20210726-招银国际-开拓药业-B-09939.HK-Encouraging_real-world_data_of_proxalutamide_in_COVID-19_treatment_in_Paraguay_6页_1mb

Kintor Pharmaceutical (9939 HK) Company Update Summary

Core Content

Kintor Pharmaceutical (9939 HK) is a biopharmaceutical company that has been making significant progress in its pipeline of drugs, particularly in the context of the ongoing global efforts to combat the pandemic and develop new treatments for various diseases. The company is currently focused on proxalutamide and pyrilutamide, both of which have shown promising results in clinical trials and real-world applications.

Main Points

1. Proxalutamide in COVID-19 Treatment

• Emergency Use Authorization (EUA): Kintor received its first overseas EUA for proxalutamide in Paraguay in July 2021.
• Real-World Data: In the first 25 hospitalized patients treated with proxalutamide, one patient (4%) died, while 7 patients (28%) who initially required high flow oxygen showed improvement.
• Clinical Trials: The company is conducting two phase 3 multi-regional clinical trials (MRCT) for proxalutamide in outpatients in the US, South America (including Brazil), the EU, and Asia, with the first patient dosed on April 25, 2021, and interim data expected in 4Q21E. Additionally, a phase 3 MRCT for inpatients in the US is underway.
• Mechanism of Action: Proxalutamide works by targeting androgens, which are thought to promote severe forms of COVID-19 due to their role in increasing the expression of TMPRSS2 and ACE2 receptors, key molecules in coronavirus infection.

2. Commercialization Strategy

• Licensing Agreement: On July 15, 2021, Kintor entered into a licensing agreement with Fosun Pharma for the commercialization of proxalutamide in India and 28 African countries.
• Revenue Potential: Kintor is expected to receive upfront and development milestone payments up to RMB110 million and commercialization milestone payments of RMB450 million, with eligibility for at least 50% of operating profits in the collaboration regions.
• Distribution Network: Fosun Pharma's subsidiaries, Gland Pharma and Tridem Pharma, have strong distribution networks in India and French-speaking African regions.

3. Pyrilutamide Development

• Clinical Trial: Kintor expects to release phase 2 trial data for pyrilutamide in the treatment of androgenetic alopecia (AGA) in 2H21E.
• FDA Approval: The US FDA has approved the phase 2 trial for pyrilutamide in AGA, indicating the potential for further development in this area.

4. Market Position and Financials

• Market Capitalization: As of the latest data, the company's market cap is HK$30,387 million.
• Earnings Outlook: The company is projected to report significant growth in revenue and net profit from FY21E onwards, with FY21E revenue at RMB10,132 million and net profit at RMB5,018 million.
• Valuation: The target price (TP) is HK$98.07, which is an increase from the previous TP of HK$92.08, based on a 10-year DCF model with a WACC of 9.7% and a terminal growth rate of 3.0%.

5. Risk Factors

• Clinical Trial Risks: Potential failure in phase 3 trials for proxalutamide in the treatment of COVID-19.
• Pipeline Delays: Delays in the development or commercialization of the company's pipeline could impact future performance.

Key Information

• Current Price: HK$78.40
• Up/Downside: +25.09%
• Target Price: HK$98.07
• Target Debt to Asset Ratio: 30.0%
• Effective Corporate Tax Rate: 15.0%
• ROE (Return on Equity): Expected to rise from -44% in FY21E to 42% in FY23E.
• ROA (Return on Assets): Expected to rise from 75% in FY21E to 39% in FY23E.
• Current Ratio: Increased significantly from 1.5 in FY19A to 19.8 in FY23E, indicating improved liquidity.

Key Pipeline Drugs

Financial Highlights

• Revenue: Expected to grow from RMB0 in FY19A to RMB10,132 million in FY21E and RMB8,351 million in FY22E.
• Net Profit: Expected to grow from RMB-457 million in FY21E to RMB5,018 million in FY23E.
• EPS (Earnings Per Share): Projected to rise from RMB-1.18 in FY21E to RMB12.95 in FY23E.
• Operating Margin: Projected to increase from 68.44% in FY21E to 70.79% in FY22E.
• Net Margin: Projected to increase from 58.10% in FY21E to 60.08% in FY22E.

Valuation Analysis

• DCF Valuation: Based on a 10-year risk-adjusted DCF model, the equity value is estimated at HK$38,010 million.
• Sensitivity Analysis: The target price (HK$98.07) is derived from the model, and the valuation is sensitive to changes in WACC and terminal growth rate.

Analyst Ratings

• BUY: Indicates that the stock has potential for more than a 15% return over the next 12 months.
• OUTPERFORM: Suggests the industry is expected to outperform the relevant broad market benchmark.

Conclusion

Kintor Pharmaceutical is leveraging its pipeline of promising drugs, particularly proxalutamide and pyrilutamide, to expand its market presence and drive growth. The company's real-world data and clinical trial progress provide a strong foundation for its valuation and investment potential. Despite the risks associated with clinical trials and pipeline delays, the current financial outlook and strategic collaborations suggest a positive trajectory for the company's future performance.