ABBISKO- B (02256): First annual profit achieved, ushering in a dual logic of performance inflection point and valuation repair.

The income increased by over 2500% year-on-year, achieving annual profit for the first time. With the support of innovative research and development and BD transactions, ABBISKO-B (02256) successfully crossed the finish line in 2024, entering a profitable period and taking a key step towards achieving profitable scale. In fact, in recent years, Helyo's management has been using real money to buy back shares through cancellations to reward investors. As of now, 22.594 million shares have been repurchased and cancelled, accounting for 3.22% of the total shares of the company. On March 3, the board of directors of Helyo approved the company's use of HK$200 million to buy back shares in the market, sending a positive signal to the market. With the dual logic of turning point in performance and valuation recovery, the secondary market has shown positive feedback since the company disclosed its annual performance forecast on January 20. It was observed that from January 21 to February 21, Helyo's stock price rose by as much as 39.66%, reaching a high of HK$6.55, the highest since July 2022. In fact, in recent years, frequent policy measures to support innovative drugs in the domestic pharmaceutical field have been introduced, and the matching of supply and demand for innovative drugs globally has continued to improve. How to achieve a leapfrog development in this commercially promising market has become a common challenge for innovative drug companies. With its strong innovation capability and BD transactions, Helyo has successfully achieved innovative income and turned losses into profits, generating significant cash flow. Through the sustainable and scalable profit expectations conveyed by the 2024 annual report, it has set a benchmark paradigm for the "innovation-profit" positive cycle in the innovative drug industry. Crossing the profit turning point, verifying innovative value In the current environment, the commercialization capability is undoubtedly an important indicator for measuring the differentiated innovation capability of domestic innovative drug companies. For Helyo, achieving annual profit for the first time represents the strong innovative research and development capabilities of the company and the differentiated advantages of innovative pipeline products recognized by the industry and the market. It was learned that on March 3, Helyo announced its 2024 annual performance. The financial report shows that the company achieved operating income of approximately 504 million yuan, a significant increase of 2544% year-on-year; at the same time, the company recorded a net profit attributable to shareholders of 28.3 million yuan for the period, turning losses into profits year-on-year, and the adjusted net profit reached 49.04 million yuan. In 2024, one of the direct driving factors for Helyo to achieve annual profit for the first time was a BD transaction with a well-known multinational pharmaceutical company Merck for its core product Pimicotinib (ABSK021), which involved a "high down payment, high milestone, high split" arrangement and provided a down payment of 70 million US dollars. In terms of market conditions, Pimicotinib is mainly used to treat TGCT, which cannot be treated surgically. The National Organization for Rare Disorders in the United States reported that the incidence of TGCT is approximately 43 per million. Currently, the main competitor on the market is the FIC product Pexidartinib from Daiichi Sankyo, which was approved for marketing in 2019 as a systemic therapy for severe TGCT that cannot be improved through surgery, but the drug has serious liver toxicity and has been blackboxed by the FDA. Nevertheless, Pexidartinib's revenue in 2023 still reached 5.3 billion yen. In comparison, Pimicotinib from Helyo achieved the best efficacy for TGCT while significantly improving safety. The topline results of the global Phase III MANEUVER study released in November showed that Pimicotinib's objective response rate (ORR) reached 54.0%, significantly better than the placebo group's 3.2% (p<0.0001), with good tolerability of the once-daily oral treatment and a very low proportion of treatment discontinuation due to treatment-related adverse events. In addition, the company also updated the long-term follow-up data of the Phase 1b clinical study of Pimicotinib: the best ORR was 85.0%, with a median treatment duration of 20 months, further improved from the previous data of 25 weeks. As the first Chinese self-developed CSF-1R inhibitor to enter global Phase III TGCT clinical trials, Pimicotinib has been recognized as a breakthrough therapy by regulatory agencies in China, the United States, and Europe. It is worth mentioning that at the American Society of Hematology (ASH) annual meeting in December last year, the company also presented preliminary positive results of a Phase II study of Pimicotinib in the treatment of cGvHD to the global academic community. The data showed that the ORR in the 20mg dose group reached 64% and covered multiple organ responses. It can be seen that as a potential global BIC drug in the CSF-1R inhibitor track, Pimicotinib not only shows outstanding performance in TGCT indications, but also has greater potential in multiple indications such as cGvHD, highlighting its potential as a "billion-dollar molecule". It is understood that Helyo's collaboration with Merck on the Pimicotinib project is progressing smoothly. After the release of the Phase III study results, Pimicotinib is expected to submit an NDA application this year, signaling the start of commercialization. Subsequently, Helyo will also receive multiple milestone payments from Merck according to the contract. With its BIC attributes, it is expected to quickly open up market space and become a major revenue growth engine for Helyo in the future. It is clear that with the strong innovative research and development capabilities and global BD capabilities driving it, Helyo's clinical research and development are gradually bearing fruit in commercialization, making the company a pharmaceutical company with strong innovation and clinical transformation capabilities, and the certainty of transitioning to Biopharma is gradually increasing. Innovation pipeline blossoming, potential of FIC/BIC varieties highlighted As some of the key research products in development have reached a more mature and certain late stage, Helyo's fine control over research and development expenses has further improved. The financial report shows that the confirmed research and development expenses of the company for the reporting period were 451 million yuan, with a difference of no more than 5% from