Core Viewpoint - The company has received further validation for the efficacy and safety profile of its CLDN18.2 ADC, leading to an upward revision of long-term sales forecasts and a positive outlook on its business development opportunities abroad [1][2] Group 1: CLDN18.2 ADC Development - The company announced that its CLDN18.2 ADC ATG022 has received breakthrough therapy designation in mainland China for the treatment of 3L+ CLDN18.2 positive, HER2 negative gastric/gastroesophageal junction adenocarcinoma [1] - Latest data from the I/II phase CLINCH study shows an overall response rate (ORR) of 40% for both the high-expression groups (IHC2+ >20%) at doses of 2.4mg/kg and 1.8mg/kg, and 33% for the low/very low expression group (IHC 2+ ≤20%) at 1.8-2.4mg/kg [1] - The disease control rates (DCR) were reported at 90%, 84%, and 50% for the respective groups, indicating an improvement over previously published small sample data [1] Group 2: Competitive Advantage - The median progression-free survival (PFS) for the high-expression group was reported at 6.97 months, significantly better than competitors AZD0901 and IBI343, which had PFS of 4.8 months and 5.5 months respectively [1] - The safety profile for the 1.8mg/kg dose group is promising, with grade 3 or higher treatment-related adverse events (TRAE) occurring in less than 20%, and no occurrences of ocular toxicity or interstitial lung disease (ILD) [1] Group 3: Future Development Plans - The company's future development plans for gastric cancer include: 1) Initiating a 3L monotherapy trial for high-expression patients; 2) Exploring conditional approval for 3L low/very low expression; 3) Combining with K drug for 2L treatment in PD-L1 positive populations; 4) Combining with K drug and chemotherapy for 1L treatment in PD-L1 positive populations [2] - Management maintains a global peak sales forecast exceeding $5 billion for the product [2] Group 4: Financial Projections and Valuation - The company has adjusted its financial forecasts for 2025-2027 based on the latest performance data and product launch timelines, increasing long-term and peak sales projections by nearly 30% [2] - The DCF target price has been raised to HKD 8.8, corresponding to a target market value of approximately HKD 6 billion and a peak sales multiple of 2.1 times [2]

Investment Rating - The report maintains a "Buy" rating for the company 德琪医药 (6996 HK) with a target price of HKD 8.80, indicating a potential upside of 38.3% from the current price of HKD 6.36 [6][12]. Core Insights - The latest data on CLDN18.2 ADC confirms its superior efficacy and safety profile compared to potential competitors, leading to an upward revision of long-term sales forecasts and a positive outlook on the company's business development (BD) prospects [2][6]. - The differentiated second-generation TCE platform is significantly undervalued, with promising product and collaboration opportunities anticipated [2][6]. - The company is expected to achieve peak sales exceeding USD 5 billion globally, supported by ongoing clinical developments and regulatory approvals [6][7]. Financial Forecasts - Revenue projections for 2025E, 2026E, and 2027E are set at RMB 123 million, RMB 157 million, and RMB 253 million respectively, with significant growth anticipated in subsequent years [5][13]. - Gross profit margins are expected to remain high, with a gross margin of 81.9% in 2025E, slightly declining to 84.9% by 2027E [5][15]. - The company is projected to incur net losses of RMB 210 million in 2025E, narrowing to RMB 173 million by 2027E [5][13]. Market Performance - The stock has shown remarkable performance with a year-to-date change of 878.46%, reflecting strong investor interest and market confidence [4][12]. - The 52-week high and low for the stock are HKD 7.28 and HKD 0.54 respectively, indicating significant volatility and growth potential [4][12]. Clinical Development - The company has received breakthrough therapy designation for its CLDN18.2 ADC ATG022 for the treatment of CLDN18.2 positive, HER2 negative gastric cancer, with promising clinical trial results showing an overall response rate (ORR) of 40% in high-expression groups [6][7]. - Future development plans include various clinical trials aimed at expanding the indications and enhancing the product's market presence [6][7].