【Company Research】Shanghai Henlius Biotech, Inc. (2696 HK) – More product approvals in coming months

• Sales of HLX01 to ramp up thanks to the release of capacity bottleneck. In Apr 2020, Henlius received NMPA’s approval for HLX01 (Hanlikang, Rituximab) for the additional 2,000L drug substance production scale and 2,000L production equipment. Thus, the total production capacity of HLX01 will be lifted from the previous 2,000L to 14,000L. In addition, HLX01 recently received NMPA’s approval for a new 500mg package while previously HLX01 only obtained approval for 100mg package. HLX01 will enjoy more significant pricing advantages by offering both 500mg and 100mg packages. We expect attributable sales from HLX01 to pick up from RMB79mn in 2019 to RMB264mn in 2020E.

 

• HLX02 to receive approvals from EMA and NMPA in 2020E and HLX03 to receive NMPA’s approval in 2020E. In Apr 2020, Henlius’ biopharmaceutical manufacturing facility of HLX02 (trastuzumab) in Xuhui, Shanghai, has passed the GMP inspection by the EU, making Henlius the second domestic company receiving EU’s GMP approval. We expect HLX02 to receive EU MAA approval for commercialization in 2020E. In addition, we forecast HLX02 and HLX03 (adalimumab) to receive approvals from NMPA in 2020E. The Company also accelerated clinical development for HLX10 (PD-1 antibody) and has initiated 5 phase III trials and 4 phase II trials for HLX10 mono and combo therapies. Trials of HLX10 cover large indications such as NSCLC, SCLC, GC, HNSCC, HCC, ESCC, cervical cancer and HBV. By end-2020E, Henlius may file the NDA for HLX10 to NMPA for treatment of MSI-H solid tumors and the NDA for HLX04 (bevacizumab) to the NMPA, in our view.

 

• Maintain BUY.  Henlius kicked off STAR board (A share) listing in March 2020. Upon completion of A share listing, Henlius will have rich capital to fund future R&D activities. Our TP of H$57.21 is based on 11-year risk-adjusted DCF valuation (WACC: 10.03%, terminal growth rate: 3.0%). We like Henlius given its rich biological pipeline and strong in-house R&D capability.

 

• 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.