Biogen returned global rights of Orelabrutinib
　　On the heel of FDA partial hold of a ph2 trial of orelabrutinib in MS in Dec 2022, Biogen decided to terminate the license and collaboration agreement with InnoCare for orelabrutinib. Following the termination, InnoCare will regain all global rights with no impact on its recognized income. Besides potential impacts of FDA partial hold, we think Biogen’s decision might be also due to its program reorganization amid a challenging 2023E. Despite recent pullbacks, Innocare remains confident in orelabrutinib in MS and expects to publish the results from the interim analysis in 2Q23E. Should we see positive results in the upcoming ph2 interim analysis, we think it could help to recover some sentiment for orelabrutinib in MS and rebuild a foundation for potential new BD opportunities. That said, we reckon Biogen’s termination could bring up some uncertainties over orelabrutinib’s future registration trial in MS and commercialization in ex-China market. We thus lower the PoS assumption for orelabrutinib in MS to reflect recent pushbacks.
　　TYK2 assets could be the next re-rate catalysts
　　Recent global progress on TYK2 class unfolds both the scientific and therapeutic merits, 1) On Sep 9th 2022, FDA approved BMS Sotyktu (Deucravacitinib), the FIC TYK2 allosteric inhibitor, for moderate-to- severe plaque psoriasis. BMS expects Sotyktu could reach USD4bn at peak; 2) Takeda, on Dec 13th 2022, inked a licensing deal (USD6bn biobucks, o/w USD4bn upfront) with Nimbus Therapeutics for a mid- stage allosteric TYK2 inhibitor, NDI-034858. Innocare now has two TYK2 assets (ICP-332, ICP-488) in its pipeline. Noting ICP-488 is one of the five clinical-stage allosteric TYK2 inhibitors globally, we think ICP-488 is well-poised for potential BD opportunities to unlock its value.
　　Maintain BUY, SOTP-based TP cut to HKD22
　　We cut SOTP-based TP to HKD22 from HKD31.2 to reflect a lower PoS assumption for orelabrutinib in MS in ex-China market. Major Orelabrutinib catalysts: 1) sNDA approval for r/r WM and MZL in China in 1H23E; 2) NDA submission to FDA for r/r MCL by 23E; 3) ph2 interim analysis for in MS in 2Q23E. Investment risks: clinical delay/failure, lower-than-expected sales, regulatory risks, NRDL-driven price cut risk.