Investment Rating - The report maintains a "Positive" investment rating for the pharmaceutical and biotechnology industry in China [5]. Core Insights - The ESMO conference showcased significant breakthroughs in both foreign and domestic innovative drugs, highlighting the competitive strength of Chinese pharmaceutical companies on the international stage [3][12]. - The report emphasizes the potential of domestic innovative drugs to redefine standard therapies, particularly in the context of PD-1/VEGF dual antibodies and antibody-drug conjugates (ADCs) [8][29]. Summary by Sections 1. PD-1 plus and Domestic Dual Antibodies - The PD-(L)1/VEGF dual antibody, Ivosidenib, demonstrated strong positive results in a Phase III trial for first-line treatment of advanced squamous non-small cell lung cancer (NSCLC), showing a progression-free survival (PFS) improvement of 4.2 months compared to the PD-1 group [13][16]. - SSGJ-707, a PD-1/VEGF dual antibody, showed promising results in treating microsatellite stable (MSS) colorectal cancer, with an overall response rate (ORR) of 68.7% and a disease control rate (DCR) of 98.5% [18][19]. - HB0025, another PD-L1/VEGF dual antibody, reported an ORR of 83.3% in squamous NSCLC patients, indicating strong anti-tumor efficacy [20][21]. 2. ADCs: Accelerated Breakthroughs - SKB264, an ADC, has shown significant PFS and overall survival (OS) benefits in a Phase III trial for EGFR-mutant NSCLC, with PFS HR of 0.49 and OS HR of 0.60, indicating its potential as a new standard therapy [29][30]. - In the breast cancer domain, SKB264 demonstrated an ORR of 41.5% in CDK4/6i pre-treated HR+/HER2- advanced breast cancer, significantly outperforming chemotherapy [31][32]. - The report highlights the global potential of SKB264, with ongoing studies expected to further validate its efficacy and safety profile [23][29].

Core Viewpoint - Bank of America Securities has raised the target price for Kelun-Biotech from HKD 471.5 to HKD 522, maintaining a "Neutral" rating, citing encouraging clinical progress but limited short-term authorization opportunities [1] Clinical Progress - The report highlights significant improvements in progression-free survival (PFS) data for sac-TMT and A166, which contributed to the upward revision of the target price [1] - The National Medical Products Administration has recently approved sac-TMT for second-line treatment of EGFR mutation non-small cell lung cancer (NSCLC) and A166 for second-line and above HER2-positive breast cancer (BC) [1] Revenue Forecast - Revenue forecasts for 2025 to 2027 have been increased by 1% to 5%, reflecting the positive clinical developments and long-term projections [1]

Core Viewpoint - The Hong Kong stock market's innovative drug sector is experiencing a decline, with the Hong Kong Stock Connect Innovative Drug ETF (520880) dropping over 3.5% as of the report, indicating a potential buying opportunity for investors despite the downturn [1] Group 1: Market Performance - The Hong Kong Stock Connect Innovative Drug ETF (520880) has seen a trading volume exceeding 200 million yuan, continuing to exhibit high premiums in the market [1] - The innovative drug sector faced a significant drop recently, with the ETF attracting over 75 million yuan in a single day, totaling over 120 million yuan in the last four days [1] Group 2: Recent Developments - The ESMO 2025 conference recently showcased positive data for several core projects of Chinese innovative drugs [1] - On October 22, Innovent Biologics announced a global strategic partnership with Takeda Pharmaceutical worth 11.4 billion USD, setting a record for the value of business development (BD) transactions in China's innovative drug sector, involving three product rights and pipeline development [1] Group 3: Future Outlook - Huafu Securities suggests that the recent adjustments in the Hong Kong innovative drug sector may present a significant opportunity for investment in late October [1] - The long-term outlook remains positive for companies with commercialization capabilities and rich pipelines, particularly in BioPharma, potential BD targets, and cutting-edge technology [1] - The innovative drug industry is expected to benefit from interest rate cuts, with performance anticipated to improve, and the end-of-year BD period may act as a catalyst for growth [1] Group 4: Index Composition - The Hong Kong Stock Connect Innovative Drug ETF (520880) and its linked fund (025220) passively track the Hang Seng Hong Kong Stock Connect Innovative Drug Select Index, which includes top ten weighted stocks such as BeiGene, China Biologic Products, Innovent Biologics, and others [1]

