Core Viewpoint - The National Medical Products Administration has approved the initiation of Phase II clinical trials for AK139, a dual-specific antibody targeting IL-4Rα/ST2, developed by Kangfang Biotech (9926.HK), for seven indications [1][4] Group 1: Clinical Development - AK139 is set to undergo clinical trials for chronic obstructive pulmonary disease, severe bronchial asthma, chronic spontaneous urticaria, allergic rhinitis, chronic sinusitis with nasal polyps, moderate to severe atopic dermatitis, and nodular prurigo [1][4] - This marks the first global approval for a dual-specific antibody targeting IL-4Rα/ST2, indicating a significant advancement in the treatment of respiratory and autoimmune diseases [1][4] Group 2: Innovation and Technology - The development of AK139 leverages Kangfang's proprietary AI drug development technology, showcasing the company's commitment to innovation in the pharmaceutical sector [1][4] - The introduction of AK139 represents a strategic expansion of Kangfang Biotech's dual/multi-antibody drug development capabilities from oncology to other therapeutic areas [1][4]

Core Insights - Akeso, Inc. has received approval from the National Medical Products Administration in China to initiate Phase II clinical trials for its bispecific antibody AK139, targeting multiple respiratory and autoimmune indications [1] - The indications for AK139 include chronic obstructive pulmonary disease (COPD), severe bronchial asthma, chronic spontaneous urticaria, allergic rhinitis, chronic rhinosinusitis with nasal polyps, moderate-to-severe atopic dermatitis, and prurigo nodularis [1] - AK139 is the first bispecific antibody targeting IL-4R and ST2 pathways, aiming to address significant unmet clinical needs in chronic inflammatory diseases [1] Company Overview - Akeso is a leading biopharmaceutical company founded in 2012, focusing on the research, development, manufacturing, and commercialization of innovative biological medicines [2] - The company has developed a robust R&D ecosystem centered on its proprietary Tetrabody bispecific antibody platform and has over 50 innovative assets in its pipeline, with 26 candidates currently in clinical trials [2] - Akeso aims to provide affordable therapeutic antibodies and create significant commercial and social value, positioning itself as a global leader in the biopharmaceutical industry [2]

Core Viewpoint - Akeso, Inc. has received acceptance for its supplemental New Drug Application (sNDA) for gumokimab, a novel treatment for active ankylosing spondylitis, from the National Medical Products Administration (NMPA) in China, indicating a significant step forward in addressing the needs of approximately 4 million AS patients in the country [1][4]. Group 1: Drug Development and Regulatory Progress - Gumokimab is the second indication for which Akeso has gained NDA review acceptance, following its previous acceptance for treating moderate-to-severe psoriasis in January 2025 [2]. - Gumokimab is Akeso's third non-oncology drug candidate to enter the regulatory review phase, alongside ebronucimab and ebdarokimab, showcasing the company's expanding non-oncology portfolio [3]. - The NDA acceptance for gumokimab is based on positive results from the pivotal Phase III clinical trial (AK111-303), which demonstrated effective alleviation of AS symptoms and significant improvements in patients' activity, physical function, and quality of life [4]. Group 2: Company Overview and Pipeline - Akeso is a leading biopharmaceutical company founded in 2012, focused on the research, development, manufacturing, and commercialization of innovative biological medicines, with a robust pipeline of over 50 innovative assets across various disease areas [8][9]. - The company has developed a unique integrated R&D innovation system, including the ACE Platform for drug development and Tetrabody technology for bispecific antibody development, positioning itself as a globally competitive biopharmaceutical entity [8]. - Akeso has 26 candidates in clinical trials, including 15 bispecific/multispecific antibodies, and has successfully launched 7 new drugs commercially, emphasizing its commitment to delivering affordable therapeutic antibodies [9].

