Strong SKB Bio Performance, with sac-TMT and Next-Generation ADC Catalysts Approaching, but Meaningful Valuation Downside Remains

Overview

The report focuses on the earnings call of SKB Bio, a controlled subsidiary of Kelun Pharmaceutical. The key conclusion is that sac-TMT commercialization growth and improved cost efficiency strengthen expectations for an earnings inflection point at the subsidiary, while multiple lung cancer clinical data releases, indication expansions, and next-generation ADCs entering clinical development represent upcoming catalysts.

Core views

SKB Bio's sales growth, gross margin, and selling expense ratio all indicate improved commercialization efficiency, and the analyst believes it could reach breakeven by FY27 or earlier. sac-TMT's indication expansion in China, combination development with SKB118, and global clinical validation will determine medium-term value realization. Meanwhile, the company is advancing its next-generation ADC pipeline through bispecific, dual-payload, and immune-activating technologies. Despite numerous fundamental catalysts, the report's Underweight rating and Rmb29.00 target price continue to reflect a cautious view on the current valuation.

Analysis framework

The report assesses the subsidiary's earnings-call disclosures, product sales and expense-ratio metrics, clinical development timeline, and the competitive landscape for first-line NSCLC among peers. Valuation primarily uses DCF, with a sum-of-the-parts approach as a cross-check for the holding-company discount.

Methodology notes

• Valuation methodsDiscounted Cash Flow Model (DCF)

  Base-case valuation

  DCF is used because the company has achieved positive free cash flow and has mature, sustainably profitable operations; assumptions include an 8.7% WACC, 9.1% cost of equity, and 3% terminal growth rate.

• Valuation methodsSum-of-the-Parts (SOTP)

  Holding-company discount

  After deducting the infusion business, generics, Chuanning's market capitalization, and Kelun Biotech's value, the implied holding-company discount is approximately 51%; the infusion business is valued at 15x P/E and generics at 12x P/E.

• FundamentalsEarnings and Clinical Catalyst Tracking

  Sales growth, profitability, and clinical milestones

  Fundamental changes are assessed using SKB Bio product sales, gross margin, selling expense ratio, and clinical data readouts and regulatory progress for sac-TMT and next-generation ADCs.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Sichuan Kelun Pharmaceutical Co Ltd（002422.SZ）

  Parent company and covered stock

  Strengths

  Owns 55.1% of SKB Bio and can benefit from sac-TMT ramp-up, improved subsidiary profitability, and advancement of the next-generation ADC pipeline.

  Weaknesses

  Valuation faces a holding-company discount, while the traditional infusion, generic-drug, and API businesses may also weigh on overall performance.

  Comparison

  The report cross-checks its SOTP valuation using 15x P/E for the infusion business, 12x P/E for generics, together with Chuanning's market capitalization and Kelun Biotech's value.

  Risks

  Centralized volume-based procurement, infusion-business saturation, API price volatility, and innovative-drug clinical or launch progress falling short of expectations.

• SKB Bio

  A 55.1%-owned subsidiary of Kelun Pharmaceutical

  Strengths

  sac-TMT is driving rapid sales growth, with high gross margin, improving sales efficiency, and continued expansion of product and clinical development.

  Weaknesses

  Revenue is highly dependent on sac-TMT, which accounted for approximately 80% of 1H26 product sales.

  Comparison

  Relative to the traditional businesses, SKB Bio is the primary source of growth and an earnings inflection point for Kelun's innovative-drug operations.

  Risks

  Uncertainties remain around commercialization ramp-up, NRDL negotiations, clinical results, and regulatory approvals.

Key data

• SKB Bio 1H26 Product SalesRmb657mn, up 112% year on yearApproximately 80% came from sac-TMT.
• SKB Bio ProfitabilityGross margin of 75%; selling expense ratio of 59%; adjusted net profit of Rmb479mnSupports the view of breakeven by FY27 or earlier.
• Sales Network800+ sales personnel, covering 2,000+ hospitalsAs of June 2026.
• FY26 Sales TargetAt least double year on yearReiterated by management during the call.
• Upcoming sac-TMT Regulatory ProgressTwo indications are expected to participate in NRDL price negotiations at end-2026; three first-line indications are advancing to the sBLA stageThe potential NMPA approval window for first-line indications is 2027-28.
• Key Clinical ReadoutsFull OptiTROP-lung06 data will be presented at ESMO; lung07 topline results may be released in 1Q27These involve first-line NSCLC treatment in combination with Keytruda and Tagrisso, respectively.
• Target Price and Market PriceRmb29.00 vs. Rmb46.69As of August 17, 2026, implying approximately 38% downside.

Impact & implications

If SKB Bio continues to deliver doubled sales and improved expense ratios, its earnings inflection point will increase the earnings contribution of Kelun's innovative-drug assets. Near-term market focus will center on the full lung06 data at ESMO, the potential lung07 readout in 1Q27, NRDL negotiations, and progress on first-line indication sBLAs/NMPA approvals. Clinical success and indication expansion could reinforce sac-TMT's value, but the premium of the current share price to the target price means investors should continue to assess valuation, execution, and competitive risks.

Risks

• Continued expansion of multiple rounds of centralized volume-based procurement into generic-drug categories.
• The large-volume infusion business approaches saturation, with revenue growth flat or declining.
• API price volatility.
• Clinical setbacks or failures in innovative-drug and generic-drug pipelines.
• Drug launch timing falls short of market expectations.
• sac-TMT faces competition from global TROP2 ADCs and bispecific regimens in indications such as first-line NSCLC.

What to watch

• Whether SKB Bio achieves at least doubled FY26 sales, as well as progress in its selling expense ratio and path to breakeven.
• Results of end-2026 NRDL price negotiations for two indications.
• Full OptiTROP-lung06 data to be presented at ESMO.
• Potential release of OptiTROP-lung07 topline results in 1Q27.
• Progress of sBLAs for three first-line indications and potential NMPA approvals in 2027-28.
• Proof-of-concept progress for sac-TMT in combination with SKB118 in NSCLC and other tumor types.
• Clinical progress of next-generation ADCs including SKB103 and SKB565.