Core Viewpoint - The recent clinical trial data presented by Keren Biotechnology at the 2025 European Society for Medical Oncology (ESMO) conference indicates that sac-TMT (TROP2 ADC) is the first drug to achieve both progression-free survival (PFS) and overall survival (OS) benefits in the second-line treatment of EGFR-mutant non-small cell lung cancer (NSCLC), addressing a significant treatment gap in this area [2][6]. Group 1: Clinical Trial Results - The OptiTROP-Lung04 study evaluated the efficacy and safety of sac-TMT compared to platinum-based doublet chemotherapy in patients with locally advanced or metastatic EGFR-mutant NSCLC [4]. - The study enrolled 376 patients, with a median follow-up of 18.9 months, showing a median PFS of 8.3 months for sac-TMT versus 4.3 months for chemotherapy, representing a 51% reduction in the risk of disease progression or death [4]. - The OS for sac-TMT was not reached (NR) compared to 17.4 months for chemotherapy, indicating a 40% reduction in the risk of death, with an objective response rate (ORR) of 60.6% versus 43.1% for chemotherapy [4][6]. Group 2: Safety Profile - The most common treatment-related adverse events (TRAEs) for both sac-TMT and chemotherapy were hematologic toxicities, with no reported cases of interstitial lung disease (ILD) or pneumonia in the sac-TMT group, suggesting a manageable safety profile [4][6]. Group 3: Future Directions - Following the promising results in second-line treatment, Keren Biotechnology has initiated a phase III clinical trial (SKB264-Ⅲ-15) to evaluate sac-TMT in combination with osimertinib compared to osimertinib alone in first-line treatment for patients with EGFR-mutant locally advanced or metastatic NSCLC [7]. - The significant clinical need for effective treatments in EGFR-mutant NSCLC has led to multiple investigational drugs targeting this indication, highlighting the competitive landscape in this therapeutic area [6][7].

Investment Rating - The report maintains a "Buy" rating for the company [6] Core Insights - The core product sac-TMT (SKB264) has shown promising results in two pivotal Phase III clinical trials presented at the 2025 ESMO, focusing on breast cancer (BC) and non-small cell lung cancer (NSCLC) [1][2] - sac-TMT demonstrates significant potential as a best-in-class (BIC) therapy, particularly in the treatment of EGFR mutation NSCLC patients who have failed prior TKI therapy, showing improved overall survival (OS) and progression-free survival (PFS) compared to chemotherapy [2][3] - In the HR+/HER2- BC study, sac-TMT also exhibited a notable improvement in ORR and mPFS compared to chemotherapy, with a trend towards better OS outcomes [4][5] Summary by Sections NSCLC Insights - The OptiTROP-Lung04 study revealed that sac-TMT achieved an overall response rate (ORR) of 60.6% compared to 43.1% for chemotherapy, with a median PFS of 8.3 months versus 4.3 months (HR=0.49, p<0.0001) [3] - The OS data indicated a 40% reduction in the risk of death for sac-TMT compared to chemotherapy (HR 0.6; 95% CI: 0.44-0.82; p=0.001) [3] Breast Cancer Insights - In the OptiTROP-Breast02 study, sac-TMT showed an ORR of 41.5% versus 24.1% for chemotherapy, with a median PFS of 8.3 months compared to 4.1 months (HR 0.35; p<0.0001) [4] - The overall survival trend for sac-TMT was significantly better than the control group, with an OS HR of 0.33, although the data was not yet mature [4] Financial Projections - The company is projected to achieve revenues of 2.084 billion, 2.876 billion, and 4.663 billion yuan for the years 2025, 2026, and 2027 respectively, with net profits expected to improve from a loss of 622 million yuan in 2025 to a profit of 561 million yuan by 2027 [6]

