A value laggard
At ASCO2020, Co. and its partner Blueprint reported promisingclinical data across multiple clinical assets
With solid R&D delivery, we think CStone is a clear laggard inbiotechs （stock fell 16% YTD vs. biotech peer’s avg. ~30% YTD gain）
Maintain BUY on Co.’s numerous clinical and regulatory catalystsin 2020E, and rNPV-based TP unchanged at HKD19.83Pralsetinib （RETi） gets FDA priority reviewAt ASCO2020, pralsetinib presented positive registrational data for RET+NSCLC from ARROW trials （n=116）。 The data shows 61% ORR inpatients （pts） received platinum-based chemotherapy and 73% ORR（12% CR） in treatment-nave pts, along with consistent well-toleratedsafety profile. The median DoR was not reached （95% CI: 11mo, notreached） and the 6mo DoR was 86%. The FDA and EMA have acceptedpralsetinib’s NDA for locally advanced or metastatic RET+ NSCLC. Inaddition, FDA has granted priority review with a PDUFA data on Nov. 23.
　　We are optimistic about its approval as the data shows comparableresults to FDA’s lately accelerated approval of Lilly’s selpercatinib forRET+ NSCLC and thyroid cancer. We believe the potential FDA’sapproval should enhance its regulatory outlook in China.
　　CS1001 eyes on top-line data for 1L NSCLC in 2H20ECo. also released updated efficacy data of CS1001’s ph1b study （n=41）for 1L nsq-NSCLC （47.6% ORR, 6.5mo mPFS, 8.7mo mDoR） and 1L sq-NSCLC （75.0% ORR, 8.4mo mPFS, 6.4mo mDoR） with a benign safetyprofile. Co. has completed enrollment for ph3 study and expect toannounce top-line data in 2H20E. We think the positive ph1 data in both1L sq- and nsq-NSCLC should enhance its commercial outlook forcompetitor to domestic PD-1 names, in particular in lung cancer space.
　　Meanwhile, we believe the promising r/r-ENKTL data at ASH19 shouldhas meaningfully differentiation over rivals in NMPA’s review process.
　　Catch the laggards in the biotech space
　　Co. expects 1 NDA approval （ivosidenib） and 5 NDA submissions forthree core assets （PD-L1, avapritinib and pralsetinib） in 2020E. We thusadvise investors to start paying attention to value laggards in the biotechspace, which is due to rerate. We maintain BUY rating on CStone’sleading clinical stage I/O backbone candidates, extensively experiencedin-house clinical team, and strong BD capabilities.