Relying on Merck's BD to support performance and stock price, can "returning goods" still not prevent SKB BIO-B (06990) valuation from going up?

In the Hong Kong stock market, the lifting of restrictions is undoubtedly an important milestone for a new company. At this point in time, investors who have been with the company through various rounds of financing will make the choice to exit or not when the restrictions are lifted. At the same time, there will be many speculative funds participating in speculation around the market before and after the lifting of restrictions, coordinating with the selling pressure formed before the stock is lifted, and profiting from short selling. Even the "hot cake" in the Hong Kong stock biopharmaceutical sector, SKB BIO-B (06990), is no exception. It is understood that since early February this year, the stock price of Coln Bogtai has been rising all the way, from a low of 63.60 Hong Kong dollars on February 5 to a high of 177.10 Hong Kong dollars on September 11, an accumulated increase of 178.46%. If calculated based on the new high of 195.00 Hong Kong dollars set on June 5, Coln Bogtai has accumulated an increase of 206.60% in four months. It is easy to see that from June 5 to September 11, there was a significant price difference in Coln Bogtai's stock price, and the reason for this was the lifting of approximately 101 million H shares of Coln Bogtai on July 12, involving 20 pre-listed investors. For short sellers, the lifting of restrictions on popular stocks is undoubtedly a rare opportunity to short sell. Data shows that on July 9, the short-selling ratio of Coln Bogtai increased from 13.31% the previous trading day to 27.88%, and then remained at a high level of 45.98% and 33.90% in the following two trading days. The corresponding Coln Bogtai also consecutively fell on July 8-10, with a cumulative decline in stock price of 18.79%, until on the 11th bringing the stock price of Coln Bogtai to a low of 120.20 Hong Kong dollars. For shareholders, if they can withstand the "big test of lifting restrictions" and the stock price remains relatively stable, then the future trend will be much more market-oriented; on the other hand, if the stock price falls significantly, it will be more difficult to regain popularity in the future. Looking back now, Coln Bogtai undoubtedly belongs to the former. The "big test of lifting restrictions" does not prevent a future rise in stock prices Although Coln Bogtai's stock price was pulled down to 120.2 Hong Kong dollars on July 11, it closed up 7.16% on the same day. After that, the company's stock price maintained a slight fluctuation and steadily increased, reaching over 170 Hong Kong dollars now, even though the company also experienced a 1068% surge in net profit in the interim report and the disappointment of being "returned" by Merck Sharp & Dohme again during this period. In the first half of this year, Coln Bogtai undoubtedly delivered a beautiful report card: total revenue reached 1.382 billion yuan, a year-on-year increase of 32.2%; net profit was 310 million yuan, turning losses into profits; adjusted net profit was 386 million yuan, a year-on-year increase of 1068%. In the financial report, Coln Bogtai clearly stated that the main reason for the growth in revenue and profits came from international BD cooperation. According to the financial report data, the reason for the company's unexpected authorization income during this period is that the company received milestone payments totaling 640 million yuan from Merck Sharp & Dohme in the first half of this year through multiple cooperation pipelines, and the remaining income also came from previous authorization cooperation upfront payments and research and development cooperation service fees. In terms of clinical pipeline development, SKB264s overseas clinical trials currently cover five sub-indications of lung cancer, two sub-indications of breast cancer, 2L+ endometrial cancer, 2L cervical cancer, and 3L+ gastric and esophageal adenocarcinoma. SKB264 has initiated 10 global Phase 3 trials overseas and may also further conduct overseas registration trials in the future to trigger milestone payments. Recently, SKB264 also received acceptance from the National Medical Products Administration (NMPA) for the second indication, for the treatment of adults with locally advanced or metastatic EGFR-mutated non-small cell lung cancer who have failed EGFR-TKI and platinum-based chemotherapy, and the application has now been put under priority review by the Center for Drug Evaluation (CDE). Prior to this, SKB264/sac-TMT had submitted a new drug application for the treatment of triple-negative breast cancer (TNBC) in locally advanced or metastatic stages who have received at least two prior systemic treatments (of which at least one was targeting late-stage or metastatic stage), and it was accepted by the NMPA at the end