Investment Rating - The report assigns a "Buy" rating to the company, Kolun Biotechnology (6990 HK), with a target price of HKD 549.00, indicating a potential upside of 16.6% from the current closing price of HKD 471.00 [6][13]. Core Insights - The report highlights the significant clinical advancements of the company's ADC products, particularly Sac-TMT, which has set a new benchmark for treating EGFR mutation-resistant NSCLC. The results from the Phase III OptiTROP-Lung04 study showed a median progression-free survival (PFS) of 8.3 months compared to 4.2 months for the control group, with a hazard ratio (HR) of 0.49 [2]. - The report also notes that the application for market approval for Sac-TMT was granted in October, further enhancing the company's growth prospects [2]. - The financial forecasts for the company have been adjusted upwards, with revenue projections for 2025-2027 increased by 0-5%, leading to a peak sales forecast of RMB 64 billion for Sac-TMT and RMB 11 billion for another product [7]. Financial Performance - The company is projected to generate revenues of RMB 2,050 million in 2025, with a gross profit of RMB 1,322 million, maintaining a gross margin of 64.5% [7][14]. - The net profit for 2026 is expected to turn positive at RMB 50 million, with a significant increase to RMB 751 million by 2027 [7][14]. - The company's market capitalization is approximately HKD 76.66 billion, with a year-to-date stock price increase of 188.43% [4]. Valuation Model - The DCF valuation model estimates the equity value of the company at approximately RMB 116.38 billion, translating to a per-share value of HKD 549.00 [8]. - The model incorporates a perpetual growth rate of 3% and a weighted average cost of capital (WACC) of 9.4% [8]. Stock Performance - The stock has shown a strong performance over the past year, with a significant increase compared to the Hang Seng Index [3]. - The 52-week high for the stock is HKD 577.50, while the low is HKD 154.00, indicating substantial volatility and growth potential [4]. Clinical Data Highlights - The report emphasizes the clinical efficacy of Sac-TMT in treating NSCLC and HR+/HER2- breast cancer, with significant improvements in PFS and overall survival (OS) rates compared to existing therapies [2][6]. - The company is well-positioned to capitalize on the growing ADC market, supported by robust clinical data and regulatory approvals [7].

Group 1 - The core viewpoint of the reports indicates an optimistic outlook on the sales of Sac-TMT and Bodo-Tuzumab, leading to an upward revision of revenue forecasts for 2025-2027 by 0-5% and an increase in peak sales projections to 6.4 billion and 1.1 billion RMB respectively [1] - The DCF target price for Keren Biotechnology-B (06990) has been raised to 549 HKD, maintaining a "Buy" rating due to the significant global value driven by clinical data for the ADC product matrix [1] Group 2 - Sac-TMT has established a new benchmark for treating EGFR mutation-resistant NSCLC, with the III phase OptiTROP-Lung04 study showing significant improvements in PFS and OS compared to the control group, with median PFS of 8.3 vs. 4.2 months and median OS not reached vs. 17.4 months [2] - The application for marketing authorization for Sac-TMT in this indication was approved in October, and it has shown lower incidence rates of oral mucositis, ocular toxicity, and interstitial pneumonia compared to competitor Dato-DXd [2] - In the ADC product matrix for breast cancer, Sac-TMT's application for second-line and above HR+/HER2- breast cancer has been accepted, and Bodo-Tuzumab has been approved for 2L+ HER2-positive breast cancer, with both III phase study results presented at the ESMO conference [3] - The OptiTROP-Breast02 study demonstrated statistical superiority in PFS for Sac-TMT with a median of 8.3 vs. 4.1 months, and the KL166-III-06 study showed Bodo-Tuzumab significantly extended median PFS compared to T-DM1 [3]

Core Viewpoint - The report from CMB International indicates an optimistic outlook for the sales of Sac-TMT and Bodo-Tuzumab based on regulatory approval progress, leading to an upward revision of revenue forecasts for 2025-2027 by 0-5% and an increase in peak sales projections to RMB 6.4 billion and RMB 1.1 billion respectively. The DCF target price has risen to HKD 549, maintaining a "Buy" rating for Kelun-Botai Biopharmaceuticals (06990), driven by the significant global value of the ADC product matrix supported by clinical data [1]. Group 1 - Sac-TMT sets a new benchmark for EGFR mutation-resistant NSCLC treatment: The results of the Phase III OptiTROP-Lung04 study presented at the ESMO conference show that the Sac-TMT treatment group achieved statistically and clinically significant improvements in PFS and OS compared to the control group, with median PFS of 8.3 vs. 4.2 months (HR=0.49, 95% CI: 0.39-0.62, p<0.0001) and median OS of NR vs. 17.4 months (HR=0.60, 95% CI: 0.44-0.82, two-tailed p=0.001) [2]. - The application for marketing authorization for this indication was approved in October, and Sac-TMT shows lower incidence rates of oral mucositis, ocular toxicity, and interstitial lung disease compared to competitor Dato-DXd, although it has a higher incidence of hematological toxicity [2]. Group 2 - The ADC product matrix has also made significant progress in breast cancer: The marketing application for Sac-TMT for second-line and above HR+/HER2- breast cancer has recently been accepted by the CDE, and Bodo-Tuzumab was approved for the first time in October for 2L+ HER2-positive breast cancer. The results of their respective Phase III studies were also presented at the ESMO conference [3]. - In the OptiTROP-Breast02 study, Sac-TMT achieved statistically significant PFS improvement (median 8.3 vs. 4.1 months, HR 0.35, p<0.0001), with preliminary OS HR of 0.33 observed across all predefined subgroups [3]. - In the KL166-III-06 study, Bodo-Tuzumab outperformed T-DM1, significantly extending median PFS (11.1 vs. 4.4 months, HR 0.39, p<0.0001) [3].

