The company and Boehringer Ingelheim reached a strategic cooperation to jointly develop and commercialize BI oncology pipelines in mainland China: Today (April 8), the company announced a strategic cooperation with Boehringer Ingelheim (BI) to jointly develop and commercialize BI oncology pipelines in mainland China, including 3 assets in clinical development and several early stage assets. Currently, the transaction consideration has not been disclosed. Product revenue will be included in Zhongsheng's financial statements, and double-digit profit margins are expected.
This strategic cooperation is a positive surprise, showing that multinational pharmaceutical companies recognize the company's strong commercialization capabilities and the company's outstanding BD capabilities: it is rare for multinational pharmaceutical companies to reach multi-product strategic cooperation. On the one hand, it shows that BI highly recognizes the company's ability to commercialize domestic oncology. On the other hand, the company can win the trust of large multinational pharmaceutical companies, which also shows that the company's talent culture is becoming more and more international and BD capabilities are outstanding.
The three clinical assets and the company's existing pipeline are complementary, and are expected to reach a total sales peak of 5 billion yuan: management believes that the 3 clinical assets and the company's existing oncology pipeline can achieve good synergistic and complementary effects, and they all have potential for FIC/BIC/TOP2 varieties. The details are as follows:
(1) Brigimadlin (MDM2-p53 antagonist): It has potential for FIC and BIC, and is expected to be approved as soon as 2025. BI is the first company to enter registered clinical trials for this target. Compared with other same-target competitors (such as Yasheng), BI has a first-mover advantage and rich research experience with MDM2-p53 targets. Currently, patients have been enrolled in key international clinical trials for DDLPS (dedifferentiated liposarcoma). They will apply for NDA as soon as possible, and are expected to be approved as soon as 2025.
(2) Zongertinib (HER2 selective TKI inhibitor): It can bind to wild-type and mutant HER2 receptors (including exon 20 mutations) tyrosine kinase domain (TKD), and its high selectivity can avoid the toxicity of binding to wild-type EGFR targets. The safety is particularly outstanding, and it has the potential to be used in various HER2 mutant tumors. Currently, the fastest progressing indication is 1L of HER2TKD mutant nsq-nsCLC, which is in the international critical clinical stage and is expected to be approved for marketing as soon as 2027. Although Enhertu (HER2 ADC) has been approved for this indication, the toxic side effects and adverse effects of ADC are not small, and Zongertinib is expected to gain considerable market share due to its excellent safety.
(3) BI 764532 (DLL3/CD3 bispecific TCE): Currently, the indications for 2L SCLC and neuroendocrine tumors are in international clinical phase II, and it is expected to be marketed as soon as 2028. BI764532 is an IgG-like structure. Although development progress is slower than Amgen/Baekje DLL3 dual anti-Bite, the IgG-like structure has been scientifically proven and more mature. China Biopharmaceuticals is one of the strongest pharmaceutical companies in the SCLC field in China (anlotinib has been approved for 3L SCLC; anlotinib combined with PD-L1 treatment is expected to be approved in 2Q24). Rich commercialization experience can help the company gain more market share. At the same time, potential approval of 2L SCLC can also help the company achieve full coverage of the SCLC field.
We can look forward to more product cooperation with BI in the future: Management believes that the 3 clinical assets currently disclosed are only the beginning of a strategic cooperation with BI, which may expand to more early-stage tumor products and other disease fields in the future. Currently, the company does not have a product pipeline that conflicts with BI.
Raise the target price to HK$5.1: We added the BI Cooperation Pipeline to our model. The BI pipeline is estimated to be valued at around RMB 9 billion (assuming: peak sales of 5 billion yuan x 60% success rate x 3 times PS). Based on the DCF valuation model (WACC: 8.2%, sustainable growth rate: 3%), our target price was raised from HK$4.5 to HK$5.1, maintaining a “buy” rating.
Investment risks: Sales fall short of expectations, profit falls short of expectations, R&D delays or failures.