of last year. It is worth mentioning that among SKB264's competing products, only Gilead's Trodelvy (sacituzumab govitecan) has been approved for marketing, with sales of around $700 million in 2022, and domestic sales of about 200 million yuan. Currently, in addition to being approved for late-stage TNBC, Gilead's Trop2 has been approved for marketing in second-line urothelial carcinoma and second-line Hr+/Her2- breast cancer. In comparison, SKB264 has not yet been approved for marketing, and there is still a certain gap in commercialization compared to its competitors, but based on the above clinical data, SKB264 still demonstrates FIC/BIC characteristics. Merck Sharp & Dohme has also stated that they will accelerate the clinical development of the SKB264 project. In fact, in a global context, competition among ADC drugs targeting Trop-2, Claudin18.2, and Nectin-4 is fierce, with progress between companies in a deadlock state. However, from the clinical data perspective, Coln Bogtai's SKB264, SKB315, and SKB410 all have the potential to achieve BIC and also reflect Coln Bogtai's research and development capabilities. However, this time Merck Sharp & Dohme returned SKB315 to Coln Bogtai. Returned by Merck Sharp & Dohme In their recent interim report, Coln Bogtai announced that Merck Sharp & Dohme returned the rights to the Claudin18.2 ADC drug SKB315. In October last year, Merck Sharp & Dohme returned two preclinical ADC products to Coln Bogtai. Looking back at the cooperation between the two companies, of the 9 ADC assets reached in the collaboration, 3 have advanced to the clinical stage, targeting TROP2 for SKB264, CLDN18.2 for SKB315, and Nectin-4 for SKB410, while the remaining 6 are preclinical projects. Only the three products with faster progress are the core of the collaboration between the two. This can be seen as the key differentiating point from the previous "returns": this time, one of the key products of the cooperation, SKB315, was returned. In fact, SKB-315 is one of the representative projects of the Coln Bogtai ADC platform, with a main focus on the development of ADC targeting CLDN18.2.Using a toxic linker strategy, a novel, moderately cytotoxic topoisomerase I (TOPO1) inhibitor is conjugated to a targeting antibody with high drug-to-antibody ratio (DAR). This differentiated design minimizes potential harm to normal gastric tissue expressing Claudin18.2.In previous head-to-head in vitro studies, compared to zolbetuximab, SKB315 showed comparable Claudin18.2 specificity, comparable or higher Claudin18.2 affinity, higher proliferative inhibition, and significant BIC potential in multiple cancer cell lines. However, the main reason why SKB315 was returned as a potential treatment is because of the slow development progress. For Meruitan now, "time is money". Although its core flagship product K drug has reached the top of the "drug king" throne, its core patent will expire in 2028. At that time, the product may face competition from generic or biosimilar drugs and declining sales, and Meruitan, lacking competitive pipeline products, may be relegated to the second-line position. In order to further consolidate its leading position in the field of oncology, Meruitan has begun to seek "PD-1+ADC" combination therapy to expand new indications, to consolidate and extend the "drug king" status of K drug. Therefore, looking at this issue from Meruitan's perspective, investors may come to a new conclusion: Meruitan may not care who they collaborate with, but what they care about is whether there is a globally competitive and potential ADC product in their pipeline that can help extend the "drug king lifeline" of K drug before 2028. If not, Meruitan will quickly cut ties with it, and this time it's SKB315's turn. It is understood that there are close to 10 Claudin18.2 ADC drugs currently in development, with three companies initiating Phase III clinical trials. SKB315, which is still in Phase II clinical trials, clearly does not have a clinical progress advantage. Looking at the secondary market, following the last Meruitan return causing Kolonbote to plummet after a review on October 24, with an intraday drop reaching 13.87%, the market reaction this time was muted, with the company's stock price closing up 5.22% on August 19. Aside from the offsetting financial data, there is also a piece of good news that Meruitan has chosen to exercise the exclusive rights to a dual-antibody ADC drug, SKB571, in the Greater China region with a first payment of $37.5 million. This undoubtedly sends a message to the market that they will continue to cooperate with Kolonbote. However, Meruitan itself is now overly anxious about its development prospects, and the two returns indicate that this MNC will cut ties at lightning speed if the product progress is below expectations. So the question is: Will the scythe used for cutting strike Kolonbote next time?