20230329-招银国际-诺诚健华-B-09969.HK-Positive_PoC_data_of_orelabrutinib_for_MS_6页_931kb

InnoCare Pharma (9969 HK) Summary

Core Content

InnoCare Pharma (9969 HK) is a biopharmaceutical company that has reported significant financial and clinical developments in FY22. The company's primary drug, orelabrutinib, has demonstrated strong sales growth, with total revenue of RMB625 million in FY22, driven by increased market penetration following its inclusion in the National Reimbursement Drug List (NRDL) in January 2022. Orelabrutinib sales in 4Q22 were slightly lower than in 3Q22 due to the impact of the pandemic, but the overall trend remains positive.

Main Points

Clinical Development

• Positive PoC Data for MS:

  • The Phase 2 trial (NCT04711148) of orelabrutinib in relapsing-remitting multiple sclerosis (R/R MS) showed promising results with a relative reduction in the cumulative number of new GdE+ T1 MRI brain lesions within Week 12:
    • 50mg QD: 71.1% reduction (p = 0.0238)
    • 50mg BID: 80.8% reduction (p = 0.0032)
    • 80mg QD: 92.1% reduction (p = 0.0006)
  • The results indicate a dose-dependent improvement, with the 80mg group showing the best outcomes. These results are better than those of tolebrutinib and evobrutinib in cross-trial comparisons, attributed to superior plasma exposure and brain penetration.
  • The company plans to stop further patient enrollment in the trial and release 24-week results in May 2023. It is also in discussions with the FDA to lift the partial study hold and design a Phase 3 MRCT trial.

• Positive PoC Data for ITP:

  • In 22 patients with prior response to glucocorticoids or intravenous immunoglobulin, 75.0% (6 out of 8) in the 50mg arm achieved the primary endpoint, highlighting orelabrutinib's potential in treating immune thrombocytopenia (ITP).

Regulatory and Commercial Progress

• Approval for r/r MZL in China: Orelabrutinib is expected to be approved for relapsed/refractory marginal zone lymphoma (r/r MZL) in 1H23, becoming the first BTK inhibitor in China for this indication.
• US Approval: The company has completed patient enrollment for the Phase 2 registrational trial for r/r mantle cell lymphoma (r/r MCL) in the US, which could be the first US indication for orelabrutinib.
• Tafasitamab: The bridging study in mainland China is expected to be completed this year, with a plan to file a Biologics License Application (BLA) by end-2023 or early 2024.

Financial Overview

• Revenue:
  • FY21A: RMB1,043 million
  • FY22A: RMB625 million
  • FY23E: RMB959 million
  • FY24E: RMB1,459 million
  • FY25E: RMB2,444 million
• Net Loss:
  • FY22A: RMB894 million
• Cash Position: As of end-2022, the company has RMB9.1 billion in cash, which is sufficient to support R&D investments.

Cost Efficiency

• The company has improved cost efficiency, with selling, R&D, and admin costs as a percentage of total revenue decreasing to 72% / 96% / 27% in 2H22 from 86% / 111% / 32% in 1H22.
• Excluding license-in expenses, R&D costs increased by 29% YoY to RMB639 million in FY22 from RMB496 million in FY21.

Valuation and Investment Recommendation

• Maintain BUY:
  • Target Price: HK$10.84
  • Current Price: HK$8.12
  • Upside: 33.5%
• DCF Valuation:
  • Present value of enterprise: RMB9,583 million
  • Equity value: RMB16,257 million
• Terminal Growth Rate: 3.0%
• WACC: 11.37%
• Sensitivity Analysis:
  • The target price is sensitive to changes in the terminal growth rate and WACC. For instance, at a terminal growth rate of 3.0%, the target price is HK$10.84.

Key Information

• Orelabrutinib is a BTK inhibitor that has shown strong potential in treating autoimmune diseases such as MS, SLE, ITP, and NMOSD.
• The company has a strong cash position, which supports ongoing R&D and commercial activities.
• The company is actively pursuing regulatory approvals in both China and the US, which could significantly boost revenue growth.
• Financial performance has shown a trend of improving cost efficiency, although net losses remain due to high R&D and operating expenses.
• Analysts have maintained a BUY rating, indicating strong potential for future returns.

Share Performance

• Market Cap: HK$14,326.3 million
• Average 3-Month Trading Volume: HK$11.6 million
• 12-Month Price Performance: The stock has shown mixed performance over different periods, with a 1-month decline of -5.7%, a 3-month decline of -37.5%, and a 6-month increase of 2.4%.

Shareholding Structure

• Hillhouse Capital: 11.8%
• King Bridge Investments: 9.2%

Analyst Certification

• The research analyst certifies that the views expressed in the report reflect personal opinions and that there are no conflicts of interest in the preparation of the report.

Important Disclosures

• This report is not investment advice and should not be relied upon for making investment decisions.
• CMBIGM is not a registered broker-dealer in the US and may have conflicts of interest.
• The report is intended for distribution to specific investors and may not be reproduced or shared without prior written consent.