Pacific Securities: Initiate coverage of LEPU BIO-B (02157) with a "buy" rating. ADC pipeline is entering the harvesting period.

Pacific Securities released a research report stating that they have initiated coverage on LEPU BIO-B (02157) with a "buy" rating. The company has multiple FIC potential drugs in research, and the ADC pipeline is about to enter the harvest period. Based on the competitive landscape and pipeline progress, the bank predicts that the revenue of Lepu Biopharmaceutical in 2024/2025/2026 will be 306/504/870 million yuan respectively. Valuation is done using discounted cash flow and pipeline sales peak multiple methods, with corresponding market capitalization of 10.08 billion Hong Kong dollars and 11.41 billion Hong Kong dollars. Key points from Pacific Securities include: Clear innovative strategy, comprehensive layout of precision tumor treatment and combination therapy Lepu Biopharmaceutical focuses on precision tumor treatment, with a research pipeline covering various forms of drugs such as antibodies, ADCs, bispecific antibodies, oncolytic viruses, etc. The company is building a diversified and comprehensive combination therapy portfolio around PD-1 precision matching: the "PD-1+ADC" forward-looking layout. Currently, the second-phase clinical trial of EGFRADC and HER2 ADC combined with PD-1 treatment has already begun; the clinical trial preparation stage for the combination of oncolytic virus CG0070 and PD-1 in non-muscle-invasive bladder cancer indications is underway. ADC drugs are differentiated through precision technology and speed Lepu Biopharmaceutical has introduced Synaffix's conjugation technology, optimized design, continuously iterated the ADC technology platform, and targeted new indications or target differentiation to avoid clustering and achieve breakthroughs. MRG003 has submitted a BLA application, becoming the first domestically approved EGFR-ADC; CMG901 is the first Claudin18.2 ADC to enter Phase III clinical trials, with the fastest global progress; MRG004 is the fastest progressing domestic TF-ADC; under the enclosure of HER2 ADC, MRG002 is targeting the indication of breast cancer liver metastasis, with clinical differentiation; MRG006A is expected to become the first domestic GPC3 ADC to enter clinical trials. Commercialization + BD dual driving force to maximize pipeline value Lepu Biopharmaceutical's Putili monoclonal antibody began commercialization in 2022, and continues to expand new indications and increase revenue through combination therapy with ADCs. The company actively seeks BD to amplify the commercial value of the pipeline. CMG901 has successfully entered international markets; MRG003 for the treatment of nasopharyngeal cancer has received orphan drug designation, fast track designation, and breakthrough therapy designation from the FDA, and is undergoing clinical development in China and the US; MRG004A has shown preliminary positive efficacy in pancreatic cancer, and has been granted orphan drug designation by the FDA, laying a good foundation for internationalization.