20220328-招银国际-开拓药业-B-09939.HK-Continued_development_of_proxalutamide_for_COVID-19_treatment_5页_1mb

Kintor Pharmaceutical (9939 HK) Company Update Summary

Core Content

Kintor Pharmaceutical is a biopharmaceutical company primarily focused on the development of drugs for oncology and dermatology, including proxalutamide and pyrilutamide. The company has been actively pursuing the development of proxalutamide for the treatment of prostate cancer and also exploring its potential in the context of the global pandemic by out-licensing it for use in treating COVID-19 in specific regions.

Main Points

Proxalutamide Development

• Out-License Agreements: In 2021, Kintor achieved out-license agreements with Fosun Pharma and Etana for the commercial rights of proxalutamide in India, 28 African countries, and Indonesia for the treatment of COVID-19.
• R&D Expenses: R&D expenses increased significantly to RMB767.9mn in 2021, up 134% YoY, mainly due to clinical trial costs for proxalutamide.
• Clinical Trials:
  • Three ongoing Phase 3 MRCT trials for proxalutamide in the context of COVID-19.
  • One outpatient trial (NCT04870606) did not meet statistical significance in interim analysis in December 2021, but no safety concerns were observed.
  • Another outpatient trial (NCT04869228) was amended to include high-risk populations in China, Brazil, Malaysia, and the Philippines, with interim results expected in 2H22.
  • The inpatient trial (NCT05009732) is ongoing in the US, Philippines, South Africa, and China.
• Prostate Cancer: Proxalutamide is expected to file an NDA in China for the treatment of mCRPC (metastatic castration-resistant prostate cancer) in 2022, based on Phase 3 trial results. A Phase 2 trial in the US for 2L mCRPC completed enrollment in July 2020 with ongoing data analysis.

Pyrilutamide Development

• AGA and Acne Vulgaris: Pyrilutamide (KX-826) is globally the first topical AR antagonist in Phase 3 trials for androgenetic alopecia (AGA). The Phase 2 trial for male AGA patients met its primary endpoint, with results to be released in June 2022.
• China Phase 3 Trial: The Phase 3 trial for male AGA patients in China (FPI in Dec 2021) is expected to complete enrollment in 1H22.
• Female AGA: A Phase 2 trial for female AGA patients completed enrollment of 160 patients in March 2022, with preliminary results expected in 4Q22.
• Acne Vulgaris: A Phase 2 trial in China for acne vulgaris started in January 2022.

Company Performance

• Revenue: The company recorded RMB34.2mn in 2021 from out-licensing, with expected revenue growth in 2022 to 2024, reaching RMB505mn in 2024.
• Net Profit: Net profit was negative in 2021 at RMB-842mn, with a projected improvement in 2022 to RMB-448mn and further to RMB-293mn in 2024.
• Cash Position: Kintor had RMB1.06bn cash at the end of 2021, which is sufficient to support further R&D.

Valuation and Target Price

• Target Price: The target price was revised from HK$35.22 to HK$34.37, with a potential upside of +205.77% from the current price of HK$11.24.
• DCF Valuation: The company's DCF-based valuation shows an enterprise value of RMB10,923mn, with the terminal value expected to be RMB22,284mn in 2030.
• Sensitivity Analysis: The target price is sensitive to the terminal growth rate and WACC, with the highest valuation at a terminal growth rate of 3.0% and WACC of 9.7%.

Key Information

• Market Cap: HK$4,357mn
• Shareholding Structure:
  • Youzhi Tong: 13.17%
  • Chuangxing Guo: 11.13%
  • Gree Financial: 6.77%
  • Legend Holdings: 6.00%
  • CloudAlpha: 4.98%
  • Others: 57.95%
• Share Performance:
  • 1-month return: -11.4%
  • 3-month return: -75.1%
  • 6-month return: -78.0%
• Current Ratio: 11.3x (end-2021)
• ROE: Expected to reach 88% in 2024
• ROA: Expected to reach 23% in 2024
• Net Debt to Equity: 170% (end-2024)

Analyst Recommendations

• Rating: BUY
• Reasoning: Despite the lack of positive interim results for proxalutamide in the outpatient trial for COVID-19, Kintor continues to develop the drug for various applications, including mCRPC and other diseases. Pyrilutamide shows strong commercial potential in the AGA and acne vulgaris markets.

Financial Highlights

Summary of Key Trials

Proxalutamide

• Outpatient Trial (NCT04870606): Completed enrollment (736 patients), no significant results in interim analysis.
• Outpatient Trial (NCT04869228): Amended to include high-risk populations, with interim results expected in 2H22.
• Inpatient Trial (NCT05009732): Ongoing in the US, Philippines, South Africa, and China.

Pyrilutamide

• Male AGA Phase 2 Trial: Completed enrollment, met primary endpoint, results expected in June 2022.
• Male AGA Phase 3 Trial (China): Expected to complete enrollment in 1H22.
• Female AGA Phase 2 Trial: Completed enrollment of 160 patients, preliminary results expected in 4Q22.
• Acne Vulgaris Phase 2 Trial: Started in China in January 2022.

Conclusion

Kintor Pharmaceutical is focused on the development of proxalutamide and pyrilutamide, with significant R&D investment in 2021. Despite the lack of positive results from the first interim analysis of proxalutamide for outpatient COVID-19 treatment, the company remains committed to its development and has a strong cash position. Pyrilutamide shows promise in the AGA and acne vulgaris markets, and the company has revised its target price based on updated DCF valuation. The BUY rating is maintained due to the potential for future growth and the company's strong financial position.