Ascentage announced 1H23 revenue of Rmb143m （+49% YoY） and net loss of Rmb402m （vs Rmb407m in 1H22）， in line with our expectation. The strong revenue growth is mainly driven by the sales ramp up of key product, Nailike （olverembatinib）， with the accumulated sale of Rmb304m since NMPA’s approval in November 2021. Its R&D expense reached Rmb310m （-9% YoY） in 1H23. As of end of June, 2023, the company has Rmb1.6bn cash on hand. Considering the further R&D investments, we lower our EPS forecasts from -Rmb2.87 to -Rmb2.97 in 23E, from -Rmb2.06 to -Rmb2.16 in 24E and from -Rmb1.72 to - Rmb1.73 in 25E. We maintain our target price of HK$29.3. With 21% upside, we maintain our BUY rating.
　　Sales ramp up of HQP1351 （olverembatinib） with the further R&D development. Nailike （olverembatinib） was added into the 2022 version of NRDL as a type 2 drug, which has been implemented from March 2023. With the rising affordability after the NRDL inclusion, sales of olverembatinib increased 37% YoY in 1H23. In July 2023, it has been received the NMPA’s approval for phase III pivotal study of olverembatinib’s combo with chemo vs imatinib’s combo with chemo in newly diagnosed Ph+ ALL patients. In addition, the company submitted the NDA of olverembatinib for the treatment of CML-CP who are resistant and/or intolerant to first-and second-generation TKIs to the NMPA in July 2022, which is expected to receive the approval in 23E. In addition, the company expects to have further discussion of the global pivotal registrational study of olverembatinib with the FDA in 23E.
　　Approval of global registrational trail of lisaftoclax （APG-2575）。 Lisaftoclax （APG-2575） is the first domestic Bcl-2 selective inhibitor to enter clinical trials in China. It is now under 19 Phase Ib/II clinical studies covering blood tumors, such as chronic lymphocytic leukemia （CLL）， non-Hodgkin’s lymphoma （NHL）， acute myeloid leukemia （AML）， multiple myeloma （MM）， and solid tumors. Over 600 patients have been treated with lisaftoclax （APG-2575）， including more than 300 patients with CLL/SLL. In addition, the company has received five ODDs from FDA for lisaftoclax. In August 2023, the company has received the approval to initiate global registrational Phase 3 clinical trial for lisaftoclax in previously treated patients with CLL/SLL from the FDA. The company expects to complete the enrollment for the single-arm pivotal phase II study of lisaftoclax on R/R CLL/SLL patients in 23E and submit the NDA to the NMPA in 1H24E. In addition, the company expects to commence the global registrational Phase 3 clinical trial for lisaftoclax in previously treated patients with CLL/SLL in 23E.
　　Pipeline products under development. Alrizomadlin （APG-115, MDM2-p53 inhibitor） is under phase II trials for melanoma and other solid tumors （combo with IO）， ACC and AML/MDS. In the US, APG-115’s monotherapy is under a phase Ib/II clinical trial （collaboration with Merck） in patients with unresectable or metastatic melanomas. In addition, APG-115 is under a phase Ib/II trail for mono and combo with azacytidine in patients with r/r AML, chronic myelomonocytic leukemia （CMML） or MDS. As for the development in China, APG-115’s combo with PD-1 （JS001）， for the treatment of patients with advanced liposarcoma （LPS） or other advanced solid tumors, is now under the phase Ib/II trail. In addition, pelcitoclax （APG-1252） is now under a Phase Ib study of combo with osimertinib in patients with EGFR mutant NSCLC and a Phase Ib study of monotherapy in neuroendocrine tumors from pancreas or other parts of the gastrointestinal tract in China. Besides, the company expects to release the updated study results of pelcitoclax’s combo with osimertinib in patients with EGFR-mutant NSCLC at ESMO in October 2023.
　　Maintain BUY. Considering the further R&D investments, we lower our EPS forecasts from -Rmb2.87 to - Rmb2.97 in 23E, from -Rmb2.06 to -Rmb2.16 in 24E and from -Rmb1.72 to -Rmb1.73 in 25E. We maintain our target price of HK$29.3. With 21% upside, we maintain our BUY rating.
　　Risks: Delay of key pipeline; lower-than-expected product sales.