Core Viewpoint - Citigroup's research report indicates that He Yu's current valuation is undervalued, supported by the high certainty of its two late-stage candidates, pimicotinib and irpagratinib, along with a differentiated innovation pipeline that is expected to achieve external licensing opportunities [1] Group 1: Drug Candidates and Clinical Trials - The firm anticipates a high success rate for the phase III clinical trial of irpagratinib for second-line hepatocellular carcinoma, which should be factored into the valuation [1] - Key catalysts for He Yu are expected in 2025 and 2026, focusing on the approval and commercialization performance of pimicotinib, the announcement of phase III data for irpagratinib, and updates on multiple candidates such as ABSK043 and ABSK061, along with potential commercial collaborations [1] Group 2: Financial Projections - The revenue forecast for He Yu in 2026 has been adjusted down from 289 million to 280 million, while the earnings per share loss estimate has been revised from 0.38 to 0.39 [1] - For 2027, the projected revenue and earnings per share loss are expected to be 452 million and 0.34, respectively [1] - The firm maintains a "Buy" rating, raising the target price from 10 HKD to 17.5 HKD [1]

Investment Rating - The report maintains a "Buy" rating for the company, expecting a relative return of over 20% within the next six months [6]. Core Insights - The company reported a total revenue of 657 million yuan for H1 2025, representing a year-on-year growth of 20%, with a net profit of 328 million yuan, up 59% [1]. - The company has successfully reduced R&D expenses to 228 million yuan, with an R&D expense ratio of 37.25%, down 6 percentage points year-on-year [2]. - The drug Pimiatinib has shown potential as a breakthrough therapy, with a 54% overall response rate (ORR) in a clinical trial, significantly higher than the 3.2% in the placebo group [3]. - The company has initiated a clinical study for ABSK011, a drug targeting FGFR4, which has received breakthrough therapy designation, indicating its potential in treating HCC patients with FGF19 overexpression [4]. - The company is actively developing several pipeline drugs, including ABSK043 and ABSK061, with promising early data [5]. Financial Projections - The company is projected to achieve revenues of 630 million yuan, 684 million yuan, and 634 million yuan for the years 2025, 2026, and 2027, respectively [6]. - The expected net profit for the same years is forecasted to be 45 million yuan, 68 million yuan, and 98 million yuan [6].

Core Viewpoint - The company reported strong performance in 1H25, exceeding expectations primarily due to higher-than-expected income from Merck's exercise of rights [1]. Financial Performance - Revenue for 1H25 reached 612 million yuan, representing a year-on-year increase of 21.5% [1]. - Net profit attributable to shareholders was 328 million yuan, showing a year-on-year growth of 58.8% [1]. - The company received 85 million USD from Merck for global commercialization rights of Pimiatin, contributing significantly to revenue [1]. Development Trends - The company has increased R&D expenditure by 6% while reducing management expenses by 13%, leading to improved profitability [1]. - The company aims to keep operational cash consumption within 570 million yuan for the year, indicating a positive outlook for profitability [1]. - Progress on core pipelines includes the acceptance of the NDA for Pimiatin in China and the initiation of registration clinical trials for Ipagotini [1]. Pipeline Progress - The company is advancing its early-stage pipeline with ongoing clinical studies for oral PD-L1 ABSK043 and FGF2/3 inhibitor ABSK061 [2]. - ABSK061 has completed the first patient enrollment for achondroplasia and is moving forward with a Phase II trial for gastric cancer in combination with ABSK043 [2]. - The new generation brain-penetrable PRMT5-MTA inhibitor ABSK131 has also commenced patient dosing [2]. Profit Forecast and Valuation - Due to higher-than-expected licensing income, the net profit forecast for 2025 has been raised by 7.5% to 48.07 million yuan [2]. - The 2026 net profit forecast remains unchanged at 320 million yuan [2]. - The target price has been increased by 32.7% to 15 HKD, indicating a potential upside of 30.5% from the current stock price [2].

Core Viewpoint - The company has raised its 2025 net profit forecast by 7.5% to 48.07 million HKD due to better-than-expected revenue from the licensing agreement with Merck, maintaining its 2026 net profit forecast at 320 million HKD, and has increased the target price by 32.7% to 15 HKD, indicating a potential upside of 30.5% from the current stock price [1] Financial Performance - In the first half of 2025, the company reported revenue of 612 million HKD, a year-on-year increase of 21.5%, and a net profit attributable to shareholders of 328 million HKD, reflecting a 58.8% year-on-year growth, exceeding expectations primarily due to higher-than-expected income from Merck [2][3] Key Developments - The company received an 85 million USD licensing fee from Merck for the global commercialization rights of Pimiatinib, contributing to the reported revenue of 612 million HKD. The company has increased its R&D expenditure by 6% while reducing management expenses by 13%, leading to strong profitability in the first half of 2025 [3] - The company has made significant progress with its core pipelines, with the NDA for Pimiatinib accepted in China and plans to submit a U.S. application in the second half of 2025. The company also initiated the first patient dosing for Ipagotini in a registration clinical trial in China [4] Emerging Pipeline Potential - The company is advancing clinical studies for its oral PD-L1 ABSK043, both as a monotherapy and in combination with other treatments. The FGF2/3 inhibitor ABSK061 has completed its first patient enrollment for achondroplasia and is progressing in a Phase II trial for gastric cancer. Additionally, the new generation brain-penetrable PRMT5-MTA inhibitor ABSK131 has completed its first patient dosing [5]

