20180315-申万宏源研究_香港_-中国生物制药-01177.HK-发掘管线价值_重估成长潜力_39页_2mb

Sino Biopharmaceutical Limited (1177:HK) Summary

Core Content

Sino Biopharmaceutical Limited (1177:HK) is a Chinese pharmaceutical company with a strong focus on research and development (R&D). The company has maintained a high R&D investment, increasing its R&D expense-to-sales ratio from 6% in 2010 to 10% in 2016 and expected to maintain this level in the coming years. The company has significantly expanded its pipeline of in-development drugs, increasing from 64 in 2010 to 467 in 3Q17.

The company's pipeline covers a wide range of therapeutic areas, including solid tumors, blood diseases, respiratory diseases, analgesia, cardio-cerebrovascular (CCV) diseases, hepatitis, autoimmune diseases, and diabetes. Among the 467 drugs in its pipeline, 199 are anti-cancer drugs, 53 target CCV diseases, 33 are anti-hepatitis drugs, 22 target respiratory diseases, and 26 are anti-diabetic drugs.

The company has 15 innovative drugs that have received CFDA clinical trial approval, with 6 pending approval. Anlotinib tablet is expected to be the first innovative drug to receive CFDA approval in 2018, becoming a key asset for the company. The company also has a number of high-potential blockbuster drugs, including Anlotinib, Tenofovir, and others, which are projected to reach peak sales exceeding RMB 800 million.

Main Points

• R&D Investment:

  • R&D expense-to-sales ratio increased from 6% in 2010 to 10% in 2016.
  • The company has invested HK$6 billion in R&D between 2010 and 2016.
  • R&D investment is expected to continue at around 10% in the coming years.

• Drug Pipeline Expansion:

  • The number of in-development drugs increased from 64 in 2010 to 467 in 3Q17.
  • The company filed 30 abbreviated new drug applications (ANDAs) and new drug applications (NDAs) between 3Q16 and 3Q17.
  • It is expected to receive CFDA approval for 22 drugs in 2018, 9 in 2019, and 17 in 2020.

• Innovative Drugs:

  • 15 innovative drugs have received CFDA clinical trial approval.
  • 6 innovative drugs are pending approval.
  • Anlotinib is expected to be approved in 2018 and become the company's first commercialised innovative drug.

• Blockbuster Drugs:

  • 12 drugs are expected to reach peak sales of over RMB 800 million.
  • These include Tenofovir, Anlotinib, Bevacizumab injection, Trastuzumab injection, TQB2450 injection, and others.

Key Information

• Financial Highlights:

  • Revenue for 2015-2019E is projected to grow from HK$14,550.23 million to HK$29,393.76 million.
  • Net income is expected to rise from HK$1,778.69 million in 2015 to HK$4,183.52 million in 2019E.
  • Diluted EPS is projected to increase from HK$0.24 in 2015 to HK$0.50 in 2019E.

• Valuation:

  • The company's target price is HK$18.50, based on a sum-of-the-parts (SOTP) valuation model.
  • The valuation includes a discounted cash flow (DCF) model for the R&D pipeline and a 25x 18E PE for existing products.
  • The company is valued at HK$8.40 per share for the R&D pipeline and HK$17.60 per share for existing products.

• Market Data:

  • Closing price: HK$15.22
  • Price target: HK$18.50
  • Market Cap (US$m): 16,353
  • Market Cap (HK$m): 128,231
  • 52-week High/Low: HK$16.06 / HK$6.07
  • Shares Outstanding (m): 8,425
  • Exchange Rate (Rmb-HK$): 1.24

• Investment Recommendation:

  • The analyst maintains a "BUY" recommendation.
  • The target price has been increased from HK$17.60 to HK$18.50, reflecting a 22% upside.

Investment Highlights

• The company has built a comprehensive drug portfolio through consistent R&D investment.
• It has received clinical trial approvals for 11 innovative drugs since 2016 and filed applications for 6 others.
• The analyst has raised diluted EPS forecasts for 2017E, 2018E, and 2019E.
• The company's drug pipeline covers many therapeutic areas, including solid tumors, blood diseases, respiratory diseases, analgesia, CCV diseases, hepatitis, autoimmune diseases, and diabetes.
• The analyst believes that 12 drugs will reach peak sales of over RMB 800 million.
• The analyst maintains a "BUY" recommendation and raises the target price to HK$18.50.