Kaituo Pharmaceutical was founded in Suzhou in 2009 and focuses on independently developing innovative drugs for the treatment of androgen receptor (AR) related cancers and other diseases. A total of 6 products are in clinical research, including AR antagonists, ALK-1 monoclonal antibodies, mTOR kinase-targeted inhibitors, Hedgehog inhibitors, and AR-degraders.
A number of other products are in the pre-clinical research or IND filing stage, including PD-L1/TGF-beta bi-target antibodies, AR-degrader, and c-Myc inhibitors. The core product, procluramide for mCRPC indications, is expected to be approved for marketing next year. We are optimistic that the company has a differentiated and risk-balanced R&D pipeline, with broad room for growth in the future. Based on a cash-flow discount model, the company's three fastest-progressing core products, procluramide, furatane, and ALK-1, are valued. It is estimated that the reasonable market value of pioneering pharmaceuticals is HK$10.745 billion, or HK$29.1 per share, with room for 40% increase from current prices.
Report summary
The commercialization of the core product procluramide is imminent, and the prospects are promising. The company's main drug under development, procluramide (GT0918, a small molecule AR antagonist), is undergoing a phase III clinical trial for second-line treatment of metastatic casting-resistant prostate cancer (mCRPC) in China. It is expected that a new drug application will be submitted this year. Another phase III clinical trial of procluramide with abiraterone as first-line treatment for mCRPC in China is expected to complete patient enrollment this year. A phase II clinical trial of procluramide for second-line treatment of mCRPC is also being conducted in the US and is expected to be completed by the end of June this year. Benchmark Pfizer's enzalutamide, which is already on the market, and procluramide showed better safety and good efficacy. In the non-head-to-head trial, procluramide did not induce epilepsy in the subjects, and the proportion of the 200mg dose group that took 15 and 18 months of administration exceeded 31.4% and 20%, respectively, which was superior to the Japanese enzalutamide trial (20% for patients without chemotherapy). We believe that the total domestic and international indications of procluramide for mCRPC are expected to reach a peak sales of 5 billion yuan.
The product line is well-stocked, and chemical drugs and biopharmaceuticals form an echelon. The company's product line is clearly laid out around AR-related indications such as tumors, androgenic alopecia, etc., with a high degree of innovation and sufficient momentum for development. A phase II global multicenter clinical trial application for ALK-1 (GT90001) monoclonal antibody products for the treatment of advanced hepatocellular carcinoma has been approved by the FDA. The phase II clinical trial of furatane (KX-826) for androgenic alopecia was completed in December 2020. It is expected that in the next three years, the company will continue to have new products approved for listing, with sufficient development momentum.
Independent research and development capabilities have been deeply accumulated, and the company responded quickly after the COVID-19 pandemic to expand the COVID-19 indications for puclolamide.
In March '21, the study for critically ill patients reached the end of the trial, and the study on men with mild to moderate illness was approved by the FDA for phase III. Referring to Gilead's COVID-19 drug Veklury (Remdesivir), which has 20-year sales of 2.8 billion US dollars, the Veklury treatment cycle is 5 to 10 days, and the price of one course of treatment ranges from 2,340 US dollars (about 16,000 yuan) to 3120 US dollars (about 21,000 yuan), with sales of about 1 million doses. Kaituo Pharmaceutical originally designed a production capacity of about 4 million tablets per year for cancer patients. The workshop has now been remodeled and will be upgraded to 50 million tablets per year, which can supply about 1 million COVID-19 patients.
We believe that compared to Gilead Veklury and Lilly's neutralizing antibodies, the oral dosage form of procluramide is easier to increase market penetration, and COVID-19 indications are expected to contribute incremental flexibility to the company's performance.
First, it has a “buy” rating, with a target price of HK$29.1. Based on the AR development platform, the company continues to expand the field of indications through authorization, authorization, and cooperative development. We are optimistic that the company has a differentiated and risk-balanced R&D pipeline, with broad room for growth in the future. Based on a cash-flow discount model, the company's three fastest-progressing core products, procluramide, furatane, and ALK-1, are valued. It is estimated that the reasonable market value for developing the pharmaceutical industry is HK$10.745 billion, or HK$29.1 per share.
Main risk factors: R&D progress falls short of expectations, drug sales fall short of expectations, and medical insurance control exceeds expectations.