20210108-招银国际-德琪医药-B-06996.HK-Leading_Asia-Pacific_biopharmaceutical_company_developing_first-in-class_SINE_compounds_79页_3mb

Summary of Antengene Corporation Limited (6996 HK)

Core Content

Antengene Corporation Limited (6996 HK) is a leading clinical-stage biopharmaceutical company in the Asia-Pacific region, established in 2016 in Shanghai. It is focused on developing innovative oncology medicines, particularly first-in-class and best-in-class therapies targeting key oncogenic pathways and proteins.

Antengene has a robust and highly innovative pipeline of 12 clinical and pre-clinical assets, including two late-stage clinical assets, four early-stage clinical assets, and six pre-clinical stage assets. As of 31 Dec 2020, the company had 11 ongoing clinical trials and 4 planned, with 9 IND approvals across APAC regions.

The company's core products include ATG-010 (selinexor), a first-in-class and only-in-class SINE compound targeting XPO1, which has been approved by the FDA for the treatment of multiple myeloma (MM) and diffuse large B-cell lymphoma (DLBCL). ATG-008 (onatasertib) is a second-generation mTOR inhibitor, and ATG-016 (eltanexor) is a second-generation SINE compound with an improved therapeutic window. ATG-019 (KPT-9274) is a dual PAK4/NAMPT inhibitor, and ATG-017 (AZD0364) is a potent and selective ERK1/2 inhibitor.

Main Viewpoints

• Pipeline Strength: Antengene has a diverse and promising pipeline with multiple drugs in various stages of development, including two late-stage clinical assets and several pre-clinical candidates.
• First-in-class Innovations: ATG-010 is the first and only SINE compound approved by the FDA for MM and DLBCL, making it a key differentiator in the oncology space.
• Integrated R&D and Commercialization Platform: The company has a strong R&D team with experience in oncology drug development and a dedicated commercial team to support future drug launches.
• Commercialization Timeline: The company is expected to commercialize ATG-010 in 2022, ATG-008 and ATG-016 in 2024. Drug sales are forecasted to start in 2022, with expected revenue of RMB160 million in FY2022E and RMB486 million in FY2023E.
• Valuation and Investment Thesis: Antengene is initiated at BUY with a target price of HK$25.70, based on a 15-year DCF model (WACC: 11.1%, terminal growth rate: 2.0%). The valuation reflects the potential of its innovative drug pipeline.
• Market Potential: The oncology drug market in the Asia-Pacific region, especially in China, is growing rapidly, driven by increasing incidence of MM and DLBCL and unmet medical needs.

Key Information

Clinical and Pre-clinical Assets

Drug Name	Stage	Target	Indication
ATG-010 (selinexor)	Phase III (MM)	XPO1	R/R MM, R/R DLBCL
ATG-008 (onatasertib)	Phase III (HCC)	mTORC1/mTORC2	2L+ HBV+ HCC, NSCLC, etc.
ATG-016 (eltanexor)	Phase II (MDS)	XPO1	R/R MDS, solid tumors
ATG-019 (KPT-9274)	Phase II (NHL)	PAK4/NAMPT	NHL, advanced solid tumors
ATG-017 (AZD0364)	Phase II (Hem/Onc)	ERK1/2	Hematological malignancies, etc.

Market Trends

• Multiple Myeloma (MM): Incidence increased from 18.3 thousand in 2015 to 20.7 thousand in 2019, with a CAGR of 3.1%. Expected to grow to 23.8 thousand in 2024 and 27.7 thousand in 2030.
• Diffuse Large B-cell Lymphoma (DLBCL): Incidence rose from 31.8 thousand to 35.3 thousand in 2019, with a CAGR of 2.7%. Projected to increase to 39.8 thousand in 2024 and 45.3 thousand in 2030.
• Global Oncology Market: Expected to grow significantly due to increasing demand for targeted therapies and the expansion of treatment options.

Financial Forecast

FY	Revenue (RMB mn)	Net Loss (RMB mn)
FY18A	0	-146
FY19A	0	-324
FY20E	0	-680
FY21E	0	-810
FY22E	160	-732
FY23E	486	-478

Investment Risks

• Competition: Intense competition in the oncology space, especially from other SINE compounds and established pharmaceutical companies.
• Clinical Delays: Potential delays in clinical development activities, which could impact the commercialization timeline.
• Regulatory Challenges: Extensive government regulations in the APAC region may pose challenges in drug approval and commercialization.
• IP Protection: Risk of failure in protecting intellectual property rights, which is crucial for maintaining a competitive advantage.

Share Performance

• Current Price: HK$17.38
• Target Price: HK$25.70 (+47.86% upside)
• Market Cap: HK$11,665 million
• Shareholding Structure:
  • Meiland Pharma Tech: 26.21%
  • Active Ambience: 9.34%
  • FMR LLC: 9.13%
  • Begonia Investment: 8.49%
  • Qiming Venture: 5.80%
  • Celgene China: 4.11%
  • ATG Incentives Plus: 3.83%
  • Free float: 33.09%

R&D and Commercialization Strategy

• Antengene has a decompartmentalized R&D approach to promote cross-functional collaboration.
• The company plans to expand its R&D team to over 100 members by 2023E.
• It has a commercial team led by Lixin Yu in China and Thomas Karalis in other APAC markets, with strategic oversight by John Chin.

Key Partnerships

• Karyopharm: Exclusive license for ATG-010, ATG-016, and ATG-527 in APAC regions.
• AstraZeneca: Exclusive global license for ATG-017.
• Origincell: Exclusive global rights for ATG-101.

Conclusion

Antengene is well-positioned to become a key player in the Asia-Pacific oncology market with its strong R&D pipeline, innovative drug development approach, and strategic partnerships. The company is expected to enter the commercial phase with the approval of its lead drug, ATG-010, in 2022 and is valued at HK$25.70 based on a DCF model. However, the company faces significant risks including competition, clinical delays, regulatory hurdles, and IP protection challenges. Despite these, its promising pipeline and market potential make it an attractive investment opportunity.