Fast-growing mAb and biosimilar market in China. According to Frost & Sullivan, China’s mAbs market is expected to grow at a 57.9% CAGR, from RMB16bn in 2018 to RMB156.5bn in 2023E. At the same time, China’s biosimilars market is projected to grow at 74.2% CAGR in 2018-23E, from RMB1.6bn in 2018 to RMB25.9bn in 2023E. Henlius focuses on antibody drug development and rides on the booming biologics market in China.
Rich late-phase pipeline products. Henlius develops both biosimilar and bio-innovative drugs with a strong pipeline of over 20 antibody drugs and 31 IND approvals in the field of oncology and autoimmune diseases. Henlius obtained the first biosimilar approval in China, HLX01-NHL, in Feb 2019. Besides, it has three biosimilars at near-commercial stage with high visibility, including HLX02 and HLX03 under priority review, HLX04 and HLX01-RA in Phase 3 clinical trials.
Industry-leading manufacturing capacity. Henlius currently has a sizable biological manufacturing capacity of 14,000L, which is one of the largest capacities among domestic biopharmaceutical companies. A new manufacturing facility in Songjiang, Shanghai is under construction.
Well-established commercial capability. Henlius will sell products through both in-house marketing team and sales force of its parent company, Fosun Pharma. Henlius has entered into commercial cooperation with Fosun Pharma and Jiangsu Wanbang (a subsidiary of Fosun Pharma) regarding HLX01 and HLX03, respectively. Henlius will leverage Fosun Pharma’s strong commercial expertise in China to ramp up sales fast.
Risk-adjusted revenue to be RMB167mn/ RMB666mn/ RMB1,448mn in FY19E/20E/21E and profitable year to be 2021E. Risk-adjusted revenue will be driven by HLX01 and three biosimilars at late development stage. We forecast net loss of RMB319mn/ RMB171mn in FY19E/20E and expect Henlius to record net profit of RMB198mn in FY21E.
Initiate BUY with TP of HK$61.12. We derive TP of HK$61.12 based on 12-year risk-adjusted DCF valuation (WACC: 10.03%, terminal growth rate: 4.0%).
Catalysts: 1) Earlier-than-expected launch of products in pipeline, 2) stronger-than-expected sales from newly launched product, 3) positive outcome of clinical trial data.
