Key points of investment:
The international platform innovates pharmaceutical companies and creates a flagship position in the ADC field. Sichuan Colun Botai Biotech is a subsidiary of Colon Pharmaceutical Holdings. It was founded in 2016, officially listed on the Hong Kong Stock Exchange in July 2023, and included in the Hong Kong Stock Connect component in March 2024. The company focuses on R&D, production, commercialization and international cooperation of biotechnological drugs and innovative small molecule drugs. Build a rich and comprehensive ADC innovation pipeline through an advantageous R&D platform, and reach strategic cooperation with international pharmaceutical giants to enter the international market.
The “OptiDC” R&D platform helped the company continue to expand its ADC pipeline, and MSD actively promoted the progress of internationalization. Currently, the company is presenting a research and development pattern with ADC drugs as the core and advancing in hot fields such as monoclonal antibodies, double antibodies, and innovative target small molecule drugs. At present, the company has 4 ADC drugs that have entered the clinical stage, covering the core ADC targets TROP2, HER2, CLDN18.2, and Nectin-4. In addition, the company also has a variety of pre-clinical ADC drug reserves. The company's deep cooperation with MSD has made Columbotai the most important partner of MSD's ADC pipeline, and the core pipeline has broad future space in the international market.
SKB264 (Trop2 ADC) is about to be approved domestically, and overseas clinical progress is being accelerated: domestically, 3L TNBC was accepted by the NDA in December 2023 and is expected to be approved this year; eGFRMT TKI-resistant NSCLC is expected to submit a marketing application this year; 1LTNBC and 2L+ HR+/HER2- BC are in the registered clinical phase; 1L HR+/HER2- BC (after ET failure) and 1legFrWT NSCLC are expected to enter registered clinical trials this year. Overseas, since October 2023, MSD has intensively launched 8 global phase III clinical trials. As one of the important entry points for clinical breakthroughs, it aims to cover a wider range of cancer types and actively expand the front line. The strong combination of K Pharmaceutical+SKB264 is expected to continue the life cycle of MSD K Pharmaceuticals and explore a broad market.
Large molecules and small molecules are in parallel in the research pipeline, taking into account short-term fulfillment and long-term growth. The A166 (HER2 ADC) NDA for 3L+ HER2+BC was accepted by the CDE in May 2023 and is expected to be approved for listing this year; the A167 (PD-L1) NDA for 3L+ RM-NPC was accepted by the CDE in November 2021 and is expected to be approved for marketing this year; the NDA for A140 (cetuximab biosimilar) was accepted by the CDE in September 2023. In the field of small molecules, A400 (selective RET inhibitor) is expected to be submitted for marketing this year for RET+NSCLC; other pipelines such as A223 (JAK1/2 inhibitor) are progressing steadily, and the indications relate to tumor and non-tumor fields, and have good growth potential.
Profit forecasting and valuation. The company has an ADC R&D platform in line with the international community and an innovative product pipeline with market potential, opening up valuation space in overseas markets. We expect the company's total revenue for 2024-2026 to be 803/13.06/2,281 million yuan, respectively. Calculated using the DCF method, assuming a sustainable growth rate of 2%, WACC of 8.41%, the reasonable equity value of the company is 47.2 billion yuan, corresponding to HK$51 billion (exchange rate of RMB 1 = HK$1.08). First coverage, giving the company a “buy” rating.
Risk warning: risk of clinical development failure, risk of deteriorating competitive landscape, risk of sales falling short of expectations, industry policy risk, etc.