Core Insights - The FGFR4 inhibitor ABSK011 combined with atezolizumab shows significant clinical potential for treating advanced hepatocellular carcinoma (HCC) with FGF19 overexpression, as highlighted in the phase II clinical study results presented at ESMO GI 2025 [1] - The study included 15 first-line (1L) and 18 second-line (2L) patients, with an overall objective response rate (ORR) of 51.7% and a median progression-free survival (mPFS) of 7.0 months [1][2] - ABSK011 has entered the registration clinical trial phase, with ongoing studies demonstrating its efficacy in both 1L and 2L HCC settings [2][3] Group 1: Clinical Study Results - ABSK011 shows a 50.0% ORR and 7.0 months mPFS in the 1L HCC subgroup, outperforming existing therapies like sorafenib and atezolizumab plus bevacizumab [2] - In the 2L HCC setting, ABSK011 demonstrates a 52.9% ORR and an expected mPFS of 8.3 months, significantly better than current treatments with ORR ranging from 5.9% to 12% and mPFS between 2.8 to 5.4 months [2] Group 2: Company Pipeline and Financial Projections - The company has a robust pipeline with over 20 drug candidates, including 10 in clinical development, primarily targeting solid tumors [3] - Revenue projections for the company are estimated at 630 million, 684 million, and 634 million yuan for 2025-2027, with net profits expected to be 45 million, 68 million, and 98 million yuan respectively [3]

Investment Rating - The report maintains a "Buy" rating for the company [6][7][15] Core Insights - The FGFR4 inhibitor ABSK011 shows exceptional potential in treating advanced hepatocellular carcinoma (HCC) in combination with atezolizumab, as evidenced by its inclusion in the "Top Trials" list at ESMO GI 2025 [1] - ABSK011 demonstrates significant clinical value in both first-line (1L) and second-line (2L) treatment settings for HCC, with an overall objective response rate (ORR) of 51.7% and a median progression-free survival (mPFS) of 7.0 months [2] - The 1L subgroup for ABSK011 shows an ORR of 50.0% and mPFS of 7.0 months, outperforming existing therapies such as sorafenib and atezolizumab plus bevacizumab [3] - ABSK011 has entered the registration clinical trial phase, with five ongoing IST clinical trials, including the ABSK-011-201 and ABSK-011-205 studies [4] - The company has a robust pipeline with over 20 drugs in development, including several in clinical stages targeting solid tumors [5] Financial Projections - Projected revenues for the company are estimated at CNY 630 million, CNY 684 million, and CNY 634 million for the years 2025 to 2027, respectively [6] - Expected net profits for the same period are projected to be CNY 45 million, CNY 68 million, and CNY 98 million [6]

Investment Rating - The report initiates coverage with an OUTPERFORM rating, setting a target price of HK$13.40 based on a current price of HK$8.06 [2]. Core Insights - The company is focused on precision therapy with small molecules in oncology and is expected to achieve profitability in 2024, driven by significant revenue growth from licensing agreements [3][4]. - The core pipeline, particularly Pimicotinib, shows potential for best-in-class status with expected global peak sales exceeding USD 2 billion [4][19]. - The company has a robust pipeline targeting FGFR mutations, with potential to address a significant patient population across various cancers [14][39]. Financial Projections - Revenue projections for FY24 to FY27 are Rmb 504 million, Rmb 595 million, Rmb 420 million, and Rmb 560 million respectively, with net profit expected to reach Rmb 28 million in FY24 and Rmb 76 million in FY25 [2][8]. - The company anticipates milestone payments and royalties from its collaborations, contributing to its financial growth [10][14]. Pipeline Development - The company has advanced clinical programs, including Pimicotinib for TGCT and cGvHD, with promising clinical data indicating high objective response rates [28][33]. - The oral PD-L1 inhibitor ABSK043 is positioned to capture a share of the PD-(L)1 market, which was valued at USD 52 billion in 2023 [6][14]. - The early-stage pipeline includes over 15 preclinical candidates, demonstrating a commitment to innovation and sustained R&D investment [7][16]. Management Team - The management team has extensive experience in drug development and commercialization, with backgrounds in leading pharmaceutical companies [11][13]. - The founder and CEO, Dr. Xu, has nearly 30 years of experience in drug development, enhancing the company's strategic direction [11][13]. Market Opportunity - The global market for CSF-1R inhibitors is expanding, with significant unmet medical needs in conditions like TGCT and cGvHD, where the company’s products are positioned to provide effective solutions [19][25]. - The company’s focus on FGFR-targeted therapies addresses a large patient population, with an estimated 1.9 million cases annually across various cancers [39][40].