Agencies:Everbright Securities
Rating: Buy
Target price:HK$78
Incidents:
The marketing authorization application for HLX02 (trastuzumab, EU trade name: Zercepac) for treatment of HER-positive early-stage breast cancer, HER2-positive metastatic breast cancer, and untreated HER2-positive metastatic gastric cancer or gastroesophageal adenocarcinoma submitted by the company's business partner Accord Healthcare Limited (“Accord”) was approved by the European Commission. HLX02 has obtained a centralized listing license in all EU member states as well as Iceland, Liechtenstein, and Norway.
Comment:
China's first antibody-like drug exported to the European Union, ranking among world-class antibody drugs
Zercepac is the first antibody-like drug exported from China to the European Union. The approval of this product marks that the company's product quality has reached a world-class level and is a milestone in the international layout. Zercepac is the 6th trastuzumab analogue approved in Europe, and sales in Europe are handled by partner Accord. Accord is ranked in the top three generic drug sales in Europe and ranked first in generic drug sales in the oncology field. There are 8,500+ generic drugs on sale, covering 85+ countries. In addition to the initial payment and milestone payments of US$40.5 million (original agreement) +US$30.08 million (additional specifications), the company will also receive license fees based on 15% to 26.5% of the profit generated from net sales.
Establish extensive partnerships and monetize clinical value internationally
In addition to authorizing Accord's European interests, the company's trastuzumab also authorized Mabxience in Argentina, Uruguay, Paraguay, Jacobson in Hong Kong and Macau, and Cipla's exclusive commercialization rights in Australia, New Zealand, Colombia and Malaysia to monetize the clinical value of trastuzumab analogues to the widest extent possible into commercial value.
Leading domestic progress and excellent competitive pattern
The company's trastuzumab submitted a marketing application in China in April 2019, and is expected to be approved for listing in the near future, becoming the first trastuzumable-like drug in China. As of 2020.7.30, no other company has submitted a marketing application for trastuzumab analogues. The company's trastuzumab will have a long time window. The competition pattern is relatively good in the short term, the price war pressure is low, and the market share is expected to increase rapidly.
Earnings forecasts, investment ratings and valuations:
The company is one of the leading antibody drugs in China. It is leading progress in internationalization of monoclonal antibody analogues, and has strong overall competitive strength. Considering the increased indications for rituximab (see appendix), the revenue forecast for 2020-2022 was raised to 7.73/18.33/3.143 billion yuan (original forecast was 5.98/1,588/2,88/2,843 billion yuan), up 750.6%/137.1%/71.5% year on year; net profit was -6.81/-0.52/671 billion yuan, corresponding to EPS of -1.25/0.10/1.24 billion yuan. Considering the rapid pace of release of similar drugs, we adjusted the peak time forecast for some drugs and added the valuation forecast for HLX07, an improved EGFR drug. According to estimates, the company's valuation was 38.1 billion yuan. According to the 2020.7.30 HKD/RMB exchange rate of 0.9020, corresponding to HK$42.3 billion, the target price was raised to HK$78 billion. Maintain a “buy” rating.
Risk warning:Risk of R&D progress falling short of expectations; Risk of sales not meeting expectations; GlobalThe risk that the expansion will not meet expectations.