Core Insights - The company AK112 is leading globally in the development of second-generation immune-oncology (IO) therapies and is expected to capture the largest market share in this segment [1][2] - The broad-spectrum anti-cancer effects of PD-1 and VEGF targets are promising, with a significant existing market potential of nearly $60 billion, driven by the synergistic mechanisms of dual-target therapies [1] - The company has made substantial progress in clinical trials, with multiple Phase III studies underway and a unique position as the only approved PD-1/VEGF dual antibody globally [2] Market Potential - The global peak sales for VEGF monoclonal antibody Bevacizumab reached approximately $7.1 billion in 2019, while combined global sales for PD-1/PD-L1 monoclonal antibodies are projected to reach $51.6 billion by 2024 [1] - The total upfront payments for PD-1/VEGF or PD-L1/VEGF dual antibody licensing agreements have reached $3.9 billion, with total deal values amounting to $28.8 billion [1] Clinical Development - AK112 has received approval for two indications in China, with one included in the national medical insurance directory, showcasing its leading global progress [2] - The company is advancing multiple Phase III clinical studies for various cancers, including NSCLC, triple-negative breast cancer, and pancreatic cancer, which could potentially replace existing market products [2] - The first international registration trial for the PD-1/CTLA-4 dual-specific antibody, AK104, has been approved, indicating significant clinical and commercial potential [2] Financial Projections - Revenue forecasts for the company are estimated at 3.518 billion, 5.765 billion, and 9.372 billion yuan for 2025-2027, with net profits projected to be -186 million, 803 million, and 2.966 billion yuan respectively [3] - Assuming successful international Phase III trials for AK112, the risk-adjusted peak sales are estimated at approximately $19.7 billion [3] - Based on a DCF valuation with a WACC of 8.06% and a perpetual growth rate of 1%, the reasonable market capitalization is calculated to be 222.8 billion HKD [3]

Investment Rating - The report maintains a "Buy" rating for the company, expecting a relative increase of over 20% in stock price compared to the market benchmark index within the next six months [6][17]. Core Viewpoints - The company is leading the global progress with its product AK112, which is expected to capture the largest market share in the second-generation IO market [2][4]. - The broad-spectrum anti-cancer effects of PD-1 and VEGF targets are promising, with a significant existing market potential of nearly 60 billion USD globally [3]. - The company has already received approval for two indications of AK112 in China, making it the only PD-1/VEGF dual antibody product available globally [4]. Financial Forecast and Valuation - Projected revenues for the company from 2025 to 2027 are estimated at 35.18 billion, 57.65 billion, and 93.72 billion CNY respectively, with net profits expected to be -1.86 billion, 8.03 billion, and 29.66 billion CNY [6][8]. - The estimated peak overseas sales for AK112, after risk adjustments, could reach approximately 197 billion USD [6]. - The report calculates a reasonable market value of 222.8 billion HKD based on a DCF valuation with a WACC of 8.06% and a perpetual growth rate of 1% [6].

Investment Rating - The report maintains an "Outperform" rating for the company [2][11]. Core Insights - The company reported a revenue of RMB 2.13 billion in 2024, a decrease of 53.1%, primarily due to a reduction in licensing revenue, while commercial sales revenue increased by 24.9% to RMB 2.00 billion [3][16]. - The company has effectively managed costs, with a significant decline in expense ratios, leading to a narrowed operating net loss of RMB 660 million, down 16.7% year-over-year [4][18]. - The clinical pipeline is advancing steadily, with key programs such as Cadonilimab and Ivonescimab making progress in various clinical trials [5][19]. Financial Performance - Revenue projections for 2025-2027 are RMB 3.41 billion, RMB 5.45 billion, and RMB 7.31 billion, reflecting year-over-year growth of 60% and 34% in subsequent years [11][34]. - The company is expected to turn a profit in 2025, achieving a net profit of RMB 50 million [11][34]. - The gross profit margin is projected to remain high, with estimates of 92.3% in 2025 and 92.9% in 2027 [15]. Clinical Pipeline Progress - Cadonilimab is involved in multiple clinical trials, including adjuvant treatment for hepatocellular carcinoma and combination therapies for non-small cell lung cancer [5][19]. - Ivonescimab is also progressing in various trials, including first-line treatments for biliary tract cancer and head and neck squamous cell carcinoma [20][23]. - The company has several NDA/sNDA approvals expected in 2025, which could significantly impact revenue and market position [9][25]. Cost Management - The company has demonstrated excellent cost management, with R&D expenses decreasing by 5.3% due to the transition of certain clinical research services to in-house execution [4][18]. - Selling expenses grew at a lower rate than commercial sales revenue, resulting in a decline in the selling expense ratio by 5.5 percentage points [4][18]. Valuation - The target price has been adjusted to HKD 96.6 per share based on a DCF model, reflecting a WACC of 10.0% and a perpetual growth rate of 3.0% [11][34].

