The company's recent situation
On November 7, 2023, the company announced that it had signed an agreement with Menarini to introduce the exclusive development and commercialization rights of Elacestrant (trade name: Orserdu) in China from Menarini.
reviews
Strengthen strategic cooperation with Menarini and introduce the world's first marketed oral SERD drug. According to the company announcement, ElaceStrant is the first oral SERD (selective estrogen receptor downregulation) drug to be marketed globally. It was approved by the FDA/EMA in January/September 2023 for the treatment of patients with advanced ESR1+ and ER+/HER2- breast cancer (about 25-30% of all breast cancer patients) who have progressed after endocrine treatment; the agreement stipulated that Saisheng will obtain Elacestrant's domestic benefits with a cash advance payment, milestone payment and net sales sharing. We expect Saisheng to obtain Elacestrant's domestic benefits. Relevant clinical trials will be carried out, and the listing application is expected to begin as soon as 2025-2026. Furthermore, according to the company's official website, Saisheng Pharmaceutical, Shanghai Pharmaceutical Holdings, and Menarini signed a tripartite strategic cooperation declaration in October 2023. In addition to Oeserdu, the company and Menarini have previously reached a product development agreement on Vaborem, so we recommend that you keep an eye on the progress of cooperation between the two sides.
Clarify BD strategies and expand a definitive pipeline around advantageous departments. The company has established an efficient commercial team in the field of anti-tumor and infection, and has also expanded its product portfolio around superior departments through cooperative introduction; in addition to Oserdu, the company has also introduced the pediatric oncology drug Dayouze (partner Y-mAbs, humanized GD2 monoclonal antibody, already marketed in China) and the advanced antibiotic Vibativ (partner Cumberland, can be used for MRSA infections, domestic NDA has been accepted), Vaborem (partner Menarini, can be used for carbapenem-resistant bacterial infections, domestic phase III), etc. Develop molecules that are relatively mature and more deterministic. We believe that a BD strategy that focuses on deterministic molecules is more conducive to leveraging the company's back-end capabilities and comparative advantages accumulated in corresponding departments. It is expected that these mid to late stage molecules will rely on the company's mature commercialization platform to further drive revenue growth within the next 2-3 years.
The variety of cash flows is growing steadily, with continued repurchases and dividends. The company actively manages the life cycle of its core product, Ridaxian, with revenue of 1.33 billion yuan (+13% YoY) on 1H23, and is continuously being incorporated into various guideline agreements. Relevant clinical research has been updated at academic conferences such as ASCO. At the same time, the company is also actively exploring the collaborative potential of Ridexine in tumor immunotherapy and expanding potential market space. At the same time, the company actively carried out repurchase dividends. From January to August 2023, the total amount of capital used by the company for repurchases and the 2022 annual report was over HK$1 billion, including a premium cash offer of nearly $700 million (major shareholders and management did not participate).
Profit forecasting and valuation
We maintain our profit forecast, corresponding to a price-earnings ratio of 5.9/5.4 times in 2023/2024; maintaining an outperforming industry rating. Considering the recent recovery in sector sentiment, we raised our target price by 8% to HK$13.5, corresponding to a price-earnings ratio of 7.3/6.6 times in 2023/2024, with room for 23% increase from the current stock price.
risks
Product pattern deteriorated; drug collection impact; new drug development fell short of expectations; product supply fell short of expectations.