20220511-招银国际-瑞科生物-B-02179.HK-Leading_innovative_vaccine_player_with_rich_blockbuster_pipelines_62页_4mb

Summary of Recbio Technology (2179 HK) Equity Research Report

Core Content

Recbio Technology is a leading innovative vaccine company with a diverse and promising pipeline of 12 vaccine candidates, including three of the top five global best-selling vaccines from 2020. The company is focused on developing vaccines for HPV, shingles, tuberculosis (TB), flu, and hand, foot, and mouth disease (HFMD), with a particular emphasis on the HPV vaccine franchise.

Main Products and Pipeline

• REC603: A recombinant HPV 9-valent vaccine in Phase III clinical trials in China, with BLA submission expected by 2025E.
• ReCOV: A recombinant adjuvanted COVID-19 vaccine currently in Phase II/III trials in the Philippines and UAE, with EUA filing expected in 2022E.
• REC610: An IND-enabling recombinant shingles vaccine candidate, with IND submission expected in 2022E and BLA in 2024E.
• R520A: A pre-clinical mRNA vaccine targeting the Omicron variant of SARS-CoV-2, developed through a joint venture with Wuhan Ruikeji.
• REC601 & REC602: Recombinant bivalent HPV vaccines targeting mass market populations.
• REC604a & REC604b: HPV vaccines using Recbio's self-developed AS04 adjuvant, designed for fewer doses than existing products.

Technology Platforms

Recbio has developed a solid trifecta of technology platforms that support the design, optimization, and production of vaccines:

1. Antigen Design and Optimization: Utilizes a structure-based immunogen design approach.
2. Adjuvant Development and Production: Recbio can independently develop and manufacture novel adjuvants, benchmarking all FDA-approved adjuvants (AS01, AS03, AS04, CpG1018, MF59).
3. Immunological Evaluation: A top-tier platform for selecting optimal antigen-adjuvant combinations, enhancing immunogenicity.

These platforms enable Recbio to develop best-in-class vaccines and reduce dependency on third-party suppliers.

Commercialization and Market Strategy

Recbio is well-prepared for commercialization with:

• A GMP-standard manufacturing facility for ReCOV, capable of producing 300 million doses annually.
• An HPV vaccine manufacturing facility in Taizhou, Jiangsu, with a potential annual capacity of 5 million doses of 9-valent HPV vaccines or 30 million doses of bivalent HPV vaccines.
• A strategy to establish its own sales and marketing team in China and collaborate with biotech companies with strong domestic networks.
• Plans to enter overseas markets through partnerships with global pharmaceutical companies and technology transfer with local giants and NGOs in developing regions.

Financial Forecast

The company is expected to begin vaccine sales in FY2022E, with the following risk-adjusted revenue projections:

• FY2022E: RMB155 million
• FY2023E: RMB1,789 million
• FY2024E: RMB1,474 million

Despite the anticipated revenue growth, Recbio is expected to continue incurring net losses in these periods due to high R&D and operational expenses. The target price of HK$38.79 is derived from a 14-year DCF model with a WACC of 12.5% and a terminal growth rate of 2.0%.

Investment Thesis

• Rich innovative vaccine portfolio covering major infectious diseases.
• Comprehensive HPV franchise with five highly differentiated products.
• Advanced technology platforms that support the development of best-in-class vaccines.
• Well-prepared for commercialization with manufacturing capabilities and strategic partnerships.
• Net profit to breakeven in 2025E as multiple vaccine candidates approach regulatory milestones.

Investment Risks

1. Competition: Intense competition in the vaccine market, especially in the HPV and COVID-19 segments.
2. Clinical Development Failures: Risks associated with the success of clinical trials and regulatory approvals.
3. Government Regulation: Regulatory hurdles and uncertainties in vaccine approval processes.

Key Milestones

Conclusion

Recbio Technology is positioned to become a leading player in the global vaccine market, leveraging its innovative vaccine pipeline, advanced technology platforms, and strategic commercialization plans. With a target price of HK$38.79 and an upside of +59.63%, the company is initiated at BUY based on its potential to achieve regulatory milestones and market capture in key vaccine segments.