InnoCare recorded total revenue of RMB625mn in FY22, including RMB566mn sales from orelabrutinib (+164% YoY vs RMB215mn in FY21). Sales of orelabrutinib in 4Q22 was RMB166mn, slightly lower compared to RMB183mn in 3Q22 mainly due to COVID-19 interruptions. The strong sales growth of orelabrutinib in FY22 was mainly driven by the increasing market penetration of the drug after NRDL inclusion effective since Jan 2022. InnoCare was able to continuously improve its cost efficiency. The selling costs/ R&D costs/ admin costs as a percentage of total revenue decreased to 72%/ 96% / 27% in 2H22, from 86%/ 111%/ 32% in 1H22, respectively. Excluding license-in expenses, the R&D costs in FY22 increased 29% YoY to RMB639mn from RMB496mn in FY21.
　　InnoCare recorded RMB894mn net loss in FY22. As of end-2022, the Company has RMB9.1bn cash on hand, sufficient to support the Company’s R&D investments.
　　Positive PoC data of orelabrutinib for autoimmune diseases. The initial　data of Ph2 trial (NCT04711148) of orelabrutinib in R/R MS was released.　With 136 patients’ data analysed, the primary outcome measure at the interim analysis, relative reduction for the cumulative number of new GdE+ T1 MRI brain lesions within Week 12 vs placebo, was 71.1% in the orelabrutinib 50mg QD group (p=0.0238), 80.8% in the 50mg BID group (p=0.0032), and 92.1% in the 80mg QD group (p=0.0006), indicating the trend of dose-dependent improvement. The 92.1% reduction in the 80mg group seemed to be better than the results of tolebrutinib and evobrutinib (-85% and -70%, respectively) in cross-trial comparisons, thanks to the superior plasma exposure and brain penetration of orelabrutinib, in our view. As the primary endpoint of the study has been met, the Company plans to cease further patient enrolment, while will continue patient follow-up with a plan to release the 24-week treatment results in May 2023. Meanwhile, the Company will continue to discuss with FDA regarding lifting the partial study hold and designing a Ph3 MRCT trial.For ITP, positive PoC data of orelabrutinib was also released - in 22 patients with previous response to glucocorticoids or intravenous immunoglobulin, 75.0% (6 out of 8) patients at the 50mg arm achieved the primary endpoint.We see the potential of orelabrutinib for the treatment of various autoimmune diseases, including MS, SLE, ITP and NMOSD.
　　New commercial approvals to further drive revenue growth. With priority　review schedule, orelabrutinib is expected to be approved for r/r MZL in 1H23 (sNDA in Aug 2022), becoming the first BTKi in China for the treatment of r/r MZL. In the US, the Company has completed the patient enrolment for the Ph2 registrational trail for r/r MCL which is likely to be the first indication of orelabrutinib to be approved in the US. The bridging study of tafasitamab in mainland China, which has been half-enrolled, is expected to be finished this year, and the Company expects to file the BLA of tafasitamab in mainland China by end-2023 or early 2024.
　　Maintain BUY. We expect orelabrutinib to continue its strong sales momentum. We maintain our TP unchanged at HK$10.84 (WACC: 11.37%, terminal growth rate: 3.0%).