A number of 2H21 varieties are expected to receive data disclosure; maintain "buy"

Pioneering Pharmaceutical announced 1H21 results on August 27, 2021: 1) the company did not generate revenue and its loss increased by 67% to RMB 326 million; 2) the company has seven clinical stage drugs, five of which are in the III phase. We expect the company to disclose phase III data of protamine in COVID-19 outpatients and phase II data of Freitane in the treatment of androgenic alopecia (AGA) at 2H21. We maintain our "Buy" rating and expect EPS to be RMB 1.58 / 36.86 AGA 6.34 in 2021-22-23 (RMB 36.41 won before 2022), and raise the target price based on the DCF method to HK $91.09 (previous value: HK $88.19). The main reasons are: 1) the success rate of Freitain AGA indications has been raised from 30% to 50%. 2) adjust the exchange rate of RMB against the US dollar from 6.39 to 6.47.

Puclosamide: the double acceleration of clinical and commercialization

1H21 has made significant progress in the field of COVID-19: 1) A clinical study conducted in Brazil has shown that it can significantly reduce the hospitalization rate and 30-day mortality rate of male and female outpatients; 2) the results of clinical trials in Brazilian inpatients showed that the mortality rate and the median recovery time were significantly reduced in the Pucruamide group. 3) the company has initiated three III phase studies and completed the first outpatient administration in the United States; 4) the company has granted the India / Africa rights of Puclosamide and Indonesia interests to Shanghai Fosun Pharmaceutical (600196 CH) and Etana (private) respectively. We expect the company to disclose key data on protamine at 2H21, including: 1) US III interim data for COVID-19 outpatients; and 2) domestic registered clinical data for metastatic castration resistance to prostate cancer second-line therapy.

The R & D pipeline is in full bloom

The research and development of the company's overall pipeline is progressing smoothly: 1) the domestic study of Freitain in the treatment of acne completed the first batch of patient administration, 2) the clinical study of the combination of ALK-1 and Navulyou in the treatment of hepatocellular carcinoma revealed preliminary data, and obtained FDA's global multicenter phase II clinical license; 3) AR-PROTAC completed the first batch of patient administration in July. We expect the company to continue to promote pipeline progress in the second half of the year, including:

1) Freitane is expected to disclose phase II clinical data of AGA indications and start a phase III study at 4Q21 in September; 2) early pipelines are expected to be approved by IND and complete patient recruitment / administration.

Investment in R & D has increased significantly, and management costs have increased steadily.

In the first half of the year, R & D expenses increased by 90.2% to RMB 282 million, mainly due to the rapid progress of COVID-19 indication clinical research of Puclosamide, and the increase in management costs by 10.2% to RMB 50 million was mainly due to the expansion of the team and the expansion of staff compensation-related expenses.

Risk hints: 1) failure to meet the main indicators of clinical trials; 2) vaccination to inhibit the epidemic situation of COVID-19; 3) uncertainty of commercialization; 4) progress of clinical trials and regulatory review is slower than expected.