2024 Financial Report | Heavy focus on NASH pipeline, can Geli Pharmaceuticals reverse the "no drugs to sell" situation

On March 26, Ge Li Pharmaceutical (1672.HK) disclosed its 2023 financial report, with a current revenue of 54 million RMB, a year-on-year increase of 4.6%, and a net loss of 145 million RMB for the same period, narrowing by over 50% compared to 2022.

The main revenue-generating product for Ge Li Pharmaceutical is the COVID-19 treatment drug Lopinavir.

However, with the decline of the COVID-19 pandemic, the sales of Lopinavir in 2024 are in jeopardy, and Ge Li Pharmaceutical is facing the dilemma of "no drugs to sell".

Currently, Ge Li Pharmaceutical has three investigational drugs for the treatment of non-alcoholic steatohepatitis (NASH), which have attracted market attention.

However, challenges continue to confront Ge Li Pharmaceutical.

On one hand, two drugs in the NASH pipeline are being sued for infringement by the U.S. pharmaceutical company Viking (VKTX.O), casting a shadow over the future commercialization of the drugs.

On the other hand, GLP-1 drugs have shown certain clinical efficacy in treating NASH, posing as formidable competitors for Ge Li Pharmaceutical with a different target mechanism.

Whether Ge Li Pharmaceutical can succeed in the NASH pipeline and what the future commercial prospects will be are subjects of ongoing market attention.

Can NASH Drugs Take Over

Once basking in the glory of being the "first stock of 18A", Ge Li Pharmaceutical may not have expected to fall into the predicament of having no drugs to sell just five years later.

In 2023, Ge Li Pharmaceutical's revenue was 57 million RMB, a 4.6% year-on-year increase, mainly contributed by the oral small molecule COVID-19 treatment drug Lopinavir.

Despite slight growth, it is evident that with the waning of the COVID-19 pandemic, the sales of Lopinavir are unsustainable.

Trader Wind (ID: TradeWind01) inquired whether Ge Li Pharmaceutical plans to terminate the production of Lopinavir, but as of the time of writing, no response has been received.

Apart from Lopinavir, Ge Li Pharmaceutical once shone in the field of innovative drugs for hepatitis C. Drugs like Gonoher, New Lelai, and Paroxin, which were introduced through authorization from Roche, Presidio, and as an agent for Roche, respectively, were important sources of revenue for Ge Li Pharmaceutical.

However, due to Gonoher's failure in the medical insurance negotiations in 2020, the impact of low-price strategies of similar drugs, and Roche's cessation of Paroxin promotion in the Chinese market in September 2022, Ge Li Pharmaceutical's hepatitis C drug pipeline suffered a complete defeat.

Fortunately, Ge Li Pharmaceutical has sufficient cash reserves, with cash and cash equivalents amounting to 2.275 billion RMB as of the end of 2023. Ge Li Pharmaceutical is expected to sustain its research and operations until 2028.

However, whether Ge Li Pharmaceutical can find the next growth point is highly anticipated.

Currently, Ge Li Pharmaceutical's pipeline is divided into two categories: virus and tumor.

In the promising field of NASH treatment drugs, Ge Li Pharmaceutical's layout is at the forefront among domestic pharmaceutical companies.

Currently, Ge Li Pharmaceutical has a total of three investigational drugs for NASH treatment, namely ASC40 targeting fatty acid synthase (FASN), ASC41 targeting thyroid hormone β receptor (THRβ), and THRβ/Farnesol X receptor (FXR) ASC43F, a dual-target drug.

Currently, the drug ASC41 has shown impressive data performance. The 2nd phase mid-term clinical data for 52 weeks showed that NASH patients confirmed by liver biopsy who took ASC41 for 12 weeks had an average relative decrease in liver fat content of up to 68.2% compared to baseline.

