20160310-中国银河国际证券-三生制药-01530.HK-INITIATE_COVERAGE_Pioneer_in_the_thriving_biopharmaceutical_industry_23页_1mb

报告摘要

3SBio [1530.HK] Summary

Core Content

3SBio is a leading biopharmaceutical company in China, established in 1993, and has emerged as a pioneer in the industry. It has demonstrated strong growth and a solid position in the healthcare sector due to its established blockbuster products, innovative R&D capabilities, extensive market coverage in high-end hospitals, and strategic M&A activities. The company has initiated a BUY rating with a Target Price (TP) of HK$11.67, which implies an upside potential of 16.9% and a 2016E/17E PER of 26.8x/19.8x.

Main Points

1. Established Blockbuster Products

EPIAO (Recombinant Human Erythropoietin) is a leading product in the rhEPO market, holding over 40% market share in China. It is used for the treatment of anemia associated with CKD, blood transfusions in surgery, and chemotherapy-induced anemia (CIA). Expected CAGR of 20.1% from 2014 to 2017E.
TPIAO (Recombinant Human Thrombopoietin) is a National Class I New Drug and the only rhTPO product in China. It is used for chemotherapy-induced thrombocytopenia (CIT) and immune thrombocytopenia (ITP). Expected CAGR of 28.0% for rhTPO in the same period.
These two products are expected to account for over 75% of total revenue in 2015E and are key drivers of the company’s organic growth.

2. Innovative R&D Team

The company has a research team of about 130 members.
It has 28 products in the R&D pipeline, with 14 classified as National Class I New Drugs.
The R&D expense ratio is expected to range between 5% to 10%, indicating a strong focus on innovation and development.
The acquisition of CP Guojian is expected to further enhance its R&D capabilities and expand its product portfolio into the monoclonal antibody (mAb) field.

3. Strong Sales and Marketing Strategy

The company uses an academic promotion model to promote its high-end products.
It has a sales force of 833 in-house employees, 110 distributors, and 462 third-party promoters, covering 1,162 Class III hospitals and 2,244 Class II hospitals.
This strategy has enabled it to maintain a dominant market position and secure insurance coverage for its products, enhancing its market reach.

4. Recent M&A Activities

The company has made four major M&A acquisitions since late 2014, including the acquisition of CP Guojian in early 2016 for RMB6.5bn.
This acquisition has expanded its product portfolio into mAb therapeutics, providing a platform for future product development and manufacturing.
These M&A activities are seen as essential for diversifying the product portfolio and filling the growth gap between the launches of new products.

Key Financials

Metric	2013A	2014A	2015E	2016E	2017E
Turnover (RMB m)	875	1,131	1,701	3,023	3,942
Core Net Profit (RMB m)	275	411	571	928	1,259
Core Net Margin (%)	31.4	36.3	33.6	30.7	31.9
Core EPS (RMB)	0.109	0.163	0.227	0.369	0.501

Key Ratios

Metric	2013A	2014A	2015E	2016E	2017E
Sales Growth (% YoY)	33.4	29.2	50.4	77.8	30.4
Core Net Profit Growth (%)	110.5	49.5	38.9	62.6	35.7
PER (x)	77.5	51.8	37.3	23.0	16.9
PBR (x)	23.5	27.0	4.6	3.9	3.3
ROAE (%)	22.5	41.0	17.9	15.7	17.9

Investment Highlights

Market Leadership: 3SBio holds a leading position in the rhEPO and rhTPO markets in China.
Growth Potential: The company is expected to achieve a core EPS CAGR of 45.2% between 2014 and 2017E.
Valuation Justification: Despite being highly valued (as of March 9, 2016, at HK$9.99), the strong growth potential in the fast-growing biopharmaceutical sub-sector justifies the current valuation.
Academic Promotion Model: Effective in promoting high-end products and expanding market coverage.

Investment Risks

Overly Concentrated Product Portfolio: Reliance on a few core products.
Potential ASP Pressure: Possible downward pressure on the pricing of core products.
New Product Launch Delays: Slower-than-expected introduction of new products could affect growth.

Product Portfolio

Product	Generic Name	Indication	Highlights
EPIAO	Injectable Recombinant Human Erythropoietin	Anemia associated with CKD, CIA, surgery transfusion	Dominant market leader, only product approved for all three indications in China
TPIAO	Recombinant Human Thrombopoietin	CIT, ITP	Only commercialized rhTPO product in the world, National Class I New Drug
IV Iron Sucrose	Iron Sucrose	Iron deficiency anemia	Complementary to EPIAO, better efficacy and fewer side effects
SEPO	Injectable Recombinant Human Erythropoietin	Anemia associated with CKD, CIA	Complementary to EPIAO, covers different dosage forms and distribution channels
Sparin	Low-Molecular-Weight Heparin Calcium	DVT prophylaxis, hemodialysis clot prevention	Most widely used anticoagulant, fewer side effects and more predictable response
Intefen	Recombinant Human Interferon alpha-2a	Malignancies, viral infections	One of the first interferon products in China
Inleusin	Recombinant Human Interleukin 2	Renal cell carcinoma, melanoma, tuberculosis	One of the first interleukin products in China
Gan Xin	Metadoxine	Alcoholic liver disease	In-licensed from an independent third party

Conclusion

3SBio is well-positioned to be a long-term winner in the Chinese healthcare sector, supported by its blockbuster products, innovative R&D pipeline, effective sales and marketing model, and strategic M&A activities. The company has shown strong revenue growth and is expected to maintain a high core EPS CAGR through the combination of organic growth and product diversification. The BUY rating and target price reflect confidence in its future growth potential and market leadership in the biopharmaceutical industry.