InnoCare Pharma reported 2022 revenue of Rmb625m （-40% YoY） and net loss of Rmb887m （vs net losses of Rmb65m in 2021）， in line with our expectation. Sales of orelabrutinib in 2022 increased 164% YoY to Rmb566m. Excluding the one-off items, its adjusted net losses reached Rmb474m （vs adjusted net profit of Rmb3m in 2021）。 Its R&D expenses reached Rmb639m （+29% YoY, excluding the license-in upfront payment） in 2022. As of end-2022, the company has net cash of over Rmb9.0bn on hand after listed on Shanghai Sci-Tech Innovation Board in September 2022. Given the collaboration terminated with Biogen for orelabrutinib’s indication of multiple sclerosis （MS） and other autoimmune diseases, we revise down our EPS forecast from -Rmb0.29 to -Rmb0.35 in 23E, from -Rmb0.18 to -Rmb0.28 in 24E and forecast -Rmb0.19 in 25E. Based on the DCF model, we cut our target price from HK$18.0 to HK$12.0. Considering the multiple catalysts in 23E and orelabrutinib’s potentials in autoimmune diseases, with 40% upside, we maintain our BUY rating.
　　Strong sales performance of Yinuokai （orelabrutinib） in 2022. Sales of orelabrutinib increased 164% YoY to Rmb566m in 2022. In 2022, orelabrutinib’s sales team covers over 1,500 hospitals and over 300 cities. We expect the fast sales ramp up of orelabrutinib with the NRDL inclusion. As for other oncology indications under development, it is now under phase III registrational trials in China for the treatment of 1L CLL/SLL, 1L MCL and 1L DLBCL-MCD. In addition, apart from the approved indications of r/r CLL/SLL and r/r MCL, orelabrutinib’s NDAs for r/r WM and r/r MZL have been accepted by the NMPA in 2022, and r/r MZL is expected to receive the NMPA’s approval in 23E. In addition, the company expects to submit the NDA for orelabrutinib for the treatment of r/r MCL in the US in 23E. Meanwhile, tafasitamab （CD19） has been approved for the urgent clinical use in the Hainan Province and has received the NDA approval in HK, which is expected to submit the NDA in mainland China 23E.
　　Orelabrutinib’s collaboration with Biogen terminated. In February, the company announced to terminate the collaboration with Biogen for the global development and commercialization of orelabrutinib for the treatment of multiple sclerosis （MS） and other autoimmune diseases. Recently, the company announced that the 12-week interim analysis topline data of the MS global Phase II trial had met the primary endpoint, which significantly reduced disease activity in relapsing MS patients, with the 80 mg QD group showed the highest reduction of 92.1%. In terms of the development of other autoimmune diseases, orelabrutinib is now under the phase IIb clinical trial for the SLE and under phase II clinical trial for ITP.
　　Comprehensive pipeline on liquid cancer, autoimmune diseases and solid tumors. As for the liquid cancer pipeline, InnoCare also has other pipeline products under development, such as ICP-B02 （CD3 x CD20）， ICP-248 （BCL-2）， and ICP-490 （E3 Ligase）。 In terms of its pipeline of autoimmune diseases, ICP-332 （TYK2-JH1） is under the phase II trial for atopic dermatitis （AD）。 In addition, ICP- 488 （TYK2- JH2） is under phase I trial and is expected to enroll psoriasis patients and no DLT observed so far. Regarding the pipeline of solid tumors, ICP-192 （gunagratinib, pan-FGFR inhibitor） is under phase II trial for CCA and UC, and head and neck cancer （first patient dosed in February 2023）。 In addition, the phase II dose expansion study of ICP-723 （zurletrectinib, pan-TRK） is ongoing for NTRK fusion-positive cancers.
　　Maintain BUY. Given the collaboration terminated with Biogen for orelabrutinib’s indication of multiple sclerosis （MS） and other autoimmune diseases, we revise down our EPS forecast from - Rmb0.29 to -Rmb0.35 in 23E, from -Rmb0.18 to -Rmb0.28 in 24E and forecast -Rmb0.19 in 25E.
　　Based on the DCF model, we cut our target price from HK$18.0 to HK$12.0. Considering the multiple catalysts in 23E and orelabrutinib’s potentials in autoimmune diseases, with 40% upside, we maintain our BUY rating.
　　Risks: lower-than-expected sales of key product; R&D failure of key pipeline.