Investment Rating - The report assigns an investment rating of "Recommended" for the pharmaceutical and biotechnology industry [3][33]. Core Insights - The "AI + Healthcare/Pharmaceutical" theme continues to gain traction, with short-term momentum expected to persist. The report highlights significant stock performance in the sector, with the pharmaceutical and biotechnology sector (SW) rising by 2.71%, outperforming the CSI 300 index, and all sub-sectors showing positive growth, particularly in medical services [3][4]. - In the U.S., Tempus AI, a representative company in medical AI, saw a weekly increase of approximately 30% and over 160% year-to-date, driving the momentum of the medical AI concept. In China, companies like KingMed Diagnostics and Dian Diagnostics announced collaborations with DeepSeek, indicating a shift towards the commercialization of AI applications in healthcare [4][3]. - The report emphasizes investment opportunities in sub-sectors such as "AI + Medical Imaging," "AI + Diagnostic Services," and "AI + Drug Development," recommending key companies including United Imaging, Mindray, BGI Genomics, and WuXi AppTec [3][4]. Industry Performance Tracking - The pharmaceutical and biotechnology sector (SW) rose by 2.71% in the week of February 10-14, ranking 5th among 31 Shenwan primary industries. The CSI 300 index increased by 1.19% during the same period [5][6]. - All sub-sectors experienced growth, with medical services leading at +6.51%, followed by medical devices at +4.81%, and pharmaceutical commerce at +4.18% [5][6]. - Notable individual stock performances included Dian Diagnostics (+46.29%), Mian Health (+31.58%), and United Imaging (+27.33%) [6]. Industry Dynamics and Key Company Tracking - The National Healthcare Security Administration released a list of key tasks for 2025, focusing on efficient medical insurance processes and direct settlements for collected drugs and consumables [7]. - The retail terminal drug sales scale in China is projected to reach 574 billion yuan in 2024, with a growth rate of 3.7%, indicating a slowdown in growth due to demographic and economic factors [8]. - The report also notes significant collaborations, such as Baiyang Pharmaceutical's agreement with Roche for the exclusive marketing rights of a targeted cancer drug in mainland China [9][11]. Industry Data Tracking - The report tracks various industry metrics, including the basic medical insurance fund income, which reached 28,507.29 billion yuan in 2024, showing a year-on-year growth of 5% [15][16]. - The domestic pharmaceutical manufacturing industry achieved a total revenue of 25,298.50 billion yuan in 2024, with profit totals declining by 1.1% year-on-year [17].

Investment Rating - The report assigns an investment rating of "Recommended" for the pharmaceutical and biotechnology industry [3][33]. Core Insights - The "AI + Healthcare/Pharmaceutical" theme continues to gain traction, with short-term momentum expected to persist. The domestic and international markets are witnessing significant developments in AI applications within healthcare, particularly with companies like Tempus AI showing substantial stock price increases [3][4]. - The report highlights investment opportunities in specific segments such as "AI + Medical Imaging," "AI + Diagnostic Services," and "AI + Drug Development," recommending key companies including United Imaging, Mindray, BGI, and WuXi AppTec [3][4]. Industry Performance Tracking - The pharmaceutical and biotechnology sector (SW) rose by 2.71% last week, outperforming the CSI 300 index, which increased by 1.19%. All sub-sectors within the industry experienced growth, with medical services leading at +6.51% [5][6]. - Notable individual stock performances included Dean Diagnostics (+46.29%) and Meinian Health (+31.58%), while stocks like Betta Pharmaceuticals saw declines of -11.36% [6]. Industry Dynamics and Key Company Tracking - The National Healthcare Security Administration released a list of key tasks for 2025, focusing on efficient medical insurance processes and direct settlements for collected drugs and consumables [7]. - Recent collaborations include Baiyang Pharmaceutical signing a commercialization agreement with Roche for the drug Rituximab, and Sanofi Biologics partnering with Baili Tianheng to explore new treatment potentials in oncology [11][12]. Industry Data Tracking - The retail terminal drug sales in China are projected to reach CNY 574 billion in 2024, with a growth rate of 3.7%, indicating a slowdown compared to previous years [8]. - The medical insurance fund's income for 2024 is reported at CNY 28,507.29 billion, reflecting a year-on-year growth of 5.00% [15][16]. - The domestic pharmaceutical manufacturing industry achieved a total revenue of CNY 25,298.50 billion in 2024, remaining stable compared to the previous year [17].