1H25 revenue was largely in line, but bottom line fell short due to low GPM and increased operating expenses. The standout positive was the announcement that its key drug, AK112, demonstrated a significant overall survival benefit in HARMONI-A trial. Akeso’s robust clinical progress, combined with an extensive pipeline, underpins our positive outlook on it. We uplifted our peak sales forecast for AK104 and AK112 in China to RMB4.5bn and RMB8bn, respectively. We have also raised our POS-adjusted peak sales forecast for AK112 overseas to US$7bn.
　　Derived new TP of HK$185. Reiterate BUY.
　　Key Factors for Rating
　　1H25 bottom line slightly missed: Revenue was RMB1.41bn (+38% YoY), consisting of drug sales of RMB1.4bn (+49% YoY and +31% HoH), driven by NRDL inclusion of cadonilimab (AK104, PD-1/CTLA-4, 2L cervical cancer) and ivonescimab (AK112, PD-1/VEGF, 2L EGFRmut NSCLC), and license income of RMB9.9m, largely in line with our expectation. However, drug gross margin decreased by 13ppts to 79%, mainly due to price cuts on AK104 and AK112 following their NRDL inclusion. Bottom line fell short with net loss widening from RMB239m to RMB588m, due to (i) lower-than-expected GPM, (ii) increased R&D expenses, and (iii) loss on the equity investment in Summit Therapeutics (SMMT US, NR).
　　HARMONI-A study met its endpoint: The most significant surprise from 1H25 results was Akeso’s announcement that AK112’s HARMONi-A study (in 2L EGFRmut NSCLC) reached its OS endpoint, confirming that AK112+chemo is able to deliver superior OS compared to standard chemotherapy. Beyond 1L NSCLC (mono/+chemo) and 2L EGFRmut NSCLC, Akeso has initiated 7 more phase III trials in China for AK112, covering 1L BTC, 1L PD-L1+ HNSCC, 1L PD- L1- TNBC, 1L PDAC, 1L CRC, 1L ES-SCLC, and 2L PD-(L)1i failed NSCLC. Patient recruitment for the 1L BTC trial (vs. durvalumab + chemo) has been completed and the data readout could represent a key catalyst.
　　Potential to foray overseas market: The FDA approval of penpulimab (PD- 1) in 1L and 3L NPC demonstrates Akeso’s ability to develop, register and obtain approval for novel therapeutics globally. Furthermore, Akeso has initiated a global registrational Phase II MRCT clinical trial of AK104+lenvatinib for 2L HCC (COMPASSION-36), and has completed the patient enrollment in the global Phase II MRCT of AK117 (CD47) +azacitidine in 1L MDS.
　　Key catalysts in 2H25-2026 include (i) data updates of HARMONi (AK112 in 2L EGFRmut NSCLC in overseas) at WCLC; (ii) data publication of HARMONi-6 (AK112 +chemo vs tisleizumab in 1L sqNSCLC) at ESMO, (iii) OS data update of HARMONi-A trial, (iv) data readout of AK112-309 (+chemo vs. versus durvalumab+ chemo in 1L BTC), and (v) NDA submission of gumokimab (AK111, IL-17) in ankylosing spondylitis and Manfidokimab (AK120, IL-4Rα) in atopic dermatitis.
　　Eyes on NRDL negotiation in the YE2025: Akeso has 4 drugs with 5 indications to lobby in the YE2025 NRDL negotiation, including ivonescimab (1L PD-L1+ NSCLC), cadonilimab (1L gastric cancer and 1L cervical cancer), ebdarokimab (AK101, IL-12/23) (plaque psoriasis) and ebronucimab (AK102, PCSK9) (hypercholesterolemia).
　　Key Risks for Rating
　　Failure of regulatory filing; (ii) slower-than-expected sales ramp-up of new drugs; and (iii) failure of major clinical trials
　　Valuation
　　Post results, we have fine-tuned our 2025-27 sales forecast for AK104 and AK112, and decreased our forecasts for PD-1 and non-oncology drugs due to fierce competition. We also have edged down the GPM assumption to reflect the impact of price cut. Although we cut short-term profitability forecasts of Akeso, we raised our long term forecasts beyond 2027. We have uplifted our peak sales forecast for AK104 and AK112 in China to RMB4.5bn and RMB8bn respectively, considering their indication expansion-particularly for AK112, which is expanding into cold tumours with five ongoing Phase III trials for 1L treatment.
　　We have also raised our POS-adjusted peak sales forecast for AK112 overseas to US$7bn. After updating our risk-free rate and market premium to 3.3% and 6.7% and rolling over our DCF model, we derive a new TP of HK$185 and reiterate our BUY rating. We favour Akeso's comprehensive pipeline. Its early- stage bispecific antibody (BsAb) and ADC products, such as AK138D1 (HER3 ADC), AK146D1 (Trop2/Nectin4 ADC), and AK139 (IL-4Rα/ST2) and potential overseas contributions from AK104 and AK117 are not yet reflected in our target price.