Company profile
Kaituo Pharmaceutical is a clinical-stage drug developer in China, with a total of 5 drug pipelines under development. Currently, a number of phase I-III clinical trials are being carried out in China, the US and other places, including the small molecule second-generation AR (androgen receptor) antagonist procluramide (GT0918), the AR antagonist forretane (KX-826) for the treatment of androgenic alopecia and acne, the angiogenesis inhibitor ALK-1 whole-human monoclonal antibody (GT90001), the mTOR polykinase inhibitor detoxetine (GT0486), and HedgeHosMog/inhibitors (GT1708F). Since its establishment in 2009, the company has completed multiple rounds of financing, with a cumulative financing amount of about RMB 700 million. Furthermore, the company was listed on the Mainland New Third Board in 2016 and delisted in June 2018.
Sino-Thai views
The core drug proclomide is potentially the best AR antagonist in its class for mCRPC: According to Frost & Sullivan's report, prostate cancer is an underdiagnosed disease and one of the fastest-growing cancers in China. The percentage increase in new cases from 2014 to 2018 was 10.4%, ranking second among the top ten cancer types in China. Most prostate cancer patients treated for androgen deprivation will eventually worsen and develop CRPC within 18-24 months of treatment, and the vast majority of CRPC will develop mCRPC. AR antagonists have become one of the most important treatments for prostate cancer. According to the company's clinical research data, the core product proclomide is safer. Given its dual mechanism of action and chemical properties, which can downregulate AR expression, puclomide is potentially the best drug of its kind for treating mCRPC. In addition, pucluramide is undergoing phase III clinical trials for mCRPC in China, phase II clinical trials, and breast cancer clinical trials in the US.
In terms of operating performance: In fiscal years 2018 and 2019, net losses were 110 million yuan and 230 million yuan respectively; R&D expenses were 90 million yuan and 210 million yuan respectively; 32.4% of the company's total assets as of the end of 2019 were composed of intangible assets, mainly from licenses for drugs under development and drugs under development from Suzhou Kaixi, respectively, including GT1708F licensed at the end of 2016, ALK-1 (GT90001) licensed in 2018, freton (KX-826) acquired from Suzhou Kaixi in 2018, and 2019 A licensed c-MYC inhibitor. If the intangible assets mentioned above are impaired, it will adversely affect the company's operating performance.
In terms of valuation: Based on the global share capital of 3.7 billion after the public sale, the company's market value was HK$658—7.44 billion, which is lower than the Hong Kong stock market average. Since the company is not yet profitable, the PE valuation method does not apply. The price stabilizer this time is UBS, and there is no relevant track record reference. However, the sponsor, Huatai Financial, had 4 projects in '19, 2 up 2 and 2 down. The company brought in 4 cornerstone investors and subscribed for a total of about 120 million US dollars. Considering that the company's market value was about 2 billion yuan when it was delisted from the New Third Board in '18, and the market value after this prospectus was about 7 billion yuan after listing, the valuation is high. Although the prostate cancer drug market where the company is located is developing rapidly, competition in the industry is fierce, compounded by negative factors such as the recent price reduction of the anti-cancer drug abiraterone acetate tablets. Investors are advised to wait for the company to pay attention after listing. Based on the above, we gave it 59 points, and the rating was “no subscription”.
Risk warning: (1) market competition risk, (2) the company is in a loss, revenue is not stable, (3) R&D progress falls short of expectations, and results are uncertain