Once again received Merck's USD 85 million exercise fee, and the potential of ABBISKO-BFIC/BIC varieties BD continues to be released

In 2024, the reason why ABBISKO-B (02256) was able to achieve full-year profitability for the first time is directly driven by the company's "high upfront payment, high milestone, high revenue share" BD deal with the well-known multinational pharmaceutical company Merck regarding its core product Pimicotinib (Pimicotinib/ABSK021), which resulted in a $70 million upfront payment.

On April 1st of this year, ABBISKO officially announced again: Merck has exercised its global commercialization option for Pimicotinib (ABSK021) according to the licensing agreement signed by both parties in December 2023, with an exercise fee of $85 million. This clearly demonstrates Merck's sincerity in cooperation and its positive attitude towards developing the global commercialization market for Pimicotinib.

According to Zhito Finance APP, relying on its strong innovation capabilities and BD transactions, ABBISKO successfully achieved innovative revenue and turned losses into profits in 2024, generating abundant cash flow and conveying expectations for sustainable scaled profitability through its annual report performance. Additionally, with the exercise payment made by Merck, the BD cooperation between the two parties has brought ABBISKO over $150 million in cash.

According to the agreement, ABBISKO will also receive R&D milestone payments and sales milestone payments from Merck, with potential total payments reaching up to $606 million, not including double-digit net sales revenue sharing. This undoubtedly provides the company with considerable financial support, shortens the development cycle, and paves the way for the successful launch of multiple FIC/BIC blockbuster products in ABBISKO's future innovative R&D pipeline.

Strong Alliance Enters Next Development Stage

The "main event" of the cooperation between ABBISKO and Merck is undoubtedly the global development and commercialization of Pimicotinib.

As the first CSF-1R inhibitor independently developed in China to enter global Phase III clinical trials for TGCT, Pimicotinib has already received breakthrough therapy designation from regulatory agencies in multiple countries including China, the United States, and Europe. As a potential global BIC drug in the CSF-1R inhibitor track, Pimicotinib not only performs outstandingly in the TGCT indication but also has greater imaginative space in various other indications such as cGVHD.

The main reason Merck is interested in Pimicotinib is due to the drug's outstanding potential as a "billion-dollar molecule," with enormous value continuously being explored in global commercialization potential.

According to Zhito Finance APP, Pimicotinib is primarily used to treat TGCT that is not suitable for surgery. The National Organization for Rare Disorders reports that the incidence of TGCT is approximately 43 per million.

Currently, the main competitor in the market is Daiichi Sankyo's FIC product Pexidartinib, which was approved for marketing in 2019 as a systemic therapy for severe TGCT that cannot be improved by surgery, but this drug has serious hepatotoxicity and has received an FDA "black box warning." Nevertheless, Pexidartinib's revenue in 2023 still reached 5.3 billion yen.

In comparison, ABBISKO's Pimicotinib achieves the best efficacy for tenosynovial giant cell tumors while significantly improving safety.

The recently released topline results of the global Phase III MANEUVER study show that Pimicotinib's objective response rate (ORR) reached 54.0%, significantly better than the 3.2% in the placebo group (p< The treatment of pimasertib (0.0001) has shown good tolerability with once-daily oral administration, and the proportion of patients who discontinued treatment due to treatment-related adverse events is extremely low. Additionally, the company updated the long-term follow-up data from the Phase 1b clinical study of pimasertib: the best overall response rate (ORR) is 85.0%, and the median duration of treatment has reached 20 months, further improving from the previous 25-week data.

Moreover, at the American Society of Hematology (ASH) annual meeting last December, the company presented preliminary positive Phase II research results of pimasertib for treating cGvHD to the global academic community. The data showed that the ORR in the 20mg dose group reached 64%, with multi-organ responses observed.

Currently, the pimasertib project in collaboration with Merck BD is progressing smoothly. After the topline results of the global Phase III study are released, pimasertib may submit an NDA application this year, with commercialization imminent. Merck's decision to exercise options at this critical juncture before the commercialization of pimasertib indicates that the collaboration between the company and Merck BD has entered a new development phase, also reflecting Merck's "must-win" attitude and confidence in the future global sales of pimasertib.

Commercialization of FIC/BIC Products and BD Potential Highlighted

In recent years, the management of the company has been using "real cash" to reward investors through a cancellation-style stock repurchase. On March 3 of this year, the board of directors approved the use of HKD 200 million to repurchase shares in the market, demonstrating management's confidence in the company's future development. Following this announcement, the company's stock price surged, reaching an intraday high of HKD 8.98 on March 28, an increase of over 40% from the opening price on March 3.

