Last week, Akeso reported significant progress in drug development, including (i) NMPA NDA approval of ebdarokimab (AK101, IL-12/23) for plaque psoriasis, (ii) positive Phase III results (AK112-306/HARMONi-6) for ivonescimab (AK112, PD-1/VEGF) + chemo vs. tislelizumab + chemo in 1L sq-NSCLC, (iii) FDA NDA approval of penpulimab (AK105, PD-1) in 1L nasopharyngeal carcinoma (NPC) in combination with chemo and as monotherapy in 3L NPC, and (iv) NMPA sNDA approval of AK112 monotherapy for 1L PD-L1+ NSCLC. This milestones underscore Akeso’s strong execution capabilities. We revised up our TP to HK$110 to reflect the clinical development delivery and maintain BUY rating.
Key Factors for Rating
First interim OS analysis of AK112 vs. Keytruda revealed: Notably, NMPA approved the second indication of AK112 based on the results of HARMONi-2 or AK112-303 that evaluated AK112 mono against Keytruda mono in 1L PD-L1+ NSCLC. This approval positions AK112 for this year NRDL negotiation, ahead of our expectations. Akeso also announced the results of the first interim overall survival (OS) analysis, showing a clinically meaningful hazard ratio of 0.777, offering a ~22-23% relative risk reduction in death over Keytruda, but not statistically significant, leading to 36% of Summit Therapeutics (SMMT US) share decline last Friday. In our view, the share price decline of Summit was overdone primarily due to the high expectation on the OS HR. This was just the first interim analysis, conducted at 39% data maturity with a nominal alpha level of 0.0001. We deem the results consistent with our expectation and below the 0.8 threshold as clinically meaningful. In additional, last year, Akeso reported an outstanding progression-free survival (PFS) HR of 0.51, a clinically meaningful benefit demonstrated across clinical subgroups, including those with PD-L1 low expression, PD-L1 high expression, squamous and non-squamous histology. We await further OS curve as well as the second OS interim analysis.
AK112-306 PFS success: in the phase III trial of AK112-306/HARMONi-6, AK112 plus chemo has demonstrated strong positive results for 1L sqNSCLC against tisleilizumab on PFS, regardless of PD-L1 expression. The trial enrolled 532 participants, among which approximately 63% were central type of squamous cell carcinoma, which is consistent with real-world patient populations. This marks the first Phase III NSCLC trial to show statistically significant PFS improvement over a PD-(L)1 inhibitor + chemo. The potential approval in China given the primary end-point was met will help AK112 to capture the broader chemo combo market and enhance investors’ confidence on HARMONi-3 (+chemo vs. Keytruda +chemo in 1L NSCLC in overseas).
Approval of AK105 by FDA as milestone: Following Beigene’s and Junshi’s, Akeso’s AK105 was the third domestically developed PD-1 inhibitor approved by FDA. FDA has approved AK105 in combination with cisplatin or carboplatin and gemcitabine for the 1L NPC and mono for 3L NPC. While we do not expect sales contribution from AK105 in overseas due to small patient populations and commercialisation challenges, the approval validates Akeso’s clinical, regulatory, and compliance capabilities.
Valuation
With AK101 and AK112 approvals, and AK112-306’s PFS success, we raised POS estimates for these indications and AK112’s potential in overseas NSCLC market. Overall, we revised up TP to HK$110 and maintain BUY rating.
Key Risks for Rating
(i) Failure of regulatory filing; (ii) slower-than-expected sales ramp-up of new drugs; and (iii) failure of major clinical trials.