20181217-招商证券_香港_-信达生物-B-01801.HK-Building_a_complimentary_small_molecule_portfolio_with_the_Incyte_deal_5页_1mb

Innovent Bio (1801 HK) Summary

Core Content

Innovent Bio (1801 HK) has announced a collaboration with Incyte (INCY US, NR) to license three clinical-stage small molecule drug candidates in China. The deal includes an upfront payment of USD40 million, potential development and regulatory milestones up to USD129 million, commercial milestones up to USD203 million, and tiered sales-based royalties. This strategic move is expected to enhance Innovent's position in the FGFR and JAK markets, particularly for the treatment of cholangiocarcinoma, bladder cancer, and other oncology indications. The analysts maintain a "BUY" rating and have raised the target price (TP) to HK$27.8, indicating a potential 26% upside from the previous price of HK$22.15.

Main Points

• Collaboration with Incyte: Innovent has entered into a licensing agreement with Incyte for three clinical-stage drug candidates: pemigatinib (FGFR1/2/3 inhibitor), itacitinib (JAK1 inhibitor), and parsaclisib (PI3K antagonist).
• Potential Market Position: The collaboration is expected to position Innovent in the FGFR and JAK races in China, particularly for 1L cholangiocarcinoma and bladder cancer treatment.
• Combo Potential: The drug candidates are anticipated to have combo potential with Innovent's existing assets in solid tumours and hematology.
• Valuation Update: The analysts estimate that pemigatinib could add c.USD130 million to Innovent's end-2018 NPV, before netting off the USD40 million upfront payment.
• Financial Performance: Innovent has shown significant growth in revenue and adjusted net profit, with a 133% increase in revenue expected in 2020.
• Product Pipeline: The company has a diverse pipeline with various drug candidates targeting different indications, including oncology and autoimmune diseases.
• Market Cap and Shareholding: Innovent's market cap is HK$24,168 million, with the free float accounting for 23.6% of total shares.

Key Information

Financial Highlights

• Revenue:
  • 2016: 0
  • 2017: 19
  • 2018E: 0
  • 2019E: 481
  • 2020E: 1,118
• Adjusted Net Profit:
  • 2016: (500)
  • 2017: (537)
  • 2018E: (739)
  • 2019E: (886)
  • 2020E: (936)
• Earnings Per Share (Fully Diluted):
  • 2016: (0.57)
  • 2017: (0.61)
  • 2018E: (0.73)
  • 2019E: (0.76)
  • 2020E: (0.80)

Key Drug Candidates

• Pemigatinib (FGFR1/2/3 inhibitor):
  • Expected to be one of the first approved FGFR inhibitors in China.
  • Targeting 1L cholangiocarcinoma and bladder cancer with FGFR gene rearrangement.
• Itacitinib (JAK1 inhibitor):
  • Being tested in acute GVHD and NSCLC.
  • Could complement Innovent's IBI-305 (Avastin-similar).
• Parasclisib (PI3K antagonist):
  • Synergy expected with IBI-301 (Rituxan-similar) in NHL.

Clinical Trial Landscape

• FGFR Inhibitors:
  • The clinical landscape in both overseas and China is competitive, with multiple drugs in various phases of development.
  • Pemigatinib is expected to have strong efficacy and a good safety profile compared to other FGFR inhibitors.

Valuation

• Target Price (TP): HK$27.8
• Potential Upside: 26% from the previous price of HK$22.15
• NPV-based TP: Raised by 2.4%

Shareholding Structure

• Directors and Management: 12.6%
• FIL Limited: 15.0%
• Capital Group: 7.8%
• Other Pre-IPO Investors: 24.5%
• Free Float: 23.6%

Key Data

• 52-week Range (HK$): 14.0-24.35
• Market Cap (HK$ mn): 24168
• Average Daily Volume (mn): 3.44
• BVPS (HK$): 0.51

Investment Ratings

• Industry Rating: OVERWEIGHT (Expect sector to outperform the market over the next 12 months)
• Company Rating: BUY (Expect stock to generate 10%+ return over the next 12 months)

Analyst and Regulatory Information

• Analyst Disclosure: The analysts involved in the report certify that the views expressed reflect their personal opinions and that their compensation is not tied to the recommendations.
• Regulatory Disclosure: The report is subject to important disclosures available on the CMS HK website.
• Disclaimer: CMS HK is not registered as a broker-dealer in the United States and its services are not available to U.S. persons except as permitted under SEC Rule 15a-6.