Subsequently, CICC released a research report maintaining a "outperform industry" rating for HeYu-B (02256) and raised the company's target price to HKD 9.2. As the company's stock price continues to rise, market expectations for HeYu's "entry into the Hong Kong Stock Connect" are also increasing.

It is not difficult to see the confidence of the company's management and market investors in HeYu's future development. This confidence is primarily based on the potential for commercialization and BD of the company's innovative R&D pipeline.

According to Zhitong Finance APP, investors currently prefer "more certain companies" in the innovative pharmaceutical investment space in Hong Kong stocks, and what HeYu lacks the least at this stage is "certainty."

From the perspective of the innovative R&D pipeline, HeYu focuses on precision oncology and immunotherapy, covering popular targets such as EGFR, FGFR, CSF-1R, and KRAS. The company has established a globally competitive differentiated innovative R&D pipeline that includes 19 candidate drugs, many of which have "best-in-class" or "first-in-class" potential.

Taking another major product of HeYu, ipatasertib (ABSK011), as an example, ipatasertib has achieved a leading position in the global small molecule pipeline and is expected to become a Global FIC/BIC drug due to its excellent efficacy and safety.

From a market perspective, according to GlobalData, the global liver cancer market is expected to be around USD 5.3 billion by 2029, with immunotherapy accounting for approximately 72.2% of the market share, reaching USD 3.8 billion. Referring to the previously launched small molecule kinase inhibitor sorafenib, its ORR for liver cancer indications is less than 20%, yet its global sales still exceeded USD 500 million in 2021, reflecting the enormous unmet treatment needs in the current market Compared to other FGFR4 targeted drugs, Ipagutinib has advantages in compliance and cost-effectiveness, and is expected to achieve a higher sales ceiling in domestic and international markets due to its strong BIC attributes, further increasing the certainty of becoming a "billion-dollar molecule," with potential heavyweight BD value.

As mentioned above, several innovative drugs under development by hello Group possess FIC/BIC potential, indicating that the company has a continuously expanding pipeline of products with significant BD potential.

On March 28, hello Group announced that it would present four research results at this year's AACR annual meeting, including noteworthy PRMT5*MTA inhibitors and pan-KRAS inhibitors with substantial BD potential.

Taking the PRMT5*MTA inhibitor ABSK131 as an example, in recent years, synthetic lethal targets have sparked a global research frenzy, with many multinational corporations (MNCs) laying out plans for the PRMT5 target. However, the development of first-generation products has not progressed smoothly due to compound defects and significant side effects.

Among the new generation of PRMT5-targeted drugs being developed globally, ABSK131 shows strong BIC potential. Previous preclinical studies have demonstrated that ABSK131 has good drug metabolism and pharmacokinetic properties when administered orally, and it also has the ability to cross the blood-brain barrier. In terms of progress, the IND applications for hello Group's ABSK131 were approved by the U.S. FDA and China's CDE in December last year and March this year, respectively, gaining recognition from global authoritative institutions.

Currently, only the PARP inhibitor field has products approved for market among synthetic lethal targets, but it has seen the emergence of AstraZeneca's Lynparza, a blockbuster with sales exceeding $2.5 billion. Recently, Bayer announced the introduction of Puhe Pharmaceutical's PRMT5 inhibitor, highlighting the potential market potential and BD value of synthetic lethal targets.

In addition to the PRMT5*MTA inhibitors, the pan-KRAS inhibitors disclosed by hello Group at this AACR conference are also worth attention. As one of the popular cancer targets in recent years following PD-1, the pan-KRAS target has attracted international industry attention due to its broad market prospects. Previously, Revolution supported a market value of over $7 billion with the phase II data of pan-KRAS RMC-6236.

Currently, hello Group is not only at the forefront of developing pan-KRAS inhibitors but is also exploring the direction of KRAS inhibitor resistance, with innovative research on KRASG12D small molecule inhibitors and other products that also have the potential for significant BD transactions.

Summary

All of the above reflects hello Group's certainty in global commercialization and differentiated original research innovation. With further collaboration endorsements from Merck, the company is expected to continue boosting its stock price with multiple potential FIC/BIC products in its pipeline, significantly shortening the capital circulation cycle for investors, enhancing their investment willingness and confidence, and laying a solid foundation for continued long-term holdings in hello Group