Puclosamine receives first EUA approval; reiterates "buy"

Pioneering Pharmaceutical announced on July 16, 2021 that the Ministry of Public Health and Social Welfare of Paraguay (MSPBS) had granted the Emergency use Authorization (EUA) of procramine for the treatment of COVID-19 inpatients in the MSPBS hospital system. We believe that the approval of this emergency right of use is the starting point for Puclosamide's expansion into emerging markets. We maintain our "Buy" rating and expect the company's EPS for 2021-22-23 to be RMB1.58 / 36.41Purple 6.27, maintaining our DCF-based target price of HK $88.19 (WACC:10.2%).

The starting point of global business development

The recent epidemic of COVID-19 in Paraguay has been partially controlled, but the epidemic continues, with more than 1000 new cases a day. According to the company, Pucruamide has achieved positive preliminary results among COVID-19 inpatients at Barrio Obrero Hospital in Paraguay. We believe that the approval of the first emergency use right is the starting point for the company's follow-up global market exploration: 1) We judge that this approval is based on the positive clinical results of Puclosamide in Brazil, showing the reliability of this clinical data; 2) the real-world data obtained in Paraguay are expected to confirm the efficacy of Puclosamide in patients with more complex baseline data. 3) the cooperation between the company and Shanghai Fosun Pharmaceutical (600196 CH) in India and Africa shows the company's ambition to locate emerging markets, and this approval reflects the preliminary results of the company's strategy.

The clinical progress of the three stages of III goes hand in hand

Pioneering Pharmaceutical is currently conducting three phase III clinical studies in many countries and regions, including the United States, South America, the European Union and Asia, to verify the efficacy of proclomide in the treatment of outpatients and inpatients of COVID-19. We expect that the mid-term analysis of the III phase trial will be conducted in 4Q21, and the company is expected to obtain EUA approval of Puclosamide in the United States and other places by the end of 2021.

Risk hints: 1) failure to meet the main indicators of clinical trials; 2) vaccination to inhibit the epidemic situation of COVID-19; 3) uncertainty of commercialization; 4) progress of clinical trials and regulatory review is slower than expected.