20181121-招商证券_香港_-歌礼制药-B-01672.HK-Partnering_with_Roche_to_market_Pegasys_in_China_5页_876kb

Ascletis Pharma (1672 HK) Summary

Core Content

Ascletis Pharma (1672 HK) is a pharmaceutical company that has entered into a significant partnership with Roche to exclusively market Pegasus, a pegylated interferon used for the treatment of hepatitis B virus (HBV) and hepatitis C virus (HCV). This partnership is expected to enhance the company's net present value (NPV) by approximately RMB300 million and provide strategic and financial benefits.

Main Points

• Partnership with Roche: Ascletis has obtained the exclusive marketing rights for Roche's Pegasus in China. Pegasus had sales of around RMB300 million in 2017 and held 84% of the pegylated interferon market in China according to PDB data.
• Market Position: Pegasus is off patent but not subject to bioequivalence (BE) generic competition in China. This is expected to result in relatively moderate competition from two Chinese players, Xiamen Tebao and Kewin.
• Strategic Synergy: The partnership is expected to create sales synergy when marketing the complete Ganovo regimen (Danoprevir + pegylated interferon) and to tap into the HBV market, which accounts for about 90% of Pegasus sales in China and represents an 80 million patient market.
• Sales Team Integration: A portion of Roche's current Pegasus marketing team is likely to join Ascletis, further strengthening its sales capability in hepatitis diseases.
• Target Price Adjustment: The target price for Ascletis has been raised to HK$20.0 from HK$19.8, reflecting the strategic benefits of the Pegasus deal and improved prospects for its drug portfolio.
• Competition from Epclusa: The entry of Epclusa into China's EDL (Drug Evaluation and Licensing) on 25 October 2018 has increased competition, but Ascletis remains a strong contender due to its superior SVR12 results (97% for HCV GT3 patients) compared to Epclusa's 83% for HCV GT3b patients.
• Reimbursement Pilot Program: Ganovo has entered Tianjin's DRGs-based reimbursement pilot program, which is a positive development for the company's product pipeline.

Key Information

Financial Highlights

• Revenue Growth:

  • 2016: RMB33 million
  • 2017: RMB53 million (+61% YoY)
  • 2018E: RMB142 million (+167% YoY)
  • 2019E: RMB425 million (+199% YoY)
  • 2020E: RMB734 million (+73% YoY)

• Adjusted Net Profit:

  • 2016: (RMB27 million)
  • 2017: (RMB53 million)
  • 2018E: RMB33 million
  • 2019E: RMB195 million (+484% YoY)
  • 2020E: RMB314 million (+61% YoY)

• EPS Fully Diluted (HKD):

  • 2016: n.a.
  • 2017: (HKD0.07)
  • 2018E: HKD0.04
  • 2019E: HKD0.20
  • 2020E: HKD0.32

• ROE:

  • 2016: -10%
  • 2017: -12%
  • 2018E: 0%
  • 2019E: 5%
  • 2020E: 8%

• Adjusted Net Profit Margin:

  • 2018E: 15.0%
  • 2019E: 45.8%
  • 2020E: 42.7%

• PER Adj (x):

  • 2018E: 212.4
  • 2019E: 40.5
  • 2020E: 25.2

Shareholding Structure

• Founder and founder's family: 53.3%
• C-Bridge: 12.4%
• JJW11 (incl. staff incentive): 5.8%
• BSIH: 3.5%
• Qianhai Cayman: 2.2%
• MBD: 0.7%
• Shunda: 0.5%
• Free float: 21.6%

Market Performance

• 1672 HK Price Performance:

  • 1m: +14.1%
  • 6m: -46.4%
  • 12m: -46.4%

• HSI Performance:

  • 1m: +1.1%
  • 6m: -16.8%
  • 12m: -11.7%

• Market Cap (HK$ mn): 9,010

• 52-week range (HK$): 5.58 - 14.9

Investment Rating

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

Conclusion

The partnership with Roche is a pivotal move for Ascletis Pharma, enhancing its financial and strategic position in the Chinese pharmaceutical market. The company is well-positioned to benefit from the exclusive marketing of Pegasus and the synergies from its existing product lines, particularly Ganovo. Despite increased competition from Epclusa, Ascletis's strong clinical data and market positioning support the continued recommendation of BUY. The financial projections show significant growth potential, with rising revenue and adjusted net profit margins, and a strong forward-looking target price.