Kelun Biotech (06990) Report Interpretation

Overview

This quick note reviews Kelun Biotech’s 1H26 results. Nomura says the outcome was in line overall, with sac-TMT commercialization progressing as expected but lower collaboration revenue and elevated investment expenses weighing on reported financial results.

Core views

Kelun Biotech reported 1H26 revenue of CNY978mn, up 2.9% year on year but below Bloomberg consensus of CNY1.2bn and Nomura’s CNY1.4bn forecast. The shortfall principally reflected collaboration revenue of CNY315mn, down from CNY628mn in 1H25 and well below Nomura’s CNY750mn estimate. In contrast, drug sales reached CNY657mn, up 112% year on year and essentially in line with Nomura’s CNY650mn forecast. Nomura attributes the sales momentum to sac-TMT’s inclusion in the NRDL and broader hospital access, with coverage exceeding 2,000 hospitals. Management said sac-TMT accounted for more than 80% of total drug sales in 1H26. Net profit attributable to shareholders was CNY388mn, compared with a CNY145mn loss in 1H25. Although this was below Nomura’s CNY731mn forecast, it exceeded Bloomberg consensus of CNY299mn. Nomura links the gap versus its estimate to the lower collaboration revenue and operating expenses of CNY1.3bn, up 43% year on year. R&D expense rose as management guides for continued stable growth in coming years, while selling expense increased as the salesforce more than doubled to over 800 people. These pressures were partly offset by CNY752mn of other income, versus CNY32mn a year earlier, largely from legal-settlement fees received from MediLink Therapeutics and a CNY140mn tax refund. Cash and financial assets stood at CNY4.8bn at end-1H26, up from CNY4.6bn at end-FY25. Looking ahead, management expressed confidence in achieving its FY26E goal of doubling drug sales. It plans to report data from the OptiTROP-Lung05, OptiTROP-Lung06 and OptiTROP-Breast03 trials at ESMO 2026. Outside China, MSD is conducting 17 global phase III trials for sac-TMT; its plan to apply for a National Priority Review voucher for endometrial cancer in 2H26E could, in Nomura’s view, generate additional collaboration revenue for Kelun Biotech. The company has also filed an NDA for lunbotinib, a RET inhibitor, and expects a 1H27E launch. Nomura maintains Buy and its DCF-based HKD612.66 target price. The report’s main text states a 10.8% WACC and 4.0% terminal growth assumption, both unchanged; the valuation disclosure cites the same target price and WACC but a 4.5% terminal-growth assumption. The stock traded at 4.0x Nomura’s FY35F revenue estimate of CNY26.8bn.

Analysis framework

Nomura compares reported revenue, drug sales, collaboration revenue, profit and cost lines with its own forecasts and Bloomberg consensus, then explains the key deviations through commercialization progress, operating investment and non-recurring other income. It assesses upcoming clinical and regulatory developments as potential drivers of future drug and collaboration revenue, and values the stock using a discounted cash flow model.

Methodology notes

• Valuation methodsDCF (Discounted Cash Flow)

  Discounted cash flow valuation

  Nomura derives its HKD612.66 target price from a DCF model, discounting expected future cash flows using a stated 10.8% WACC and a terminal-growth assumption.

• Industry AnalysisVolume-price decomposition

  Drug-sales growth assessment

  The report separates drug sales from collaboration revenue and links drug-sales growth to NRDL inclusion and expanded hospital coverage for sac-TMT.

Asset mapping & comparison

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

• Kelun Biotech (06990.HK)

  Primary covered company; drug-sales execution and clinical progress underpin Nomura’s maintained Buy view.

  Strengths

  sac-TMT drug sales grew 112% year on year, supported by NRDL inclusion and coverage of more than 2,000 hospitals.

  Weaknesses

  Collaboration revenue was below expectations and higher R&D and selling expenses reduced profitability versus Nomura’s forecast.

  Comparison

  1H26 drug sales of CNY657mn were in line with Nomura’s CNY650mn estimate, while revenue of CNY978mn was below its CNY1.4bn estimate.

  Risks

  Slower-than-expected sac-TMT and other-drug sales ramp-up, and unsatisfactory clinical progress.

Key data

• 1H26 revenueCNY978mn+2.9% year on year; below Bloomberg consensus of CNY1.2bn and Nomura estimate of CNY1.4bn.
• 1H26 collaboration revenueCNY315mnVersus CNY628mn in 1H25 and Nomura estimate of CNY750mn.
• 1H26 drug salesCNY657mn+112% year on year; broadly in line with Nomura estimate of CNY650mn.
• 1H26 net profit attributable to shareholdersCNY388mnVersus a CNY145mn loss in 1H25; below Nomura estimate of CNY731mn but above Bloomberg consensus of CNY299mn.
• 1H26 operating expensesCNY1.3bn+43% year on year, driven by higher R&D and selling expenses.
• Other incomeCNY752mnVersus CNY32mn in 1H25, mainly legal-settlement fees and a CNY140mn tax refund.
• Cash and financial assetsCNY4.8bnAt end-1H26, versus CNY4.6bn at end-FY25.
• FY35F revenue estimateCNY26.8bnThe stock trades at 4.0x this estimate.

Impact & implications

Nomura views the result as consistent with its broader thesis because sac-TMT commercialization is progressing despite a revenue miss from lower collaboration income. It sees the FY26E sales target, ESMO trial readouts, MSD’s ex-China development activity and the expected lunbotinib launch as important drivers of the next phase of growth and collaboration revenue.

Risks

• Slower-than-expected sales ramp-up for sac-TMT and other drugs could impede achievement of the target price.
• Unsatisfactory clinical progress could impede achievement of the target price.

What to watch

• Whether Kelun Biotech achieves its FY26E target of doubling drug sales.
• Clinical-trial data from OptiTROP-Lung05, OptiTROP-Lung06 and OptiTROP-Breast03 expected at ESMO 2026.
• MSD’s planned 2H26E National Priority Review voucher application for sac-TMT in endometrial cancer and any resulting collaboration revenue.
• The expected 1H27E launch of lunbotinib following its NDA filing.