20211006-招银国际-开拓药业-B-09939.HK-Proxalutamide_expects_to_deliver_differentiated_clinical_results_compared_with_molnupiravir_5页_993kb

CMB International Securities | Equity Research | Company Update Summary

Core Content

This report provides an update on Kintor Pharmaceutical (9939 HK), focusing on its Proxalutamide drug and its potential role in COVID-19 treatment. The report also outlines the company's financial performance, valuation model, and key pipeline drugs.

Main Points

Proxalutamide vs. Molnupiravir

• Proxalutamide is expected to deliver differentiated clinical results compared to molnupiravir.
• Molnupiravir showed a 50% reduction in hospitalization or death in a Phase 2/3 trial, but has several limitations:
  • Safety concerns due to mutagenesis potential.
  • Lower efficacy compared to neutralizing antibodies (70–80%) and remdesivir (87%).
  • Previous trial termination in hospitalized patients due to underwhelming data.
  • Study design deficiencies such as excluding vaccinated patients and not disclosing baseline viral load.
• Proxalutamide has a different mechanism of action (inhibits androgen receptor and activates Nrf2 pathway), which avoids mutagenesis risks.
• Clinical results from IIT studies in Brazil:
  • 100% reduction in hospitalization for male patients.
  • 90% reduction in hospitalization for female patients.
  • 92% reduction in mortality rate for hospitalized patients.
  • 9-day reduction in hospital stay for inpatients.
• Kintor is advancing three Phase 3 MRCTs for Proxalutamide:
  • Two outpatient studies (one initiated in the US).
  • One inpatient study (first patient dosed on 1 Oct 2021).
• Proxalutamide and Pyrilutamide are highlighted as having blockbuster potential.

Investment Recommendation

• Maintain BUY with target price of HK$98.07, based on a 10-year DCF model.
• The target price is unchanged, with a potential upside of +163.28% from the current price of HK$37.25.

Financial Overview

• Revenue is projected to rise significantly:
  • FY21E: RMB 10,132 million
  • FY22E: RMB 8,351 million
  • FY23E: RMB 5,030 million
• Net profit is expected to improve:
  • FY21E: RMB 5,899 million
  • FY22E: RMB 5,030 million
• EPS is projected to increase:
  • FY21E: RMB 15.22
  • FY22E: RMB 12.98
• ROE and ROA are expected to improve significantly, with ROE of 75% in FY22E and ROA of 67%.
• Current ratio is strong, rising to 21.5x in FY23E.

Valuation

• DCF Valuation (RMB mn):
  • 2021E: -465
  • 2022E: +5,851
  • 2023E: +4,918
  • Terminal value (2030E): RMB 35,894 million
• Equity value (HK$ mn):
  • 2021E: 38,011
  • 2022E: N/A
  • 2023E: N/A
• Sensitivity analysis shows that the target price is sensitive to changes in WACC and terminal growth rate.

Key Pipeline Drugs

• Proxalutamide (GT0918):
  • Phase 3 MRCTs for outpatient and inpatient use.
  • FDA greenlighted for inpatient study.
• Pyrilutamide (KX-826):
  • Primary endpoint met in China for androgenetic alopecia.
  • FDA greenlighted for US study.
• ALK-1 (GT90001):
  • IND approved in the US and China.
  • Interim data released at ASCO CI in 2021.
• Other pipeline drugs include:
  • Detorsertib (GT0486): mTOR kinase inhibitor for metastatic solid tumors.
  • GT1708F: Hedgehog/SMO inhibitor for leukemia and basal-cell carcinoma.
  • GT20029: AR-PROTAC compound for AGA and acne vulgaris.
  • ALK-1 combination therapy with KN046 for HCC, GC, GEJ adenocarcinoma, UC, and ESCC.

Share Performance

• Market Cap: HK$14,438 million
• 3-month trailing turnover: HK$241.89 million
• 52-week high/low: HK$89.00 / HK$7.20
• Share price performance:
  • 1-month: -50.1%
  • 3-month: -34.3%
  • 6-month: +13.1%
  • 12-month: +36.1% relative to the market.

Shareholding Structure

• Management: 34.03%
• Pre-IPO & cornerstone investors: 34.07%
• Free float: 31.90%

Key Information

• Proxalutamide is a promising alternative to molnupiravir with a different mechanism of action and better safety profile.
• The company is advancing multiple Phase 3 trials, which could lead to regulatory approval and significant revenue.
• Financial performance is expected to improve significantly in the coming years, with positive operating profit and increased margins.
• Valuation is based on DCF model, with target price unchanged at HK$98.07.
• The analyst certification and disclosure emphasize independent analysis and no liability for the report's content.
• CMBIS ratings include BUY, HOLD, and SELL, with BUY indicating potential return of over 15% over the next 12 months.
• The report is intended for specific investors and not for general distribution in certain regions, including the UK and US.

Conclusion

Kintor Pharmaceutical is a promising player in the China healthcare sector, with Proxalutamide showing strong clinical potential in COVID-19 treatment. The company is advancing its Phase 3 trials, and its financial performance is expected to improve significantly in the coming years. The BUY recommendation is based on positive DCF valuation and blockbuster potential of its late-stage assets.