Kelun Pharmaceutical ASCO Data Positive but Concerns Remain

Overview

This report interprets the OptiTROP-Lung05 trial data announced by Kelun Pharmaceutical at the ASCO conference, which evaluates the efficacy of sac-TMT combined with Keytruda for treating advanced non-small cell lung cancer. Core data shows the combination therapy significantly improves progression-free survival, but there are concerns such as higher hematological toxicity. Based on DCF and SOTP valuation, the report maintains an Underweight rating and a target price of 29 CNY.

Core views

Trial data shows clear efficacy advantages: overall 12-month PFS rate reached 62.4% in the combination group vs 29.0% in the control group, with the PD-L1 high expression subgroup reaching 65.6% vs 39.0%. In terms of survival, the 12-month OS rate of 80.4% vs 68.9% also shows positive signals. However, three main concerns need attention: 1) Squamous cell carcinoma subgroup PFS rate of 51.3% shows no advantage over competitors; 2) Grade 3+ hematological toxicity incidence of 55.3% is significantly higher than control, mainly manifested as neutropenia (17.3%) and anemia (9.1%); 3) The proportion of patients with baseline brain metastases is low (~3%), which may affect data generalizability. In terms of catalysts, the first interim analysis of overall survival is expected to be announced in 2026Q4-2027H1, and the interim results of the OptiTROP-Lung06 study in the PD-L1 negative patient population may be released at ESMO. Kelun is accelerating the exploration of tumor combination schemes of sac-TMT with IO bispecific antibodies and discussing combination strategies with partner Merck.

Analysis framework

The institution uses two complementary methods for valuation: 1) Based on the company's mature profitability and positive free cash flow characteristics, using a DCF model (WACC 8.7%, perpetual growth rate 3%); 2) Back-solving the holding company discount (calculated as 51%) through the SOTP segment valuation method, specifically breaking down the infusion business (15x PE), generic drugs (12x PE), and subsidiary market capitalization. Drug value assessment focuses on key clinical trial indicators: comparing survival data of the PD-L1 high expression subgroup (the report believes it is closest to Merck's global trial standards), analyzing differences in squamous/non-squamous subgroups, evaluating discontinuation rates (combination group 3.8%-5.3% vs control group 4.9%), and establishing a reference system through horizontal dimensions (such as safety characteristics of competitor IO bispecific antibodies).

Methodology notes

• Valuation MethodDCF Discounted Cash Flow

  Free Cash Flow Discounting

  Suitable for mature companies generating stable earnings, discounts present value based on future cash flow forecasts; this piece uses a WACC of 8.7% and a 3% perpetual growth rate to reflect the company's industry status and earnings continuity

• Valuation MethodSOTP Sum-of-the-Parts

  Sum-of-the-Parts Valuation

  Values the company by business units separately and sums them up, used to back-calculate the market-implied holding discount (51%), reflecting the valuation discount patterns of diversified operating groups

• Industry/Industrial Analysis Framework

  Oncology Drug R&D Assessment Dimensions

  Uses PFS/OS survival rate data as primary efficacy indicators, cross-subgroup analysis (such as PD-L1 expression level, pathology type) ensures conclusion extrapolability, combines safety event spectrum to build risk-reward ratio framework

Asset mapping & comparison

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

• Sichuan Kelun Pharmaceutical (002422.SS)

  Core Beneficiary

  Strengths

  Excellent PD-L1 high expression subgroup data, overseas cooperation potential

  Weaknesses

  Hematological toxicity higher than competitors

  Comparison

  Squamous cell carcinoma subgroup data shows no obvious advantage over IO bispecific antibodies

  Risks

  Dosage optimization risk, subsequent clinical development costs

Key data

• 12-month PFS Rate62.4%Combination therapy improves by 33.4 percentage points compared to single-drug control group
• PD-L1 High Expression Subgroup PFS Rate65.6%Improves by 26.6 percentage points compared to control group
• Grade 3+ Hematological Toxicity55.3%Neutropenia accounts for the major part
• Target Price Corresponding PE Multiple24.6xBased on forecasted net profit for 2027

Impact & implications

Data confirms the clinical potential of the sac-TMT combination therapy, especially the efficacy advantage in the PD-L1 high expression population which can endorse international cooperation. However, the higher incidence of side effects requires optimization of dosage control schemes in subsequent clinical trials, which may affect the final approved dose and commercial prospects. If OS analysis shows survival advantages, it may drive valuation repair, but current safety and squamous cell carcinoma subgroup shortcomings still need vigilance.

Risks

• Pressure on generic drug business profit margins from continuous centralized procurement
• Infusion sector market tends towards saturation and growth stagnation
• API price fluctuations affect profitability
• Pipeline drug R&D failure or delayed listing
• Drug listing speed falls short of market expectations

What to watch

• Release of first interim analysis of OS (2026Q4-2027H1)
• Efficacy of OptiTROP-Lung06 in PD-L1 negative patients
• Progress on joint development strategy with Merck