Kelun-Biotech: A Pioneering Biotech in ADC Innovation
Investment Thesis
Kelun-Biotech, a biotechnology company founded in 2016, has emerged as a leader in the development of antibody-drug conjugates (ADCs). Through strategic partnerships with MSD, it has developed a diversified ADC pipeline that includes several clinical-stage assets and numerous preclinical candidates. This report highlights the company's differentiation in the ADC field, particularly with its lead candidate, SKB264, a TROP2 ADC.
Differentiated ADC Pipelines
Kelun-Biotech's ADC platform is characterized by its advanced integration of a wide range of ADC components, streamlined linker-payload combination screening, and proprietary conjugation technologies. This enables the precise customization of ADCs for specific targets and diseases. The company's portfolio features:
- SKB264 (TROP2 ADC): A potential best-in-class (BIC) agent for treating challenging cancers like TNBC and HR+/HER2- breast cancer.
- A166 (HER2 ADC): A promising HER2 ADC candidate with a unique mechanism of action (MoA).
- SKB315 (CLDN18.2 ADC): An early-stage ADC targeting CLDN18.2, a significant tumor marker in gastrointestinal cancers.
- SKB410 (Nectin-4 ADC): A novel ADC for Nectin-4, a target in solid tumors.
Out-licensing Collaborations
Kelun-Biotech's collaborations with MSD are pivotal in globalizing its ADC portfolio. MSD's extensive global presence and clinical development capabilities enhance the potential commercialization of SKB264 and other assets. The partnership includes out-licensing agreements for select ex-China rights to seven ADC assets, valued at potentially up to $11.8 billion.
Key Asset: SKB264
Differentiated Design: SKB264 is uniquely designed to target TROP2, a membrane protein expressed in various cancers, including TNBC and HR+/HER2- breast cancer. Its design offers improved efficacy and a distinct safety profile compared to existing TROP2-targeting ADCs like Trodelvy and Dato-DXd.
Broad Market Potential: TROP2 is highly expressed in TNBC, which represents approximately 15% of breast cancer cases, and HR+/HER2- BC, comprising 60-70% of cases. SKB264's potential in these indications is substantial due to its differentiated design and superior efficacy.
Significant Indications: SKB264 is pivotal in addressing the unmet medical needs in TNBC, where it has received a priority review from the NMPA for the third-line and above TNBC setting. It also shows promise in HR+/HER2- BC, where it could offer a safer alternative to existing therapies.
Financial Analysis and Valuation
Kelun-Biotech is poised for rapid product sales growth, driven by SKB264's potential to enter the market in 2025 for TNBC, followed by HR+/HER2- BC and NSCLC in 2026. With a strong financial outlook, the company is expected to turn profitable in 2027. Based on a discounted cash flow (DCF) model, the target price is set at HK$152.26, reflecting the company's growth potential and the value of its ADC pipeline.
Investment Risks
While Kelun-Biotech presents a promising investment opportunity, several risks should be considered, including clinical trial outcomes, regulatory approvals, competitive landscape, and market acceptance.
Conclusion
Kelun-Biotech is a trailblazer in the biotech sector, particularly in the development of ADCs. Its differentiated pipeline, strategic partnerships, and potential blockbuster assets position the company for significant growth. With a well-defined investment thesis and a robust financial forecast, Kelun-Biotech offers an attractive opportunity for investors interested in the biotechnology sector.
