Hengrui Medicine:Pyrotinib NDA filed;expect approval in 2H18

Another blockbuster launch highly likely; with peak sales of RMB2-2.8bn

Multiple catalysts ahead; late-stage pipeline represents 17% market cap
by DBe

    As of today, public database indicated that Hengrui had filed for
new drugapplication (NDA, marketing and manufacturing approval) for
pyrotinib. In ourrecently published deep dive report for Hengrui
pipeline, we estimated peak salesopportunity of RMB2-2.8bn for this
compound. We spoke with managementrecently, and anticipate that the
indications oncologists would use in practicewould include mBC and mGC
(gastric), while there is a reasonable likelihoodfor adjuvant therapy,
just like neratinib. We remind investors that Herceptin hada run rate of
RMB2.2bn by YE16, with PRDL coverage in 15provinces. WhileHerceptin
price had 53% price cuts in China recently, we still believe high endof
our estimates (RMB2.8bn) for pyrotinib is achievable as P2data might
becomparable to that of neratinib, but much better than lapatinib.。

    We update pipeline progress following the meeting with Chairman Sun.
Majorcatalysts are: 1) approval of 19K and Abraxane generic by YE17; 2)
resubmissionof retagliptin in the near term; 3) clarity on pyrotinib
development, includingan earlier submission of marketing approval; 4)
updates on clinical progressfor camrelizumab; and 5) phase 3data release
on Incyte’s ECHO-301. We alsohighlight potential upside from additional
US IND approval and clinical progressof its novel compounds in the US.
Our NPV analysis indicated the pipeline valueis RMB9.2per share. This
comprehensive report includes key ongoing clinicalstudies for all
mid/late study compounds, as well as competitors’ studies.Camrelizumab
as the largest driver; IDO inhibitor provides significant upsideWe have
updated our peak sales for camrelizumab to RMB5-6bn in China
andincreased the probability of success to 75-85%, based on the strong
ORR datafrom the phase 1study. Four registration trials are being
conducted at present.We expect Hengrui to get the first domestic
PD-1approval, with safe data fromsufficient number of patients required
by the CFDA. Additionally, we expect INDapproval for its IDO inhibitor
from CFDA in the near term, following US INDapproval in May. We believe
it would be significantly positive to the IO franchiseand we forecast
RMB3-4bn peak sales for the IDO inhibitor.

    Phase I data reported at SABCS 2015; phase 2data to be reported at
SABCS2017.Pyrotinib is a novel small molecule irreversible pan-ErbB
receptor TKI (tyrosinekinase inhibitor), similar to neratinib. ORR of
53% and DCR of 81% were reportedfrom a phase I dose finding study with
382L or above mBC patients in China. PFSwas 35-40weeks. The MTD was
480mg while grade III diarrhea was observed,similar to AE profile of
neratinib. While the company has not articulated details ofphase 2study,
we believe the NDA was based on a phase ? study (CTR20150279)with
128patients that compared pyrotinib/capecitabine vs.
lapatinib/capecitabinein 2L her2+ mBC. We noticed that there is an
ongoing phase 3study with exactlythe same design. As such, we believe
this might be the requirement from CFDAthe pyrotinib were to gain CFDA
approval based on P2data. Lastly, the companyindicated that P2data would
be presented in December.。

    DB proprietary patient-based PD-1/PD-L1model


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