=chunk) [Corporate Governance and Other Information](index=40&type=section&id=Corporate%20Governance%20and%20Other%20Information) The company adheres to corporate governance codes, detailing the use of proceeds from past placings and the **USD 75 million** Takeda share subscription, primarily for core product and key candidate development - The roles of Chairman and CEO are held by the same person (Dr. Yang), with the Board believing the existing structure does not affect the balance of power and accountability[95](index=95&type=chunk) - Net proceeds from the 2023 placing were approximately **HKD 543.9 million**, with **RMB 119.5 million** remaining unused as of June 30, 2024, expected to be fully utilized by end of 2024[107](index=107&type=chunk)[108](index=108&type=chunk) - Net proceeds from the 2024 share issuance to Takeda Pharmaceutical were approximately **USD 73 million**, with **90%** planned for the development of core product HQP1351 and key candidate APG-2575, and **10%** for other key candidates, expected to be utilized by end of 2025[113](index=113&type=chunk)[114](index=114&type=chunk) - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2024[117](index=117&type=chunk)

Investment Rating - The report maintains a "Buy" rating for the company [4]. Core Views - The company has made significant progress in its internationalization efforts, particularly through a partnership with Takeda, which includes a $100 million option payment and potential milestone payments totaling up to $1.2 billion, along with a double-digit percentage sales share [2][11]. - The core product, Olarebatinib, is advancing in clinical trials both domestically and internationally, with FDA and CDE approvals for various indications, including a Phase III trial for CML-CP and Ph+ ALL [2][15]. - Revenue forecasts for 2024-2026 are projected at RMB 1.013 billion, RMB 606 million, and RMB 1.063 billion, respectively, indicating a strong growth trajectory [3][2]. Summary by Sections Partnership with Takeda - The company signed an exclusive option agreement with Takeda for the global development of Olarebatinib, excluding certain regions in Greater China, which could accelerate its commercialization [2][11]. - Takeda's investment in the company through the purchase of shares worth $75 million further solidifies the partnership [2][11]. Core Product Development - Olarebatinib has shown promising results in clinical trials, particularly for patients with CML and Ph+ ALL, with significant response rates reported [18][20]. - The company is also advancing other products like APG-2575, which is expected to be submitted for NDA this year, and has initiated multiple Phase III trials for various hematological malignancies [15][17]. Financial Projections and Investment Recommendations - The company is expected to achieve substantial revenue growth, with a forecasted increase of 356.5% in 2024, followed by a decrease in 2025 and a rebound in 2026 [3][2]. - A DCF valuation suggests a reasonable share price of HKD 36.95, indicating significant upside potential from the current price of HKD 27.80 [4][2].

Investment Rating - The report assigns a "Buy" rating to the company with a target price of HKD 34.15, representing a potential upside of 35% from the current price of HKD 25.30 [1][6][13]. Core Insights - The company has made significant progress in global innovation, securing a partnership with Takeda for the exclusive licensing of its drug, Olverembatinib (耐立克®), which includes a substantial upfront payment and potential milestone payments totaling up to USD 1.2 billion [4][9]. - Olverembatinib has shown strong clinical efficacy, particularly in patients with chronic myeloid leukemia (CML), with notable response rates in various patient groups [5][10]. - The company's research pipeline is advancing well, with several promising drug candidates, including APG-2575 and APG-115, which have received regulatory approvals and are undergoing clinical trials [6][11][12]. Financial Summary - The company reported revenues of RMB 27.91 million in 2021, with projections of RMB 10.3 billion, RMB 5.3 billion, and RMB 9.1 billion for 2024, 2025, and 2026 respectively [22]. - Net profits are expected to be negative in the coming years, with estimates of RMB -2.32 billion, RMB -7.26 billion, and RMB -5.14 billion for the same periods [22]. - The company has a total market capitalization of HKD 80 billion and a net asset value of HKD 0.60 billion [2].