This performance is also impressive compared to Resmetirom, the first drug approved by the FDA for treating NASH in March this year. Clinical trial results showed that after 52 weeks of treatment with Resmetirom, a THRβ target drug at a dose of 100 mg, patients' liver fat levels decreased on average by 51%.

Given the huge market prospects for NASH, Evaluate predicts that Resmetirom's sales will reach $2.2 billion by 2028.

As the fastest progressing THRβ target drug domestically, ASC41's potential market prospects are also highly anticipated by the market.

Gale Pharmaceutical holds the global rights to ASC41. However, clinical trials previously conducted abroad were terminated due to cost issues. Currently, the focus is on conducting phase 2 clinical trials domestically, with the expectation of completing the enrollment of phase 2 patients this year.

Entangled in Legal Troubles

However, ASC41 is currently embroiled in a patent infringement lawsuit, adding uncertainty to the future of this drug.

At the end of 2022, Viking accused Gale Pharmaceutical of infringing on the intellectual property rights of its THRβ drug VK2809, also used to treat NASH, with ASC41 and ASC43F.

In an 83-page lawsuit, Viking claimed that in 2016, they met with senior executives of Gale Pharmaceutical at a biopharmaceutical international conference in San Francisco to discuss the potential market opportunities for VK2809. In 2019, the two parties reached an agreement allowing Gale Pharmaceutical access to VK2809's trade secrets. However, after reviewing important documents for over a month, Gale Pharmaceutical abruptly terminated the cooperation agreement.

Viking believes that Gale Pharmaceutical's actions were aimed at stealing VK2809's trade secrets.

Apart from seeking compensation, Viking also requested the cancellation of Gale Pharmaceutical's related drug rights and a permanent injunction against the development of alleged counterfeit drugs.

Gale Pharmaceutical, on the other hand, denies the allegations and has not made any provisions for the lawsuit.

TradeWind01 reached out to Gale Pharmaceutical for specific details on the current lawsuit but had not received a response as of the time of writing.

The data performance of VK2809 and ASC41 is comparable, but the former has completed phase 2 clinical trials and is progressing rapidly Phase 2 clinical data shows that patients receiving a 10mg dose of VK2809 treatment had an average relative liver fat content reduction of 51.7% at 12 weeks.

With the background of litigation risks for ASC41 and ASC43F, whether the FASN inhibitor ASC40, which can also be used to treat NASH, can take over remains to be observed.

Currently, ASC40 has completed Phase 2 clinical trials. The results show that compared to placebo, there was a statistically significant improvement in both main endpoints of NASH resolution without worsening fibrosis and NAS reduction ≥2 points, as well as NAS reduction ≥2 points without worsening fibrosis.

However, in the indication of NASH, GLP-1 drugs may also become strong competitors. Phase 2 trial data for semaglutide shows that in patients receiving the highest dose of semaglutide treatment, 66.7% of patients saw an improvement in NASH symptoms; Phase 2 trial data for the GLP-1/GCG dual-target drug Retatrutide shows that at treatment doses of 8mg and 12mg of Retatrutide, the average relative liver fat reduction rate in patients exceeded 80%.

At the same time, some institutions point out that the treatment of NASH can be combined with obesity treatment methods.

In May 2023, the Institute for Clinical and Economic Review (ICER) in the United States provided a stepwise treatment recommendation in the article "Resmetirom and Obeticholic Acid for Non-Alcoholic Steatohepatitis (NASH)".

The article points out that NASH is intricately linked to obesity, metabolic syndrome, and diabetes. Losing over 10% of body weight can reverse NASH and reduce the fibrosis stage in individual patients. Therefore, with the background of GLP-1 drugs having a certain weight loss effect, some patients may first adopt a weight management plan with the help of nutritionists and related drugs to treat NASH.

This means that during the course of NASH development, GLP-1 drugs may bring disruption to the existing NASH treatment drug pipeline.

This poses an undeniable risk to Gilead Sciences' NASH pipeline.