Company Updates - The company presented significant data at the ESMO conference on October 17, including the approval of sac-TMT for lung cancer in China on October 12, and the approval of trastuzumab deruxtecan on October 17 [1][2] - Sac-TMT demonstrated strong positive overall survival (OS) benefits in the second-line EGFRm non-small cell lung cancer (NSCLC) compared to chemotherapy, marking it as the first successful ADC drug in this indication globally [1] - In the domestic Phase III trial OptiTROP-Lung04, sac-TMT showed statistically and clinically significant improvements in progression-free survival (PFS) and OS, with a median follow-up of 18.9 months, PFS of 8.3 months vs. 4.3 months (HR=0.49), and OS not reached vs. 17.4 months (HR=0.6, p=0.0006) [1] Breast Cancer Insights - In the domestic Phase III trial OptiTROP-Breast02, sac-TMT also showed strong positive OS benefits in HR+ HER2- breast cancer, with PFS of 8.3 months vs. 4.1 months (HR=0.35), and OS not reached but with HR=0.33, indicating significant dual benefits [2] - The HER2 ADC trastuzumab deruxtecan showed clear benefits in a head-to-head trial against Roche's T-DM1, with PFS of 11.1 months vs. 4.4 months (HR=0.39) and OS HR=0.62, leading to its approval in China on October 17 [2] Financial Forecast and Valuation - The company maintains its net profit forecasts for 2025 and 2026 at losses of 672 million yuan and 174 million yuan, respectively [2] - Based on a DCF model, the company maintains an outperform rating and a target price of 550 HKD, indicating a 20.0% upside potential from the current stock price [2]

Core Viewpoint - The breakthrough in overcoming EGFR-TKI resistance in non-small cell lung cancer (NSCLC) is a common goal for new therapies, with the recent clinical data from Kolonbo Tai's TROP2 ADC sac-TMT showing significant benefits in both progression-free survival (PFS) and overall survival (OS) for EGFR-mutant NSCLC patients in the second-line treatment setting [1][3]. Group 1: Clinical Study Results - The III phase clinical study (OptiTROP-Lung04) evaluated sac-TMT against platinum-based doublet chemotherapy in patients with locally advanced or metastatic EGFR-mutant NSCLC, enrolling 376 patients with a median follow-up of 18.9 months [3]. - The study reported a median PFS of 8.3 months for sac-TMT compared to 4.3 months for chemotherapy, representing a 51% reduction in the risk of disease progression or death [3]. - The OS for sac-TMT was not reached (NR) versus 17.4 months for chemotherapy, indicating a 40% reduction in the risk of death [3]. - The objective response rate (ORR) was 60.6% for sac-TMT compared to 43.1% for chemotherapy, with a median duration of response (mDoR) of 8.3 months versus 4.2 months [3]. Group 2: Safety Profile - The most common treatment-related adverse events (TRAEs) for sac-TMT and platinum-based chemotherapy were hematologic toxicities, with no reported cases of interstitial lung disease (ILD) or pneumonia in the sac-TMT group, indicating a manageable safety profile [4]. Group 3: Future Directions - The results from the study suggest that sac-TMT has achieved statistically significant and clinically meaningful improvements in both OS and PFS compared to chemotherapy, addressing the challenge of obtaining OS advantages after EGFR-TKI resistance [5]. - Kolonbo Tai plans to expand the use of sac-TMT into first-line treatment, with a new III phase clinical study (SKB264-III-15) initiated to evaluate sac-TMT in combination with osimertinib against osimertinib monotherapy in patients with EGFR-mutant NSCLC [7].