20180905-招商证券_香港_-歌礼制药-B-01672.HK-Promising_anti-viral_franchise_51页_5mb

Ascletis Pharma (1672 HK) Summary

Core Content

Ascletis Pharma is a fully-integrated anti-viral biotech platform in China with long-term opportunities in the under-tapped HCV and HIV markets. The company has developed and commercialized several anti-viral therapies, including DAA+PR (Ganovo) and all-oral interferon-free DAA (Ravidasvir/Danoprevir), both of which have demonstrated high cure rates and strong safety profiles in clinical trials.

Main Rationales for Investment

• Market Growth Potential:
  China's anti-viral market is expected to grow significantly, reaching RMB144bn by 2028E, with a CAGR of 17%. The HCV market alone is projected to grow to RMB47bn in 2028, representing about 33% of the anti-viral market.

  • In 2017, China had 25.2mn HCV patients with a treatment rate of only 0.3%, while the treatment rate is forecasted to rise to 4.5% by 2028.
  • The US treatment rate for HCV increased from 2.4% in 2013 to 7.2% in 2016 after the introduction of DAA drugs.

• Regulatory and Diagnostic Improvements:
  China has implemented stricter screening and diagnostic processes for HCV and HBV since 2017, which is expected to increase the number of diagnosed patients and drive treatment rates upward.

• Affordability and Reimbursement:
  The Chinese government is actively working to improve the affordability of innovative drugs through dynamic updates to the National Reimbursement Drug List (NRDL) and Provincial Reimbursement Drug List (PRDL). The expansion of commercial insurance and rising household income are also expected to support broader access to these therapies.

• Pipeline Differentiation:
  Ascletis has three DAA regimens with strong differentiation:

  • Ganovo (DAA+PR): Demonstrated a 97% SVR12 cure rate in genotype 1 and 4 patients, significantly higher than the current SOC (c.60% SVR24) and Gilead's DAA+PR regimen (94% SVR12).
  • Ravidasvir/Danoprevir (RDV/DNV): All-oral, interferon-free regimen with a 99% SVR12 cure rate in genotype 1 patients. It showed superior efficacy and safety compared to existing DAA regimens like Viekirax/Exviera and sofosbuvir+ribavirin.
  • Ravidasvir+ASC21: A pan-genotype DAA regimen with strong anti-viral potency, particularly effective against difficult-to-treat genotypes and co-infected patients.

Key Financial Highlights

Investment Recommendation

• Initiation: BUY
• Target Price (TP): HK$19.8 (+162% from current price of HK$7.53)
• Market Cap: HK$10,355 million
• Free Float: 21.6%
• Valuation: Estimated equity value of RMB20.0bn based on TP and key pipeline assets.

Key Risks

• Clinical Risks: While Ganovo and Ravidasvir have completed clinical trials, other pipeline assets carry higher risk.
• Regulatory Risks: Revenue is heavily dependent on successful regulatory approvals.
• Commercial Risks: No prior experience in commercializing its pipeline, despite a strong sales and marketing team.
• Reimbursement Risks: Limited experience in negotiating reimbursement and market access.
• Competition Risks: Faces competition from both MNCs and domestic DAA drugs.
• Patent Risks: Potential invalidation of Gilead's DAA patents may lead to earlier entry of generic drugs.
• Staff and Key Man Risks: Difficulty in retaining or recruiting R&D and marketing staff, and reliance on founder Dr. Jinzi Wu.

Competitive Landscape

China's HCV and HIV markets are growing due to increased awareness, improved diagnosis, and government support. The market is expected to be significantly impacted by the introduction of more effective DAA therapies. Ascletis is well-positioned with its commercial and near-commercial stage DAA therapies and a solid commercialization team, giving it an edge in the market.

Conclusion

Ascletis Pharma is a promising player in the anti-viral space with a strong pipeline and a solid commercial platform. The company is well-positioned to benefit from the growing HCV and HIV markets in China, driven by improved screening, increased awareness, and regulatory reforms. Despite the risks associated with clinical and commercial execution, the company's strong management team and experienced sales force provide a solid foundation for future success.