Events and comments: the company released the results of the interim report. 1H22 has a revenue of US $27.6 million, mainly an advance payment of US $25 million authorized by AstraZeneca PLC. The R & D cost was US $83.6 million (yUnix 102.9%), mainly due to two phase 3 clinical launches, so the clinical-related costs reached US $60.9 million (yAccord 153.8%) and the staff cost was US $17.7 million (yUnix 35.2%). Administrative expenses decreased by $10.0 million compared with the same period last year, mainly due to 1H22's lack of employee incentive expenses. A loss of $73.1 million during the period (18.7% for yUnix). Cash and bank balances were US $202.9 million, a decrease of US $13.4 million month-on-month. The stable cash flow was mainly due to an increase of US $44.3 million in bank and other borrowings, of which long-term borrowings were about $370 million. The company believes that after the end of the two phase III clinical trials next year, the R & D costs will be greatly reduced, as well as the revenue from licensing fees and technology platform extension cooperation, and the cash flow will be able to support more than 2 years.
Catalyst in the coming year: 1) data readout: HBM9161 (Bartolizumab) MG indication Phase 3 clinical data readout (2H22); HBM9036 (dry eye disease) clinical data readout (2H22); HBM4003 (CTLA-4 ADCC enhanced monoclonal antibody) melanoma data read out at the academic conference (2H22-1H23), the management will show significant results on the phone. 2) Clinical development: HBM4003 will carry out phase 3 clinical trials in the next 6-12 months, and HBM1020 (B7H7 monoclonal antibody) will enter the clinical stage in 2H22. HBM9027 (PDL1xCD40) will submit an application for IND next year. HBM8379 (TSLP) 2H22 completed the first drug administration of Ph1.
Opportunities for commercialization are about to emerge. The company already has 16 clinical and preclinical products, two introduced products such as bartolizumab (rare diseases such as myasthenia gravis) and HBM9036 will release phase III clinical data and report in the next 3-9 months.
1H22 has completed external cooperation on a number of technology platforms and products, mainly in four directions, including product global licensing (US $350 million to authorize HBM7022 to AstraZeneca PLC), joint development, establishment of cooperative enterprises (NK cell technology platform cooperation) and platform licensing. Management believes that the above cooperation opportunities will continue to be expanded in the future to increase cash flow.
Valuation
Maintain better than the big city rating, target price HKD 8.03( unchanged). We forecast the cash flow of the company's FY22-32 and use the risk-adjusted discounted cash flow (DCF) model to value the company. The model assumes that WACC 11.8% (unchanged), because the forecast of future cash flow is mainly contributed by two products currently in phase III clinical, and phase III pipelines generally give WACC 11-13%. The sustainable growth rate is 2.0% (unchanged) because the company's dual-anti-platform technology has been validated and endorsed by big drug companies, but FIC's early pipeline still needs data to support it.
Risk
The risk of clinical development failure, the risk of government regulation, the risk of drug approval failure.