Kelun Biotech reported revenue of RMB950mn in 1H25, with a net loss of RMB145mn. Product sales reached RMB310mn, of which SKB264/sac-TMT contributed RMB302mn-34% of our prior full-year estimate. SKB264 is in the early stage of its ramp-up following approvals in late-line TNBC and EGFRm NSCLC in Nov-24 and Mar-25, respectively. Management continues to target FY25 sales of RMB800~1,000mn for SKB264. We expect that both approved indications of SKB264 will be included in the NRDL starting from early 2026. In 1H25, the Company recognized RMB641mn in collaboration revenue and R&D services, including the upfront payment from out-licensing SKB378 (TSLP) to NewCo WindwardBio and milestone payment from MSD. Selling expenses as % of drug sales was 58% in 1H25, reflecting the start of commercial activities post SKB264 approval. Cash and financial assets totaled RMB4.46bn, providing sufficient capital for commercialization and pipeline development.
　　SKB264 to release important China Ph3 results at ESMO meeting. The
　　Company plans to release the China Ph3 results of SKB264 in 2L EGFRm NSCLC and 2L HR+/HER2- BC at ESMO meeting in September. We think SKB264 could become the first TROP2 ADC to demonstrate an OS benefit in 2L EGFRm NSCLC, reinforcing its BIC profile. Recall that Trodelvy and Dato-Dxd did not deliver OS benefit in this setting. Beyond second line, we will closely track the Ph3 AVANZAR trial of Dato-DXd in first-line wild-type NSCLC (combo with Durvalumab and Carboplatin), where readout timing could shape class expectations for moving TROP2 ADCs into the frontline.
　　Efficient clinical progress of SKB264. In China, Kelun Biotech is actively
　　running multiple other Ph3 trials of SKB264, including 1) 1L PD-L1-negative TNBC (NDA submission anticipated in late 2025 or early 2026), 2) 1L PD- L1-positive NSCLC (NDA expected by late 2025), 3) 1L PD-L1-negative non-squamous NSCLC (to be fully enrolled in 2025), 4) 1L EGFRm NSCLC (NDA expected in 2026) and 5) 1L HR+/HER2- BC (post CDK4/6i).
　　Internationally, MSD has launched 14 global Ph3 trials spanning breast, lung, gastrointestinal, and gynecologic cancers-underscoring its strong conviction in SKB264. We are waiting to see if MSD will initiate a Ph3 trial in 1L NSCLC with PD-L1 <50%, which has large underlying market potential. We also expect MSD to explore combinations of SKB264 with PD- 1/VEGF bispecifics. n Second wave of innovation. Kelun Biotech is executing a multi-pronged ADC strategy across oncology and non-oncology, leveraging novel or dual payloads, bispecific ADCs, and next generation conjugation technologies.
　　SKB571, its first bispecific ADC, has shown an improved hematologic safety profile and is primarily aimed at frontline treatment of lung cancer, colorectal cancer, and gastrointestinal tumors. SKB107, a radiopharmaceutical drug conjugate (RDC), has also entered clinic. n Maintain BUY. We remain confident about SKB264’s global development.
　　We raise our DCF-based TP from HK$299.93 to HK$498.55 (WACC: 8.69%, terminal growth rate: 3.5%).