【Company Research】InnoCare Pharma (9969 HK) – Biopharmaceutical company developing global innovative therapies in oncology and autoimmune areas
- Fully-integrated platform with high operating efficiency. Led by a world-class management team, InnoCare has built a fully integrated biopharmaceutical platform with strong in-house R&D capabilities. InnoCare’s fully-integrated platform covers the entire spectrum of drug discovery and development functionalities, including drug target identification and verification, pre-clinical evaluation, clinical trial design and execution, drug manufacturing and quality control, and commercialization. During the last two years, InnoCare initiated seven clinical trials, including two registrational trials.
- Strong ties with world-class scientists. InnoCare’s in-house R&D capability is supplemented by globally renowned structural biologist Dr. Yigong Shi (施一公), the Company’s co-founder and President of Scientific Advisory Board, and cancer genomics expert Dr. Zemin Zhang (张泽民), the Company’s Scientific Advisor. InnoCare has entered into exclusive strategic collaboration agreements with Dr. Shi and Dr. Zhang, respectively.
- Orelabrutinib is a potential best-in-class BTK inhibitor. Orelabrutinib (ICP-022) is a potential best-in-class, highly selective and irreversible BTK inhibitor under clinical trials in China and US for the treatment of various B-cell malignancies and autoimmune diseases. The NMPA has accepted the new drug application (NDA) of orelabrutinib for the treatment of patients with r/r CLL/SLL and r/r MCL and granted priority review status for these two applications. We expect orelabrutinib to receive approvals from NMPA for treatment of r/r CLL/SLL and r/r MCL in 2H20E.
- Drug sales to start from 2021E. We forecast drug sales to start from 2021E and expect risk-adjusted revenue of RMB106mn/ RMB274mn/ RMB553mn in FY2021E/22E/23E. The most advanced drug is orelabrutinib which may be approved by NMPA in 2H20E, in our view. We also forecast ICP-192 and ICP-105 to receive NMPA’s approval in 2023E and 2024E, respectively. Considering that InnoCare owns the global rights in these above-mentioned drug candidates, we expect meaningful sales from the US market from 2024E. By applying different probability of success (PoS) to drug candidates, we forecast a net loss of RMB373mn/RMB286mn/RMB128mn in FY2020E/21E/22E and expect net profit to breakeven in 2023E.
- Initiate BUY with TP of HK$16.21. The most advanced drug is Orelabrutinib, which we expect to receive approval from NMPA by 2H20E. Innocare’s future cash flows will rely on the successful commercialization of pipeline drugs. We see DCF as appropriate in valuing the Company. We derive a TP of HK$16.21 based on an 11-year DCF valuation (WACC: 9.7%, terminal growth rate: 5.0%).