the research and development expenses of the previous year. However, controlling research and development expenses does not mean cutting corners everywhere. Under fine management, the pipeline research and development of the company has achieved further cost reduction and efficiency improvement, still racing ahead with global cutting-edge targets, and effectively promoting the overall research and development of the innovative pipeline.made significant progress.It is understood that Hanyu Medicine focuses on precision treatment and immunotherapy of tumors, covering hot targets such as EGFR, FGFR, and CSF-1R. It has established a globally competitive differentiated innovative R&D pipeline with 15 candidate drugs, and many of the innovative drugs under research have the potential to be "best in class" or "globally first-in-class". With years of high investment in research and development, several high-quality pipelines in the Hanyu innovative pipeline are in early clinical and preclinical stages; in terms of core products, the clinical progress of key pipelines such as simitinib, ipatigotinib, ABSK043, etc., is steadily advancing, and they are about to enter a period of commercial value realization. For example, in the development of FGFR target drugs, Hanyu has extensively laid out FGFR, including a variety of inhibitors such as small molecule FGFR4 inhibitor ABSK011, pan-FGFR inhibitor ABSK091, FGFR2/3 inhibitor ABSK061, and new generation FGFR mutant inhibitor ABSK121, ABSK012, covering the entire FGFR family. This is expected to fully unleash the potential of this category in the field of anti-tumor therapy. Among them, ipatigotinib (ABSK011) is expected to become a global best-in-class FGFR4 inhibitor, attracting high attention from investors. Last year, the company presented the latest Phase I clinical data on the safety and efficacy of ipatigotinib for the treatment of previously treated aHCC patients at the 2024 ESMO Annual Meeting. The data shows that the efficacy of the ipatigotinib 220mg BID group in patients with FGF19 overexpression liver cancer who have been treated with ICIs and mTKIs was excellent, with an ORR of 44.8%, mDOR of 7.4 months, and mPFS of 5.5 months, far exceeding currently marketed and other investigational therapies. Furthermore, at the 2024 ESMO GI in June last year, the company released the ORR data for the 220mg BID regimen in combination with Atezolizumab for 1/2L patients, once again breaking the record for investigational new drugs for previously treated liver cancer. It is worth noting that in the patient population previously treated with immune checkpoint inhibitors (ICI), this combination therapy from Hanyu has shown significant efficacy and good safety, demonstrating that targeting the FGF19-FGFR4 pathway may provide much-needed differentiated treatment for liver cancer and further enhancing the certainty of ipatigotinib combination with PD-L1 for first-line treatment. In December last year, the CDE approved the company to conduct a registration clinical study of ipatigotinib (ABSK011) for HCC patients, marking a significant milestone in research and development and bringing ipatigotinib one step closer to commercialization. According to GlobalData's predictions, by 2029, the global liver cancer market is estimated to be around $5.3 billion, with immunotherapy accounting for approximately 72.2% of the market share, reaching $3.8 billion. Referring to the previously marketed small molecule kinase inhibitor sorafenib, with an ORR of less than 20% for liver cancer indications, its global sales exceeded $500 million in 2021, reflecting the significant unmet treatment needs in the current market and anticipating Hanyu's prospects of achieving higher sales limits in the domestic and international markets after launch. In addition, in the FGFR4 race, ipatigotinib has already taken a leading position in the global small molecule pipeline progress, and with its excellent efficacy and safety, it is poised to become a global best-in-class, surpassing other FGFR4-targeted drugs in terms of compliance and economic advantages as a small molecule and boosting its potential blockbuster value. Turning Point in Performance and Valuation Repair Dual Logic With the company's strong BD capabilities driving significant revenue growth, Hanyu has achieved profitability for the first time in a full year, with cash and bank balances reaching HK$1.959 billion, steadily entering a positive cycle of innovative R&D value. However, the company's growth prospects have not been accurately reflected in Hanyu's stock price. In terms of the certainty of continuous improvement in performance, as the commercialization process of simitinib in 2025 continues to progress, milestone payments from Merck will continue to be realized, driving the company's revenue structure towards a more sustainable sales commission transition. Previously, Zhongtai released a research report predicting that the company's consolidated net profit attributable to shareholders in 2025 is expected to reach HK$30 million, more than 10 times the year-on-year growth. Furthermore, the current market has not fully reflected the pipeline value of ABBISKO-B in its pricing. The company's overall PB valuation is only 1.78 times, significantly lower than the industry average of 3.46 times, highlighting a significant undervaluation that deviates greatly from its business performance. To boost market confidence, during the reporting period, Hanyu repurchased and cancelled a total of 22.594 million shares, involving a total of HK$68.7393 million, pragmatically fulfilling the previously disclosed HK$100 million repurchase plan. Furthermore, Hanyu has once again added HK$200 million for share buybacks, demonstrating the company's sincere attitude towards shareholder responsibility and returns. This is an important operation for the company to give back to shareholders with real money and silver, reflecting the management's greater confidence in the company's future development. Currently, Hanyu has successfully reached a turning point in performance, with core products such as simitinib and ipatigotinib in its research pipeline, both with the potential to become billion-dollar molecules, as well as heavyweight investigational products such as ABSK091, ABSK061, and ABSK043. With the increasing global commercial value of FIC/BIC products, the upcoming commercialization of simitinib, which has huge global market potential, will undoubtedly accelerate the market realization of Hanyu's dual logic of performance turning point and valuation repair. With its strong pipeline, efficient R&D, and global BD capabilities, the company is expected to become a benchmark for valuation repair in the biopharmaceutical sector of the Hong Kong stock market.