Core Viewpoint - The report from China Merchants Securities Hong Kong initiates coverage on HeYue-B (02256) with a "Buy" rating, estimating a fair equity value of HKD 21 billion and a target price of HKD 32.5 for the next 12 months, highlighting the company's long-term growth potential and efficient small molecule development capabilities [1] Group 1: Product Development and Market Potential - HeYue's developed drug, Pimitinib, is positioned as the most effective CSF-1R small molecule globally and is set to launch in both China and the U.S., promising ongoing sales revenue for the company [1] - The company is actively targeting two significant families of important targets, FGFR and KRAS, with FGFR4 as a late-stage clinical asset expected to become a new targeted small molecule in the liver cancer field [1] - The global sales peak for Pimitinib is projected to reach USD 1.5 billion, providing a continuous cash flow for HeYue, with the drug being a key asset in Merck's pipeline [1] Group 2: Clinical Advancements and Pipeline - HeYue has demonstrated the best efficacy globally for TGCT in the development of CSF-1R inhibitors, with safety and response rates surpassing similar molecules [1] - The company has established a robust pipeline with 22 candidate drugs, including 12 in clinical stages and 10 in preclinical stages, showcasing its leading recognition of frontier targets and developing clinical capabilities [3] - The selective FGFR4 inhibitor, currently in pivotal Phase III trials, targets advanced liver cancer patients with FGF19 overexpression, marking a potential first in the global market if successful [2] Group 3: Strategic Focus on Targeted Therapies - The company has been focusing on the FGFR target for a decade, with a deep layout in selective FGFR4 inhibitors and FGFR2/3 inhibitors, addressing unmet needs in liver and gastric cancers [2] - The ongoing research on RAS targets, including early-stage molecules for G12D and pan-RAS, is expected to enhance the company's offerings in precision oncology [2] - The development of next-generation FGFR inhibitors and oral PD-L1 small molecules is anticipated to exceed market expectations through better data disclosure and potential business development transactions [3]