Investment Rating - The report does not specify a clear investment rating for the company [2]. Core Views - As of June 21, 2024, the company received a $75 million equity investment from Takeda, significantly boosting its cash reserves and supporting clinical research in China and the U.S. [2] - The company signed an exclusive option agreement for the global rights to the third-generation BCR-ABL inhibitor, Olverembatinib, outside of China, receiving an upfront payment of $100 million and potential milestone payments totaling up to $1.2 billion [2][3]. - The efficacy of Olverembatinib in patients previously treated with TKI therapies is notable, with a 60.8% complete cytogenetic response (CCyR) rate and a 42.4% major molecular response (MMR) rate, indicating a potential peak sales exceeding $1 billion overseas [3]. - The international progress of APG-2575, a Bcl-2 inhibitor, is accelerating, with multiple indications entering Phase III clinical trials, including a significant milestone with FDA approval for a global registration trial in chronic lymphocytic leukemia (CLL) [3]. - Revenue forecasts for the company are optimistic, with projected revenues of 1.07 billion, 620 million, and 1.18 billion yuan for 2024, 2025, and 2026, respectively, driven by the commercialization of Olverembatinib and APG-2575 [4][8]. Summary by Sections Financial Performance - The company reported revenues of 221.98 million yuan in 2023, with a projected increase to 1.07 billion yuan in 2024, followed by a decrease to 620.49 million yuan in 2025, and a rebound to 1.18 billion yuan in 2026 [4][9]. - The net profit attributable to the parent company is expected to improve from a loss of 925.64 million yuan in 2023 to a loss of 121.92 million yuan in 2024, and further losses of 560.18 million yuan in 2025, and 102.77 million yuan in 2026 [4][9]. - Earnings per share (EPS) are projected to improve from -2.94 yuan in 2023 to -0.39 yuan in 2024, -1.78 yuan in 2025, and -0.33 yuan in 2026 [4][9]. Market Position and Growth Potential - The company is expected to capture market shares of 13.9%, 28.9%, and 41% for Olverembatinib in the treatment of CML from 2024 to 2026, translating to revenues of 3.4 billion, 5.7 billion, and 9.7 billion yuan, respectively [8]. - APG-2575 is anticipated to generate revenues of 0.5 billion yuan in 2025 and 2.1 billion yuan in 2026, with market entry expected in 2025 [8]. Clinical Development - The report highlights the significant clinical efficacy of Olverembatinib, particularly in patients resistant to previous treatments, which supports the company's growth narrative [3]. - APG-2575's entry into critical registration trials marks a significant milestone in the company's international expansion efforts [3].

Investment Rating - The report assigns a "Buy" rating for the company, marking its first coverage [1]. Core Views - The licensing agreement for the third-generation BCR-ABL inhibitor, Olverembatin, with Takeda marks a significant milestone, with an upfront payment of $1.1 billion and potential total payments of $1.2 billion over the next two years, along with double-digit sales royalties [3]. - Olverembatin is projected to be a best-in-class product with overseas peak sales expected to exceed $1 billion, supported by FDA approval for a global Phase III clinical trial in February 2024 [3]. - Takeda's established sales and clinical team in hematology is expected to maximize the market potential for Olverembatin, leveraging their experience with the first-generation BCR-ABL inhibitor, Ponatinib [3]. - APG-2575 is anticipated to file for NDA this year, potentially becoming the second Bcl2 inhibitor to be launched globally, with significant expansion potential in various indications [4]. - The company is expected to see rapid revenue growth driven by Olverembatin's sales and the $1 billion option payment, with projected revenues of RMB 1.02 billion, RMB 473.52 million, and RMB 918.63 million for 2024, 2025, and 2026 respectively [4]. Financial Forecasts - Total revenue for 2022 was RMB 211.86 million, with a forecasted increase to RMB 225.09 million in 2023, and a significant jump to RMB 1.02 billion in 2024, reflecting a year-on-year growth of 353.84% [2]. - The company is expected to incur net losses, with projected net profits of RMB (882.92) million in 2022, RMB (925.64) million in 2023, and RMB (220.63) million in 2024 [2]. - The earnings per share (EPS) is projected to improve from RMB (2.81) in 2022 to RMB (0.70) in 2024, indicating a potential recovery in profitability [2].

Investment Rating - The report assigns a "Buy" rating for the company, marking the first coverage of the stock [1]. Core Views - The licensing agreement for the third-generation BCR-ABL inhibitor, Olverembatin, with Takeda marks a significant milestone for the company, indicating a transition into a phase of global innovation and value realization [3]. - The potential peak sales for Olverembatin are expected to exceed $1 billion, supported by its recent FDA approval for treating previously treated CML-CP patients [3]. - The partnership with Takeda, which has a strong sales and clinical team in hematology, is anticipated to maximize the overseas market potential for Olverembatin [3]. - The company is also on track to submit a New Drug Application (NDA) for APG-2575, which could become the second Bcl2 inhibitor to be launched globally [4]. - Revenue forecasts indicate rapid growth, with projected revenues of 1,021.53 million yuan in 2024, 473.52 million yuan in 2025, and 918.63 million yuan in 2026 [2][4]. Financial Summary - Total revenue for 2022 was 211.86 million yuan, with a significant year-on-year growth of 655.45% [2]. - The company is expected to incur net losses, with projected net profits of (220.63) million yuan in 2024 and (976.46) million yuan in 2025 [2]. - The earnings per share (EPS) is projected to improve from (2.94) yuan in 2023 to (0.70) yuan in 2024, before declining again to (3.10) yuan in 2025 [2][10]. - The company’s operating cash flow is expected to improve significantly, with a forecasted cash flow of (15.56) million yuan in 2024 [9].